Why C3.ai Sank Again This Week

Shares of AI software maker C3.ai (NYSE: AI) plummeted 19.1% this week through Thursday trading, according to data from S&P Global Market Intelligence.

C3.ai had its fourth-quarter earnings release on Wednesday, and the results were pretty disastrous, with big misses on both the top and bottom lines.

While it appears the company may be a "melting ice cube," the new CEO has only been on the job for about six months, so there is still hope for a turnaround.

C3.ai's results plunge

In the fourth quarter, C3.ai's revenue fell a whopping 46.1% to $53.3 million, while adjusted (non-GAAP) losses per share fell from ($0.12) to ($0.40). Both figures missed expectations. Not only were these statistics a big miss, but management also guided next quarter's revenue to be $50 million at the midpoint of the range, down sequentially and missing the $77.7 million consensus by a wide margin.

In conjunction with the release, C3.ai's new CEO announced a large restructuring plan that aims to cut headcount by 26%, leading to overall operating expense savings of $135 million. The full effect of those savings should hit in the back half of the company's fiscal 2027, which begins in November 2026.

For reference, C3.ai projects an adjusted operating loss of $234 million for the year ending in April 2026. So, the restructuring will help the company shed more than half its current loss rate, but won't nearly get all the way back to profitability by itself.

Image source: Getty Images.

Rays of hope?

Needless to say, the quarter was a disaster. But there are still some shreds of hope for C3.ai shareholders at this point.

First, the company has cash & equivalents of $622 million and no debt. So, new CEO Stephen Ehikian has some time to figure things out.

Furthermore, Ehikian noted that after the decline, about 90% of C3.ai's revenue now comes from recurring-like subscriptions. So, revenue may stabilize a bit at these levels.

The press release also noted that across the company's federal, defense, and aerospace segment, bookings grew 134% year-over-year, good for 55% of the company's total bookings. So, at least some segments of the business appear to be catching on.

C3.ai's market cap has fallen to just $1.18 billion, meaning over half of its market cap is now in cash. If Ehikian can figure things out in short order, the stock definitely looks cheap. However, given the significant decline in revenue from a year ago, it's clear that C3.ai's commercial customers have migrated to other competitors for their AI needs.

If that trend doesn't stop or reverse, the situation could become dire. In short, C3.ai remains very risky, despite its seemingly bargain-priced shares.

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.