Shares in C3.ai tumbled after the software maker reported fiscal second quarter revenue that missed estimates and issued a weaker-than-expected revenue outlook for AI stock.
The software maker reported October quarter earnings after the market close on Wednesday.
C3.ai said it lost 13 cents per share on an adjusted basis. That compared with an 11-cent loss a year earlier.
Revenue rose 17% to $73.2 million. Wall Street analysts polled by FactSet had predicted a loss of 18 cents a share on revenue of $74.3 million.
For the current quarter ending in January, the company predicted revenue of $76 million at the midpoint of guidance. Further, analysts projected revenue of $77.7 million.
"New bookings growth is very strong and full year revenue guidance was maintained," said Oppenheimer analyst Tim Horan in a report. "However investments are ramping to meet demand and income guidance was lowered. The company is prioritizing pilot trials and transitioning to consumption priced services, pressuring growth and margins short term, but the worst is behind us."
The software maker has backed off its target to turn profitable on an adjusted basis by the fourth quarter of this fiscal year amid growing investments in artificial intelligence.
AI Stock: Profitability Pushed Out
On the stock market today, AI stock tumbled 10.8% to close at 26.02.
AI stock had gained 172% in 2023 ahead of the C3.ai earnings report.
The company has told analysts it expects revenue growth to reaccelerate as more AI pilot projects ramp up into commercial production.
Deutsche Bank analyst Brad Zelnick maintains a sell rating on AI stock.
"We remain cautious on the pace and conversion and investment into tangible consumption commitments for C3, which is hard to see in results or forward guidance to date, both top-line and gross margins that continue to be weighed down by a higher mix of pilots," Zelnick said in a report.
The software maker has backed off its target to turn profitable on an adjusted basis by the fourth quarter of this fiscal year amid growing investments in artificial intelligence.
Meanwhile, C3.ai is one of many AI stocks to watch.
Also, C3.ai had a Relative Strength Rating of 93 out of a best-possible 99 heading into the earnings report, according to IBD Stock Checkup.
Further, C3.ai's initial public offering in early December 2020 raised $651 million.
The software maker helps companies build artificial intelligence applications, and targets the energy, financial services and defense markets. But it hasn't disclosed pricing for new generative AI products.
In late 2022, the enterprise AI software provider changed its pricing model from subscription to consumption-based.
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
