BofA Securities has adjusted its outlook on c3.ai (NYSE: AI), reducing the price target to $20 from the previous $24 while sustaining an underperform rating on the stock.
The firm noted that c3.ai's subscription revenue saw a slight increase, recording a 19.7% year-over-year growth compared to the anticipated 19%.
Despite this, the unchanged forecast for fiscal year 2025 does not indicate that the company is significantly benefiting from the current momentum in artificial intelligence adoption.
The report acknowledged a rise in the number of pilot deals for c3.ai, with 52 in the first quarter, which is an increase from 34 in the previous quarter. Nonetheless, these pilot projects have not yet led to a substantial growth in subscription revenue.
The trailing twelve-month (TTM) figures for the first quarter of fiscal year 2025 showed an 81% growth in pilot deals, but this has not been reflected in the company's subscription growth projections, which stand at 23% for FY25, only slightly higher than the 21% reported in the first quarter.
In other recent news, C3.ai (NYSE:AI) has reported robust financial performance for the first quarter of fiscal year 2025, exceeding expectations with a 21% increase in year-over-year revenue.
The AI software provider announced total revenue of $87.2 million, with subscription revenue accounting for a significant 84% of this total. The company's non-GAAP gross profit stood at $60.9 million, reflecting a 70% gross margin.
C3.ai has also seen growth in its partner ecosystem, with 72% of the 71 new agreements closed through partners. The company's pre-built AI applications and generative AI solutions have been central to customer satisfaction and value delivery, as demonstrated by successful deployments with industry leaders such as Holcim (SIX:HOLN), Shell (LON:SHEL), and Con Edison.
InvestingPro Insights
As we consider the analysis provided by BofA Securities on c3.ai, it is beneficial to incorporate insights from InvestingPro to gain a more comprehensive view of the company's financial health and market position. According to InvestingPro data, c3.ai holds a market capitalization of $2.92 billion, with a negative P/E ratio of -9.9, indicating that the company is not currently profitable. The revenue growth for the last twelve months as of Q4 2024 stands at 16.41%, which is consistent with the moderate subscription growth highlighted in the BofA Securities report.
An InvestingPro Tip that stands out is the company's ability to hold more cash than debt on its balance sheet, which is a positive sign of financial stability. This could provide c3.ai with a buffer to navigate the challenges of converting pilot deals into significant subscription revenue. Additionally, the fact that 6 analysts have revised their earnings upwards for the upcoming period suggests a potential shift in market sentiment that may not yet be fully reflected in the subscription growth outlook for FY25.
It is also worth noting that c3.ai does not pay a dividend to shareholders, which is common for companies focused on growth and reinvestment. For those interested in deeper analysis, there are further InvestingPro Tips available on the platform, including insights into stock price volatility and valuation multiples.
Overall, these InvestingPro metrics and tips offer valuable context for investors assessing c3.ai's current performance and future potential within the rapidly evolving AI industry.
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