C3.ai (AI Quick QuoteAI - Free Report) and Palantir Technologies (PLTR Quick QuotePLTR - Free Report) are two prominent players in the fast-growing enterprise AI software market. C3.ai provides a broad platform of AI applications and tools for businesses, while Palantir is known for its data analytics platforms used by government agencies and large companies. Both companies aim to help organizations harness big data and artificial intelligence to improve operations. They share similarities as high-growth “picks-and-shovels” plays on the AI trend, and each has seen surging investor interest amid the generative AI boom.

Recent quarters saw both companies re-accelerate growth after earlier lulls, and their stocks have been volatile with shifting market sentiment. Palantir stock soared a staggering 340.5% in 2024 amid rapid growth, and C3.ai surged almost 20%. Year to date, Palantir stock has gained 53.5%, while C3.ai shares down 34.6%.

C3.ai & Palantir Stocks Performances

Image Source: Zacks Investment Research

Given the hype around enterprise AI and the companies’ different paths to capitalize on it, now is a timely moment to evaluate which might offer better investment value. Let's dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.

The Case for C3.ai Stock

C3.ai is a pure-play enterprise AI software provider founded by tech veteran Tom Siebel. The company offers an extensive suite of more than 100 pre-built AI applications for various industries (from energy and manufacturing to finance), and a platform for clients to develop their own AI solutions. C3.ai’s strategy emphasizes partnerships with cloud giants and government agencies to extend its reach. For example, C3.ai is the most sought-after AI application on Microsoft’s (MSFT Quick QuoteMSFT - Free Report) Azure cloud marketplace and has a tie-up with Alphabet’s (GOOGL Quick QuoteGOOGL - Free Report) Google Cloud. Since announcing an expanded alliance with Microsoft in late 2024, C3.ai closed 28 new deals through joint engagements, spanning nine industries. Sales cycles with Microsoft have shortened by approximately 20%, a testament to the strength of their joint go-to-market motions. As of the fiscal third-quarter end, C3.ai and Microsoft were engaged in more than 600 active enterprise opportunities globally. These alliances not only broaden their sales channels but could improve margins by leveraging partners’ infrastructure.

In addition, C3.ai has also won expanded contracts with the U.S. Department of Defense and multiple branches of the military – a domain where Palantir historically excels – signaling growing traction in government sectors as well.

In its fiscal third-quarter results, C3.ai reported total revenues of $98.8 million, marking a 26% increase year over year. Subscription revenues grew 22% year over year to $85.7 million, constituting 87% of total revenues. The company closed 66 agreements, including 50 pilots, a 72% increase year over year. Notably, C3.ai's expanding partnerships and pilot programs indicate growing traction in both commercial and government sectors. Notably, revenues derived from software demonstration licenses contributed significantly, reaching $28.6 million. These demonstration licenses are provided to strategic partners like Microsoft and Amazon’s AWS, enabling them to independently present C3.ai’s applications to prospective enterprise clients.

C3.ai faces significant challenges, including the need to achieve sustainable profitability and navigate competition from both established players and emerging startups. The company anticipates some moderation in gross margins due to an increased mix of more costly pilots. It expects some moderation in operating margins in the near term due to additional investments in the business.

While the lack of profits is a risk, C3.ai's improving revenue trajectory and disciplined focus on enterprise AI could lead to future profitability as it scales.

C3.ai’s stock valuation is more modest compared to Palantir’s, potentially offering more upside if it continues executing effectively. The company’s forward 12-month P/S ratio of 6.29 is slightly higher than the sector average of 5.6.

The Case for Palantir Stock

Palantir is a heavyweight in enterprise analytics and AI platforms, significantly larger than C3.ai by scale. Its Gotham platform became a critical tool for agencies like the DoD and CIA, creating a deep moat in government contracting. In recent years, Palantir has expanded aggressively into commercial markets with its Foundry platform and new Artificial Intelligence Platform (AIP), aiming to become a central provider of AI-powered decision support for large enterprises.

Palantir's key strength lies in its entrenched customer relationships and product breadth. The company enjoys long-term contracts with government agencies, providing a stable revenue base. Palantir's push into commercial AI is gaining traction, with its new AIP helping organizations deploy large language models and automation. Thanks to these developments, Palantir's growth accelerated to 29% in 2024 from 17% in 2023.

Unlike C3.ai, Palantir has achieved profitability. The company turned profitable on a GAAP basis in 2023 and continued that into 2024, marking a new chapter where it can self-fund growth. Palantir's adjusted operating income and margins improved significantly, and the company is now focused on maintaining disciplined cost management while still investing in R&D.

This success has led to a rich valuation, with the stock trading at a high forward earnings multiple, leaving little margin for error. Palantir's forward 12-month P/S ratio of 66.2, significantly higher than the sector average of 5.6, indicates a steep overvaluation. This premium suggests investors are pricing in aggressive future growth, particularly in AI and government contracts.

Palantir faces challenges, including sustaining its growth rate as a larger company and managing its heavy reliance on government contracts, which exposes it to political and budgetary risks.

Earnings Estimates Trend for AI and PLTR Stocks

Over the past 30 days, the Zacks Consensus Estimate for PLTR has decreased, while for AI stock, the same has remained unchanged for 2025, as you can see below.

For PLTR Stock

Image Source: Zacks Investment Research

For AI Stock

Image Source: Zacks Investment Research

Conclusion

Weighing all factors, C3.ai appears to offer better upside potential at the moment. While Palantir boasts a more established business with superior financials and a strong position in the enterprise AI market, much of this strength is already reflected in its stock price. The shares trade at a hefty premium, and the company's Zacks Rank #5 (Strong Sell) hints at near-term pessimism.

By contrast, C3.ai — a Zacks Rank #3 (Hold) company — while riskier and still unprofitable, is valued more reasonably. C3.ai's smaller base, if managed well, could allow it to compound at high rates for longer, and any continued execution could drive significant stock appreciation from its lower base. Its partnerships with tech giants and recent inroads with government clients also validate its potential to narrow the gap with Palantir over time. Palantir is a formidable player with proven success, but C3.ai's combination of improving fundamentals, niche focus, and a cheaper valuation gives it an edge for investors seeking upside. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.