Should You Buy the Dip on C3.AI Stock?

Investor attention when it comes to artificial intelligence (AI) has been focused on the large technology players. These are not the only companies dabbling in the AI space. In fact, there are many companies that embraced AI before it was trendy, including C3.ai (NYSE: AI). Going public in late 2020, the enterprise AI software provider has seen its stock collapse in recent years due to profitability concerns even as the rest of the AI field soars to new heights.

Let's see if now is a perfect time for contrarian investors to buy into C3.ai stock as a cheap way to invest in the AI arms race.

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Enterprise AI applications

Branding itself as an "Enterprise AI application software company," C3.ai builds and deploys custom analytics tools for large enterprises, such as Baker Hughes and the United States Air Force. These large contracts are given to the company to connect all the data together at these sprawling enterprises.

Now, the company is expanding into generative and agentic AI with its two new tools that it is serving customers. It is working with the large cloud providers and McKinsey as partners to win more deals, highlighting 419% growth in partner-supported bookings last quarter. Last fiscal year, the company signed 264 total agreements, up 38% year over year.

All these developments led to 26% year-over-year revenue growth last quarter. However, C3.ai's future may not look as bright. Its remaining performance obligations -- a measurement of total contract value that will turn into future revenue -- have collapsed from close to $500 million in 2022 to $235 million at the end of last quarter. This indicates that the company is failing to win customer spending even during this AI spending boom, where potentially hundreds of billions of dollars are going to be spent to build out this new market.

Zero profits and trailing the competition

Other concerns for C3.ai are mounting. The company has never generated a profit, posting a $324 million operating loss over the last 12 months compared to just $389 million in revenue. Huge losses like this show that C3.ai's custom software deployment model does not scale very well. It has large sales, research, and development costs that do not make up for the size of its contracts. In its fiscal 2025, which ended in April, the company spent 60% of revenue on stock-based compensation, which is not sustainable.

Looking at the competition, C3.ai is lacking and falling behind. Palantir Technologies generates around 10 times the revenue of C3.ai, is growing its revenue faster, and has soaring remaining performance obligations. Large enterprises are going for Palantir over C3.ai, and it is showing up in the numbers.

AI Revenue (TTM) data by YCharts

Should you buy C3.ai stock?

It should be clear that C3.ai is not a strong company, and investors should avoid buying it today. It is growing revenue at a decent clip, yes, but it is seeing its remaining performance obligations evaporate while earnings move in the wrong direction and customer spending gets eaten up by Palantir Technologies and other competitors.

The stock trades at a high valuation despite these horrible financials, creating even more downside risk for shareholders. C3.ai does not have an earnings ratio due to its lack of profitability, but it does trade at a high price-to-sales ratio (P/S) of 8.3 as of this writing on June 11, 2025. Some software stocks may trade at this level, but that is only for the clear industry leaders with sky-high bottom-line profit margins and long histories of growth.

C3.ai has neither. It has never generated a profit, which should tell investors it deserves to trade at a much lower P/S ratio than its software peers. Add everything up, and C3.ai is a bad investment for investors today. Don't touch this stock with a 10-foot pole.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.