After-hours plunge of over 16%! Affected by companies tightening spending, C3.ai's Q1 subscription revenue and full-year guidance fall short of expectations
AI software service provider C3.ai reported a first-quarter subscription revenue of $73.5 million due to tightened corporate spending, lower than analysts' expectations of $79.1 million, leading to a more than 16% plunge in stock price after hours. Despite total revenue reaching $87.2 million, a year-on-year increase of 20.5%, C3.ai's guidance for revenue in the fiscal year 2025 is below market expectations due to economic uncertainties and the impact of high interest rates
According to the Zhitong Finance APP, due to companies tightening spending amid economic uncertainty, AI software service provider C3.ai (AI.US) announced lower-than-expected quarterly subscription revenue in its first fiscal quarter earnings report. As a result, the company's stock price experienced a sharp decline in after-hours trading on Wednesday.
Facing high interest rates and unstable business conditions, the cautious attitude of enterprises towards new software investments has impacted the demand for C3.ai products. The company's first-quarter subscription revenue was $73.5 million, below the analysts' average expectation of $79.1 million.
Following the financial report, as of the time of writing, the stock plummeted more than 16% after hours. After more than doubling in 2023, the stock has already dropped by 20% this year.
The sharp drop in C3.ai's stock price highlights the need for tech companies to maintain a delicate balance between innovation and market stability. While the company's total revenue slightly exceeded expectations, the significant decline in subscription revenue reflects widespread concerns about corporate spending during times of economic uncertainty.
Looking ahead, despite having prominent clients such as the U.S. Department of Defense and Dolce & Gabbana, C3.ai's guidance remains below analysts' expectations. The company maintains its revenue outlook for the fiscal year 2025 between $370 million and $395 million, with the midpoint below analysts' expected $383.9 million. Revenue for the second quarter is expected to be between $88.6 million and $93.6 million, consistent with the expected $91.1 million.
The company's situation underscores the broader trend of enterprises readjusting their technology budgets in times of economic uncertainty. Its solutions leverage generative artificial intelligence technology to cater to the needs of various industries such as manufacturing, defense, aerospace, and pharmaceuticals. However, the expectations for the current fiscal year and the next quarter indicate a cautiously optimistic attitude. As businesses adapt to the turbulent economic environment, the resilience of the tech industry will be tested.
Nevertheless, the company's total revenue reached $87.2 million, a 20.5% year-on-year increase, exceeding analysts' expected $86.94 million. Adjusted earnings per share were -$0.05, better than the market's expected -$0.13.
Benefiting from enterprise clients' interest in artificial intelligence, C3.ai has been consistently launching products with generative AI. The California-based company stated that in the quarter ending on July 31, it completed 17 generative AI pilot projects with large corporations and government agencies.
C3.ai's Chairman and CEO Thomas M. Siebel stated, "We had a strong start to our fiscal year, with growing demand for enterprise AI driving accelerated revenue growth for the sixth consecutive quarter. C3.ai is the earliest enterprise AI company. We are steadfast in addressing the most challenging problems in enterprises, making us the highest-rated company in customer satisfaction in the industry."