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C3.ai (AI) Q2 Loss Narrower Than Expected, Revenues Rise Y/Y

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C3.ai, Inc. (AI - Free Report) reported a second-quarter fiscal 2023 adjusted loss of 11 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 16 cents. The company had reported a non-GAAP loss of 23 cents in the year-ago quarter.

Revenues of $62.4 million beat the consensus mark by 2.26% and increased 7% year over year, driven by the rapid adoption of its model-driven AI architecture and services.

Quarter Details

C3.ai’s subscription revenues (95.4% of revenues) increased 25.5% year over year to $59.5 million. Professional service revenues (4.6% of revenues) declined 73.3% to $2.9 million.

In the reported quarter, the non-GAAP gross margin contracted 100 basis points (bps) on a year-over-year basis to 77%.

Research and development, and general and administrative expenses increased 37% and 22% on a year-over-year basis to $50.1 million and $18.6 million, respectively. Sales and marketing expenses decreased 2.7% to $44.9 million.

C3.ai, Inc. Price, Consensus and EPS Surprise

C3.ai, Inc. Price, Consensus and EPS Surprise

C3.ai, Inc. price-consensus-eps-surprise-chart | C3.ai, Inc. Quote

In the fiscal second quarter, C3.ai reported a non-GAAP loss from operations of $15 million compared with a non-GAAP loss from operations of $22.6 million reported in the year-ago quarter.

User & Partnership Details

The total number of C3.ai enterprise customers at the end of the quarter was 236, up 16% year over year.

C3.ai expanded its partnership with the U.S. Department of Defense with new deals with the Chief Digital and AI Office, Missile Defense Agency, U.S. Air Force, and Defense Counterintelligence and Security Agency.

C3.ai and Alphabet’s (GOOGL - Free Report) Google Cloud and Microsoft (MSFT - Free Report) continued expanding their partnership base in the second quarter of fiscal 2023.

C3.ai and Alphabet’s Google Cloud made joint investments in the reported quarter in industry applications with the launch of two new enterprise AI applications. The two companies’ sales teams sold to more than 300 accounts.

C3 AI and Microsoft closed new deals with customers particularly in the energy and manufacturing sectors. Azure is C3.ai’s second-largest installed base, constituting approximately 27% of its customer base.

Balance Sheet

As of Oct 31, 2022, C3.ai had total cash, cash equivalents and short-term investments of $840.07 million compared with $907.28 million as of July 31, 2022.

Cash outflow from operations was $90.84 compared with the previous quarter’s outflow of $38.26.

Non-GAAP remaining performance obligation was $453.54 million, down 14.3% year over year.

Guidance

For third-quarter fiscal 2023, C3.ai expects revenues between $63 million and $65 million. Non-GAAP loss from operations is anticipated within $25 million to $29 million.

For fiscal 2023, C3.ai expects revenues between $255 million and $270 million. Non-GAAP loss from operations is expected in the range of $85 million to $98 million.

Zacks Rank and Stock to Consider

Currently, C3.ai carries a Zacks Rank #3 (Hold).

Its shares are down 61.7% year to date compared with the Zacks Computer and Technology sector’s decline of 33% over the same time frame.

Here is a better-ranked stock to consider in the broader tech sector:

Arista Networks (ANET - Free Report) carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ANET’s shares have fallen 11.8% in the year-to-date period against the Zacks Communication - Components industry’s decline of 12%.


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