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C3.ai Trading at a Premium at 6.39X: Time to Hold or Sell the Stock?
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C3.ai, Inc. (AI - Free Report) is currently trading at a slight premium relative to its Zacks Computer & Technology sector but at a discount to historical metrics. In terms of the forward 12-month Price/Sales, AI is trading at 6.39X, higher than the sector’s 6.18X. Its forward 12-month P/S ratio sits below its three-year average, as shown below.
C3.ai Valuation
Image Source: Zacks Investment Research
In terms of C3.ai’s share price performance, its shares have gained a notable 20.7% in the past month. However, it has underperformed the Zacks Computer & Technology sector and the Zacks Computers - IT Services industry, as shown below.
At its current price, the AI stock represents a 48.6% discount from its 52-week high of $45.08. It also indicates a 36.1% premium to its 52-week low of $17.03.
C3.ai Share Price Performance
Image Source: Zacks Investment Research
Is a recent uptick in C3.ai’s stock price reason enough to buy in? Before making a decision based solely on momentum, let’s take a closer look at the underlying factors that could help investors determine whether now is the right time to add AI stock to their portfolio.
Decoding C3.ai’s Tailwinds
C3.ai’s partnerships with hyperscalers and industry leaders, such as Amazon’s (AMZN - Free Report) AWS, Alphabet’s (GOOGL - Free Report) Google Cloud, Microsoft’s (MSFT - Free Report) Azure, and Booz Allen Hamilton, serve as key growth multipliers. The company’s integration into Microsoft’s global sales ecosystem and the execution of co-selling motions resulted in 28 closed deals across nine industries, implying a 460% quarter-over-quarter increase. These alliances shortened sales cycles by nearly 20% and expanded the company’s qualified sales pipeline by 244% year over year, highlighting the effectiveness of its partner-driven go-to-market strategy.
C3.ai expanded its customer footprint across both commercial and government sectors. Notable wins included Flex, Sanofi, ExxonMobil, Shell and the U.S. Department of Defense. These clients adopted solutions ranging from predictive maintenance and mission assurance to customer service enhancement using C3 Generative AI. This diversification across industries, from pharma to utilities and defense, demonstrates the flexibility and relevance of C3.ai’s applications across mission-critical environments.
C3.ai has built a robust federal pipeline, especially with the U.S. Department of Defense (DoD), where use cases such as predictive maintenance, logistics optimization and battlefield decision support are gaining traction. The company cited 39 active pilots with the DoD and Intelligence Community during the quarter. This engagement, which includes partnerships with entities such as the U.S. Air Force and Army, positions C3.ai to benefit from increasing federal AI budgets and long procurement cycles that often result in multi-year deals. In April 2025, C3 AI and Arcfield have announced a strategic collaboration aimed at accelerating the adoption of enterprise-grade AI applications for U.S. defense and intelligence agencies. Arcfield will utilize the C3 Agentic AI Platform and C3 Generative AI to enhance its mission-critical services, including systems engineering, predictive maintenance and space defense operations.
What’s Affecting C3.ai?
C3.ai faces significant challenges, including the need to achieve sustainable profitability and navigate competition from both established players and emerging startups. The company reported GAAP a net loss of 62 cents per share in the fiscal third quarter (non-GAAP loss of 12 cents per share).
A significant challenge for C3.ai is the cost structure associated with its numerous pilot deployments. The company signed 50 new pilots in the fiscal third quarter, bringing the total to 310, of which 245 are active. These pilots, often precursors to larger contracts, carry higher upfront costs, resulting in pressure on gross margins. 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.
C3.ai is actively scaling its operations, particularly through the expansion of its direct salesforce and strategic partner ecosystem, which includes Microsoft, AWS and McKinsey's QuantumBlack. While this investment is central to long-term growth, it also introduces near-term pressure on operating margins. The company plans to continue investing in sales, customer support and R&D through fiscal 2025. This is expected to keep operating losses elevated and push the company into negative free cash flow territory for the full year, though a positive free cash flow is expected in the fiscal fourth quarter.
C3.ai’s Estimate Revision Trend
The Zacks Consensus Estimate for fiscal 2025 loss per share has remained unchanged at $2.29 (versus a loss of $2.34 a year ago) in the past 30 days. However, the consensus mark for fiscal 2026 loss per share has widened to $2.41 in the same time frame.
The Zacks Consensus Estimate for fiscal 2025 and 2026 sales implies growth of 29.6% and 22.4%, respectively.
Image Source: Zacks Investment Research
Wrapping Up
Despite C3.ai’s high-profile partnerships and a strong pipeline of pilot programs, its persistent lack of profitability, margin pressures, and an increasingly expensive cost structure raise concerns. While recent momentum has lifted the stock price by more than 20% in the past month, this rally masks deeper operational concerns. The company continues to operate at a steep GAAP loss, with more than 300 active pilots that are yet to convert into meaningful, margin-accretive revenues. These pilots are expensive to maintain and may weigh further on gross and operating margins.
Moreover, while C3.ai trades at a forward Price/Sales ratio of 6.39, above the sector average, its long-term financial outlook has not materially improved. The increased loss estimates for fiscal 2026 and expectations of negative free cash flow for most of fiscal 2025 raise red flags for investors seeking sustainable returns. Given the uncertain timeline for profitability and the ongoing dilution risk from continued investment in sales and R&D, the risk-reward profile for C3.ai appears unfavorable at current levels. C3.ai currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
C3.ai Trading at a Premium at 6.39X: Time to Hold or Sell the Stock?
C3.ai, Inc. (AI - Free Report) is currently trading at a slight premium relative to its Zacks Computer & Technology sector but at a discount to historical metrics. In terms of the forward 12-month Price/Sales, AI is trading at 6.39X, higher than the sector’s 6.18X. Its forward 12-month P/S ratio sits below its three-year average, as shown below.
C3.ai Valuation
Image Source: Zacks Investment Research
In terms of C3.ai’s share price performance, its shares have gained a notable 20.7% in the past month. However, it has underperformed the Zacks Computer & Technology sector and the Zacks Computers - IT Services industry, as shown below.
At its current price, the AI stock represents a 48.6% discount from its 52-week high of $45.08. It also indicates a 36.1% premium to its 52-week low of $17.03.
C3.ai Share Price Performance
Image Source: Zacks Investment Research
Is a recent uptick in C3.ai’s stock price reason enough to buy in? Before making a decision based solely on momentum, let’s take a closer look at the underlying factors that could help investors determine whether now is the right time to add AI stock to their portfolio.
Decoding C3.ai’s Tailwinds
C3.ai’s partnerships with hyperscalers and industry leaders, such as Amazon’s (AMZN - Free Report) AWS, Alphabet’s (GOOGL - Free Report) Google Cloud, Microsoft’s (MSFT - Free Report) Azure, and Booz Allen Hamilton, serve as key growth multipliers. The company’s integration into Microsoft’s global sales ecosystem and the execution of co-selling motions resulted in 28 closed deals across nine industries, implying a 460% quarter-over-quarter increase. These alliances shortened sales cycles by nearly 20% and expanded the company’s qualified sales pipeline by 244% year over year, highlighting the effectiveness of its partner-driven go-to-market strategy.
C3.ai expanded its customer footprint across both commercial and government sectors. Notable wins included Flex, Sanofi, ExxonMobil, Shell and the U.S. Department of Defense. These clients adopted solutions ranging from predictive maintenance and mission assurance to customer service enhancement using C3 Generative AI. This diversification across industries, from pharma to utilities and defense, demonstrates the flexibility and relevance of C3.ai’s applications across mission-critical environments.
C3.ai has built a robust federal pipeline, especially with the U.S. Department of Defense (DoD), where use cases such as predictive maintenance, logistics optimization and battlefield decision support are gaining traction. The company cited 39 active pilots with the DoD and Intelligence Community during the quarter. This engagement, which includes partnerships with entities such as the U.S. Air Force and Army, positions C3.ai to benefit from increasing federal AI budgets and long procurement cycles that often result in multi-year deals. In April 2025, C3 AI and Arcfield have announced a strategic collaboration aimed at accelerating the adoption of enterprise-grade AI applications for U.S. defense and intelligence agencies. Arcfield will utilize the C3 Agentic AI Platform and C3 Generative AI to enhance its mission-critical services, including systems engineering, predictive maintenance and space defense operations.
What’s Affecting C3.ai?
C3.ai faces significant challenges, including the need to achieve sustainable profitability and navigate competition from both established players and emerging startups. The company reported GAAP a net loss of 62 cents per share in the fiscal third quarter (non-GAAP loss of 12 cents per share).
A significant challenge for C3.ai is the cost structure associated with its numerous pilot deployments. The company signed 50 new pilots in the fiscal third quarter, bringing the total to 310, of which 245 are active. These pilots, often precursors to larger contracts, carry higher upfront costs, resulting in pressure on gross margins. 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.
C3.ai is actively scaling its operations, particularly through the expansion of its direct salesforce and strategic partner ecosystem, which includes Microsoft, AWS and McKinsey's QuantumBlack. While this investment is central to long-term growth, it also introduces near-term pressure on operating margins. The company plans to continue investing in sales, customer support and R&D through fiscal 2025. This is expected to keep operating losses elevated and push the company into negative free cash flow territory for the full year, though a positive free cash flow is expected in the fiscal fourth quarter.
C3.ai’s Estimate Revision Trend
The Zacks Consensus Estimate for fiscal 2025 loss per share has remained unchanged at $2.29 (versus a loss of $2.34 a year ago) in the past 30 days. However, the consensus mark for fiscal 2026 loss per share has widened to $2.41 in the same time frame.
The Zacks Consensus Estimate for fiscal 2025 and 2026 sales implies growth of 29.6% and 22.4%, respectively.
Image Source: Zacks Investment Research
Wrapping Up
Despite C3.ai’s high-profile partnerships and a strong pipeline of pilot programs, its persistent lack of profitability, margin pressures, and an increasingly expensive cost structure raise concerns. While recent momentum has lifted the stock price by more than 20% in the past month, this rally masks deeper operational concerns. The company continues to operate at a steep GAAP loss, with more than 300 active pilots that are yet to convert into meaningful, margin-accretive revenues. These pilots are expensive to maintain and may weigh further on gross and operating margins.
Moreover, while C3.ai trades at a forward Price/Sales ratio of 6.39, above the sector average, its long-term financial outlook has not materially improved. The increased loss estimates for fiscal 2026 and expectations of negative free cash flow for most of fiscal 2025 raise red flags for investors seeking sustainable returns. Given the uncertain timeline for profitability and the ongoing dilution risk from continued investment in sales and R&D, the risk-reward profile for C3.ai appears unfavorable at current levels. C3.ai currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.