C3.ai Shares Plunge. Should Investors Buy the Stock on the Dip?

The share price of C3.ai (NYSE: AI) plunged last week after the company reported its fiscal Q3 results, continuing the stock's recent struggles. The enterprise artificial intelligence (AI) software company badly missed estimates, issued weak guidance, and announced massive layoffs. The stock has now lost more than two-thirds of its value over the past year, as of this writing.

Let's take a closer look to see if the stock could be a rebound candidate.

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Problems persist for C3.ai

In its fiscal 2026 third quarter, which ended Jan. 31, C3.ai's revenue plunged 46% to $53.3 million. That was well below its guidance range for revenue of between $72 million and $80 million and continued a trend of recent poor results.

Subscription revenue sank by 44% to $48.2 million, while professional services revenue nosedived by 64% to $5.1 million.

The company blamed its results on poor sales execution, particularly in North America and Europe. As such, it will flatten its sales organization with sales leaders now directly reporting to its CEO, who, for his own part, has been dealing with health issues. The company also plans to cut 26% of its global workforce, which will help it save $60 million, as part of an overall restructuring plan to cut costs by $135 million. It intends to lean into AI agents to improve productivity and efficiency.

As part of its strategy, C3.ai will also focus its attention on larger enterprise-wide transformations, targeting the energy, manufacturing, and healthcare industries in the commercial sector, as well as the defense and government services in the public sector.

While C3.ai positions itself as a software-as-a-service (SaaS) company, its gross margin is not reflective of that. Its adjusted gross margin (which takes out stock-based compensation expenses) fell to just 37%. C3.ai continued to be unprofitable, recording an adjusted loss of $0.40 per share versus a $0.12 per share loss a year ago.

It generated a negative free cash flow of $56.2 million in the quarter and a negative $137.4 million free cash flow through the first nine months of its fiscal year. It ended the quarter with $622 million in cash and marketable securities on its balance sheet and no debt.

Management guided for fiscal Q4 revenue to be between $48 million and $52 million, compared to $108.7 million a year ago. It reduced its fiscal 2026 revenue guidance range to $246.7 million to $250.7 million.

Can C3.ai's stock rebound?

C3.ai is a mess right now, with sales plummeting and margins contracting. If nothing else, its restructuring will be a good experiment to see if agentic AI can help a company significantly cut its labor force and help improve productivity. However, the company also needs to see revenue growth, and it's difficult to see where that will come from.

As such, I'd stay on the sidelines. There are cheap SaaS companies with solid growth that investors can buy right now, so there is no need to own C3.ai.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.