C3.ai Faces Significant Challenges: Revenue Decline, Leadership Change, and Uncertain Future

C3 AI is a 'sinking ship,' Wedbush says after earnings

The generative artificial intelligence boom has been driving the Nasdaq to all-time highs, but not every company in the space is a success story. Analysts at Wedbush are calling C3 AI, an enterprise AI provider, a "sinking ship" after disappointing earnings and changes in the executive suite. C3 had warned investors that its numbers were going to be rough before Wednesday's earnings announcement - and the revenue figure of $70.3 million was in line with that lowered guidance. But the company closed just 46 agreements last quarter, compared to 69 in the prior quarter. It also has withdrawn its guidance for the just-started fiscal year. The company also announced that Stephen Ehikian would take over as C3's CEO, replacing Tom Siebel, who earlier this year revealed that he was diagnosed with an autoimmune disease that resulted in "significant visual impairment." Siebel will remain at the company as executive chairman. Ehikian has previously served as Acting Administrator of the General Services Administration (GSA), as well as CEO and co-founder of Airkit, an AI company for customer service teams, and as vice president of product at Salesforce. Wedbush analyst Dan Ives wrote in a note to investors that the hire of Ehikian was "solid," given Ehikian's experience in scaling AI companies. But he said it wasn't enough to erase investor concerns. "Regardless of this new hire, the company still has significant hurdles to overcome to regain the Street's confidence given the weakness in its operational performance following the sales restructuring," Ives wrote. C3 was one of the beneficiaries of the hot IPO market during the pandemic. The stock launched at more than $119 per share, eventually moving as high as $161. That's well above the current share price of $16. Life to date, the company's stock has lost almost 87% of its value. It was down about 3% on Thursday. Government contracts are a significant part of C3's business. In May, it landed a $450 million deal with the Air Force for a predictive analytics program.

C3 AI Chairperson: The Company's Q2 2026 Results Were "Completely Unacceptable In Virtually Every Respect," Disputes MIT's AI Report

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. C3 AI, a provider of turnkey AI solutions for enterprises, is down around 12 percent in the after-hours trading session after providing a largely subpar earnings update for its fiscal Q1 2026, while also announcing a CEO replacement as a part of its nearly concluded restructuring efforts. For the benefit of those who might not be aware, C3 AI currently has two main products: its agentic AI platform that offers a plethora of pre-built, low-code/no-code, AI-powered applications to automate mundane corporate tasks, and its generative AI platform that offers access to a number of large language models (LLMs) in a tailored environment to seamlessly interact with enterprise data. For the first quarter of 2026, C3 AI reported $70.3 million in revenue vs. consensus expectations of of $94.5 million. The company reported an EPS of -$0.37, significantly wore than the consensus estimate of -$0.20. It also reported a non-GAAP gross profit of $36.3 million corresponding to a margin of 52 percent. To complete its trifecta of bad news, C3 AI delivered an ultra-light guidance for its fiscal Q2 2026, projecting a top-line figure of between $72 million and $80 million, versus the consensus estimate of $99.6 million. The company, however, chose to withhold its guidance for Q3 and FY 2026 for now, especially as its sales In what is a rare bit of good news, C3 AI has appointed Stephen Ehikian, who brings extensive AI expertise and overall and leadership experience to the proverbial table, as the new CEO, effective the 01st of September. The real fireworks, however, began during C3 AI's earnings call, when its chairperson, Thomas Siebel, declared that the just-revealed results were "completely unacceptable in virtually every respect." While expounding on his declaration, Siebel identified one key reason for the company's subpar performance: restructuring-induced upheaval leading to confusion among key sales nodes, and compounded by Siebel's illness that prevented him from offering critical coordination at this juncture. On the positive front, C3 AI has now concluded its restructuring activities, and appears poised to resume its hyper growth trajectory. Siebel also disputed a recent MIT report that said around 95 percent of enterprise generative AI projects were not generating any return, going on to declare that a "majority" of C3 AI's LLM deployments were successful, owing to the holistic solutions that it provides.

C3.ai Reports 19% Revenue Fall in Q1 | The Motley Fool

C3.ai (AI -3.90%), an enterprise artificial intelligence (AI) software company, released its financial results on Sept. 3, 2025, for the first quarter of fiscal 2026. The headline results showed a significant shortfall with revenue of $70.3 million falling 19.4% year over year. Profitability worsened compared to Q1 fiscal year 2025, with an adjusted net loss per share of $0.37. The adjusted gross margin dropped to 52% from 70% in Q1 fiscal year 2025. Management cited a disruptive sales reorganization and health issues affecting founder Thomas Siebel as key reasons for the quarter's weak outcomes. The company withdrew its full-year outlook, citing the arrival of a new CEO and operational reset. Overall, the period marked one of sharp financial underperformance and elevated uncertainty as C3.ai undergoes a leadership and structural transition. Source: C3.ai. Note: Fiscal 2026's first quarter ended July 31, 2025. Fiscal 2025's Q1 ended July 31, 2024. C3.ai develops and sells the C3 Agentic AI Platform, a set of tools that helps large organizations build, deploy, and manage artificial intelligence applications. The platform uses a model-driven architecture, which makes it easier for businesses to create complex AI tools without needing to write heavy custom code. The core products include the Agentic AI Platform, which focuses on automated enterprise AI, and the C3 Generative AI suite, which provides advanced data analysis capabilities based on artificial intelligence models. The company's strategy centers on technological innovation, platform scalability, and strategic partnerships with cloud providers such as Microsoft Azure, Amazon's AWS, and Alphabet's Google Cloud. It aims to expand its influence in sectors like government, manufacturing, and energy by enabling clients to solve complex data problems and automate workflow through AI. In recent quarters, the company has shifted more towards a consumption-based pricing model and invested in channel and partner integrations to reach new customer segments. The most telling aspect of the quarter was the revenue shortfall. Sales were $70.3 million, down nearly a fifth compared to Q1 fiscal year 2025. This decline affected both subscription revenue -- usually a stable source for software-as-a-service (SaaS) firms -- and professional services. Subscription sales dropped almost 18% compared to Q1 fiscal year 2025, and professional services revenue was down over 27% compared to Q1 fiscal year 2025. Subscription fees accounted for 86% of total revenue, an increase in mix but not in absolute dollars. Margins compressed sharply compared to Q1 fiscal year 2025. Gross profit margin slid to 52% from 70% a year ago. Operating expenses rose compared to Q1 fiscal year 2025, with spending on sales and marketing, research and development, and administration all increased over 20% compared to Q1 fiscal year 2025. Operating and net losses worsened compared to Q1 fiscal year 2025. Non-GAAP net loss of $(49.8) million was seven times the adjusted loss reported in Q1 fiscal year 2025, and the non-GAAP loss per share widened to $(0.37) from $(0.05). Leadership changes were a defining event. Founder Thomas Siebel, previously an active participant in sales, cited health issues that reduced his involvement. The company appointed Stephen Ehikian as CEO, effective Sept. 1, 2025. The sales and services organization underwent restructuring, with new leadership in place as part of efforts to refocus sales execution. Management described the quarter as "completely unacceptable," noting the disruption caused by these changes. The company also closed 46 total agreements, but did not see these translate into improved financial results. Product development continued, highlighted by advances in C3 Generative AI -- a product family that enables automated data extraction and knowledge management for enterprise clients -- and the launch of the C3 Agentic AI Platform's integrator program. This initiative allows third-party companies to build their own tailored AI solutions using C3.ai's architecture, which could open new channels for growth. The company emphasized new partnerships and deployments, especially in the federal sector, with 12 federal agreements accounting for 28% of bookings and several major defense sector clients among the wins. However, these new contracts were not enough to offset overall commercial softness and sales execution lags. The period also saw continued expansion of strategic alliances. For example, agreements with Microsoft deepened, resulting in a marked increase in qualified pipeline deals. Notably, the joint pipeline with Microsoft grew 140% year over year, while the broader partner pipeline increased by 54% year-over-year. The scale of these pipelines suggests potential for future growth, but the company noted that sales execution needs to improve for these opportunities to convert into revenue. There were no material one-time events or announced dividend changes in the quarter, focusing instead on reinvestment in platform development and go-to-market expansion. Looking forward, management provided limited visibility. For the current quarter, revenue (GAAP) is expected in the range of $72 million to $80 million, and adjusted operating losses (non-GAAP) are forecast to remain high -- $49.5 million to $57.5 million. This outlook implies only a modest sequential improvement in revenue. but continued steep losses. Most notably, the company withdrew its previous full-year revenue and profit guidance, citing the need for the new CEO and reorganized sales team to establish a clearer operational base before setting longer-term targets. Investors will need to watch for tangible signs of operational improvement. The key things to monitor include whether the expanded partner ecosystem increases deal flow, and if product momentum in areas like generative AI translates into customer wins. With a $711.9 million cash balance as of quarter end, C3.ai has breathing room to execute its turnaround, but persistent negative cash flows (GAAP) will challenge its ability to sustain current spending and invest in growth if results do not rebound.

Why You Should Avoid This Troubled AI Stock | The Motley Fool

C3.ai (AI -7.31%) is in trouble. The enterprise artificial intelligence (AI) application provider reported a steep sales decline in the first quarter of fiscal 2026. Revenue was $70.3 million, down a whopping 19.4% year over year. The second quarter should be somewhat better, with the company's outlook calling for revenue between $72 million and $80 million. However, the midpoint of that guidance range still represents a year-over-year decline of nearly 20%. Thomas Siebel, C3.ai's founder, suffered some health issues recently. Along with the first-quarter report, the company announced that Siebel would step down as CEO while continuing to serve as Executive Chairman. Siebel has already been replaced by Stephen Ehikian, who has a track record in the AI industry. Siebel apparently played a critical role in the company's sales processes, which is somewhat unusual. "With the benefit of hindsight, it is apparent that my active participation in the sales process may have had a greater impact than I previously thought," Siebel noted in the first-quarter earnings release. C3.ai completed a restructuring of its sales and services organization in the first quarter. This restructuring, combined with Siebel's lower involvement due to health issues, contributed to the company's revenue decline. C3.ai still closed 40 agreements during the first quarter, including 12 agreements involving the federal government, but the disruption took a toll. In addition to reporting a large revenue decline and guiding for a similarly large revenue decline in the second quarter, C3.ai withdrew its previous outlook for fiscal 2026. The company will provide a new outlook along with its second-quarter report in a few months. The sharp revenue decline is a serious issue, but the company's growing losses may be an even bigger problem. C3.ai reported a net loss of $116.8 million in the first quarter, nearly double the loss reported in the prior-year period. Gross profit was cut in half, and the company's gross margin tumbled to 38%. That's incredibly low for a software company. C3.ai spent nearly as much on sales and marketing in the first quarter as it produced in revenue, with spending topping $62 million. Research and development spending ate up another $65 million. Free cash flow, which benefits from the company's stock-based compensation being added back in, was a loss of around $34 million for the quarter. C3.ai has plenty of cash and marketable securities, along with no debt, so it can handle a period of negative cash flow. However, the company is valued at around $2.2 billion, even after the stock plunged more than 90% from its all-time high. While the company's full-year outlook is still up in the air, the stock trades for roughly 5.6 times last year's sales. However, sales are almost certain to decline this year as the company struggles through its sales restructuring. The forward price-to-sales ratio is likely higher, perhaps substantially so, and profitability doesn't appear to be coming anytime soon. A new CEO and a revamped sales process could help the company return to growth, but it's tough to see how the current valuation makes any sense. Investors could overlook the company's massive losses when revenue was moving higher, but that's not the case anymore. There will be plenty of AI winners, but C3.ai doesn't appear likely to be one of them, given its current issues.