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C3.ai Shares Dropped 18% on a Bleak Sales Outlook and the Publication of Q1 Financials

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To promote growth, the company adopts a shift to a consumption-based pricing strategy.

C3.ai (NYSE:AI)

As Wall Street expressed its displeasure with C3.ai’s (NYSE:AI) dismal sales estimate and intentions to switch to a new business model, the company’s shares dropped 18% on Thursday.

C3.ai (AI) announced last Wednesday that it anticipates sales for the second quarter of its fiscal year to range between $60 million and $62 million. That projection, however, fell short of the approximately $72 million in sales that analysts generally expected.

C3.ai (AI) announced that it was switching from a revenue model based on subscriptions to one based on the usage levels of its clients. Such consumption-based income models are currently employed by companies like Google Cloud, Snowflake, and Microsoft’s Azure (MSFT) (GOOG).

C3.ai (AI) reported a fiscal first-quarter loss of 12 cents per share on $65.3 million in sales, falling short of analysts’ expectations of 24 cents per share on $66 million in sales.

Wedbush Securities’ Dan Ives claimed that C3.ai’s (AI) financial performance and prospects demonstrate the company’s “uphill journey” and that it is “selling a square peg in a round hole” due to its challenging business execution initiatives.

Wall Street analysts now have a consensus hold rating on C3.ai’s (AI) stock, while the authors of Seeking Alpha have given the firm a buy rating. C3.ai (AI) shares have a buy rating from Seeking Alpha’s quantitative methodology, which typically beats the stock market.

A Summary of C3 AI’s Q1 Financial Results

Total sales for the quarter were $65.3 million, up 25% from $52.4 million in the same period last year.

  • Revenue from Subscriptions: Revenue from Subscriptions for the quarter increased by 24% to $57.0 million from $46.1 million a year earlier.
  • Gross Profit: Compared to GAAP gross profit of $39.4 million a year earlier, GAAP gross profit for the quarter was $46.9 million, or a 72% gross margin. In comparison to non-GAAP gross profit of $40.9 million a year ago, non-GAAP gross profit for the quarter was $52.6 million, showing an 81% non-GAAP gross margin.
  • Remaining Performance Obligations (RPO): Compared to a year ago, GAAP RPO climbed by 58% to $458.2 million. Our GAAP RPO now accounts for 175% of our yearly revenue for the first quarter. From $357.3 million a year ago to $496.8 million now, non-GAAP RPO jumped by 39%. 
  • GAAP net loss per share was $(0.67) as opposed to $(0.37) a year earlier. Non-GAAP net loss per share decreased from $(0.22) to $(0.12) from the prior year.

Featured Image – Megapixl © Werny 

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