C3.ai Reports Strong Q2 Results, Boosted by Microsoft Partnership and AI Expansion

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On Thu, 5 Dec, 8:01 AM UTC

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C3.ai's Q2 FY2025 results show significant revenue growth and a strategic alliance with Microsoft, driving stock surge despite CEO's plan to sell shares.

C3.ai Reports Strong Q2 Financial Performance

C3.ai, a leading artificial intelligence software company, has reported impressive second-quarter results for fiscal year 2025, marking its seventh consecutive quarter of accelerating revenue growth 12. The company posted total revenue of $94.3 million, a 29% increase year-over-year, surpassing analyst expectations of $91.02 million 35.

Key Financial Highlights

  • Subscription revenue reached $81.2 million, up 22% year-over-year, accounting for 86% of total revenue 25.
  • Non-GAAP gross profit stood at $66.3 million, representing a 70% gross margin 5.
  • The company reported a narrower-than-expected non-GAAP net loss of $0.06 per share, compared to analyst estimates of $0.16 per share 13.
  • C3.ai's cash position remains strong, with over $730 million in cash and cash equivalents 5.

Strategic Microsoft Partnership

A significant highlight of the quarter was C3.ai's new global alliance agreement with Microsoft, signed on September 30, 2024 2. This partnership establishes C3.ai as the preferred AI application provider on Microsoft's Azure cloud computing platform 1. Key aspects of this alliance include:

  • Integration of C3.ai products into Microsoft's enterprise licensing agreements 2.
  • Availability of C3.ai solutions on the Azure Price List and Marketplace 2.
  • Microsoft's global sales organization now incentivized to sell C3.ai products 2.

CEO Thomas Siebel emphasized the potential of this alliance, stating, "It is difficult to overstate the potential of the Microsoft-C3 AI strategic alliance" 12.

Customer Acquisition and Market Expansion

C3.ai reported closing 58 engagements in the quarter, including 36 pilots 2. The company entered into new and expanded agreements with major corporations such as ExxonMobil, Koch Industries, Shell, and government entities like the U.S. Department of Defense 25.

Future Outlook and Challenges

Despite the positive results, C3.ai faces some challenges:

  • The company revised its full-year operating loss forecast to $105-$135 million, wider than previously expected 1.
  • C3.ai no longer expects to generate positive free cash flow for fiscal 2025 4.
  • There are concerns about the renewal of the exclusive marketing agreement with Baker Hughes, which has been a significant revenue contributor 4.

Stock Performance and Analyst Reactions

Following the earnings announcement, C3.ai's stock surged by over 13% 5. Analysts have responded positively, with some raising their price targets:

  • JMP Securities raised its price target from $40 to $55 4.
  • JP Morgan increased its target from $19 to $28 4.

However, analysts also note that C3.ai should trade at a discount compared to peers due to its smaller scale and unprofitability 4.

CEO Stock Sale Plans

In a separate development, CEO Thomas Siebel has filed to sell 12.78 million shares, set to expire on December 17, 2026 1. This news initially caused some volatility in the stock price but was offset by the strong quarterly results 1.

As C3.ai continues to navigate the rapidly evolving AI landscape, its strategic partnerships and focus on enterprise AI applications position it for potential growth, despite ongoing challenges in achieving profitability.

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