Can C3.ai's Revenue Growth Help Drive a Rebound in Its Stock?

Core Viewpoint - C3.ai's stock price declined significantly after reporting its fiscal 2025 third-quarter results, despite showing solid revenue growth. The company faces challenges with subscription growth and the uncertainty surrounding its partnership with Baker Hughes [1][11]. Financial Performance - C3.ai reported a revenue increase of 26% year-over-year to $98.8 million in fiscal Q3 2025, marking its fourth consecutive quarter of over 20% growth [1][2]. - Subscription revenue rose by 22% to$ 85.7 million, while professional services revenue surged by 64% to $13.1 million [2]. - Excluding revenue from Baker Hughes, C3.ai's revenue would have increased by 43%, up from 41% growth in the previous quarter [3]. - The company's gross margin improved to 59.1%, with an adjusted gross margin of around 69% [7]. - C3.ai reported an adjusted loss of$ 0.12 per share, a slight improvement from the previous year's loss of $0.13 per share [8]. Partnerships and Collaborations - C3.ai has expanded its partnership with Microsoft, which has led to a 450% increase in closed agreements across various industries [4]. - The company also formed new partnerships with Amazon and McKinsey QuantumBlack to enhance its enterprise AI solutions [5]. - In fiscal Q3, 71% of C3.ai's agreements were made in collaboration with partners, with 66 agreements signed, including 20 generative AI pilots [6]. Guidance and Future Outlook - Management provided guidance for fiscal Q4 revenue between$ 103.6 million and $113.6 million, indicating a growth rate of 20% to 31% [9]. - The fiscal 2025 revenue guidance was narrowed to a range of$ 383.9 million to $393.9 million [10]. - The uncertainty regarding the renewal of the Baker Hughes partnership remains a significant concern for the company's future growth [11][12]. Valuation Considerations - C3.ai's forward price-to-sales (P/S) ratio is approximately 6, which is considered reasonable for a software-as-a-service (SaaS) company, although its low gross margins and high stock-based compensation need to be factored in [14].