On Thursday, KeyBanc maintained a Sector Weight rating on C3.ai (NYSE:AI) stock, following the company's significant fourth-quarter subscription revenue performance.
The artificial intelligence software provider reported a $9 million, or 12%, increase in subscription revenue, surpassing expectations.
Year-over-year, subscription revenues accelerated to 41% from 23%, with notable growth in the federal sector, which saw an increase of 100% for fiscal year 2024.
The company also reported the completion of 13 GenAI pilots in the quarter, with a total of 58 completed throughout the year. Looking ahead, C3.ai has provided revenue guidance for fiscal year 2025, projecting a 23% year-over-year increase at the midpoint, which is above the consensus estimate of 20%. However, the projected EBIT margin is anticipated to be significantly lower than the consensus.
KeyBanc's commentary highlighted the potential for increased demand for C3.ai's services, especially in generative AI, which is becoming a high priority in the enterprise sector.
Despite this optimism, the firm expressed concerns regarding C3.ai's capacity to expand beyond its current vertical-specific AI applications.
There is also skepticism about the company's technological edge in horizontal markets. Additionally, the shift to a consumption-based revenue model has created uncertainty about future revenue predictability.
InvestingPro Insights
As C3.ai (NYSE:AI) continues to navigate the evolving landscape of the artificial intelligence software industry, real-time data from InvestingPro offers additional insights into the company's financial health and market performance. With a market capitalization of approximately $2.92 billion, the company holds a notable position in the sector. Notably, C3.ai has a strong liquidity position, with liquid assets that exceed short-term obligations, suggesting a robust ability to meet its financial commitments in the near term. This is especially relevant considering the company's shift to a consumption-based revenue model, which could affect revenue predictability.
InvestingPro Tips indicate that C3.ai's stock price has experienced significant volatility, with a price decline of over 35% in the last three months. While this may cause concern for some investors, it could also present a buying opportunity for others who are confident in the company's long-term growth potential, especially given the 41% acceleration in year-over-year subscription revenues. Additionally, C3.ai does not pay a dividend, which is typical for growth-focused companies reinvesting their earnings back into the business.
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