Summary
C3 AI reported fiscal first quarter 2024 total revenue of $72.4 million, up 10.8% from the prior-year quarter. That top-line growth did not carry through to profitability. Gross profit fell 13.5% to $40.5 million, and gross margin dropped 15.8 percentage points to 56.0%. The MD&A attributes the gross margin decline to a lower subscription margin and higher personnel-related costs. The operating loss widened 1.2% to $74.1 million. Operating margin improved to -102.4%, an increase of 9.7 percentage points, even as the operating loss widened. The net loss narrowed 10.5% to $64.4 million. Diluted EPS improved to -$0.56. Operating cash flow turned positive at $3.9 million, up 110.3%. Capital expenditures were $11.3 million, down 27.0%. Deferred revenue declined 6.2% to $41.0 million. Remaining performance obligations fell 27.0% to $334.6 million.
C3 AI closed new and expanded agreements with NEOM, Nucor, Roche, Riverside County, California, Pantaleon, Ball, Cargill, Con Edison, Shell, Tyson Foods, and the U.S. Department of Defense. The partner ecosystem delivered 20 agreements with and through partners including Google Cloud, AWS, Microsoft, and Booz Allen Hamilton. Over 60% of business was closed with and through the partner network. Federal bookings rose 39% compared with the year-ago quarter. The federal business also expanded with new and expanded projects with the Chief Digital and AI Office, the U.S. Marines Corps, the U.S. Air Force, the Missile Defense Agency, and the Defense Counterintelligence and Security Agency. C3 Generative AI added eight new agreements in the first quarter, bringing the total to 12 generative AI agreements to date. The qualified pipeline of C3 Generative AI opportunities exceeded 140. The company also launched the C3 Generative AI Suite with 28 new domain-specific generative AI solutions, each deployable within 12 weeks for $250,000. Customer Engagement reached 334 as of July 31, 2023, compared with 223 as of July 31, 2022. Revenue came in at the high end of guidance of $70.0 million to $72.5 million. International customers represented approximately 15% of total revenue in the quarter, compared with 21% in the prior-year period. The company's customer agreements range from $25 licenses of C3 AI Ex Machina to multi-million-dollar enterprise-wide agreements.
Management provided guidance for the second quarter of fiscal 2024 and the full fiscal year 2024. Second quarter total revenue is expected in the range of $72.0 million to $76.5 million, with non-GAAP loss from operations of $27.0 million to $40.0 million. Full year fiscal 2024 total revenue is expected in the range of $295.0 million to $320.0 million, with non-GAAP loss from operations of $70.0 million to $100.0 million. The CEO stated that the company still expects to be cash positive in the fourth quarter of fiscal 2024 and in fiscal 2025, but does not expect to be non-GAAP profitable in the fourth quarter of fiscal 2024. C3 AI plans to invest in lead generation, branding, market awareness, and customer success for its Generative AI solutions. The MD&A notes that the transition to a consumption-based pricing model has lowered revenue growth and decreased RPO in the immediate term, while management believes it will accelerate revenue growth and RPO over the medium and long term.
Risks remain substantial. C3 AI depends on a limited number of existing customers that account for a substantial portion of revenue. The company has a history of operating losses. Management expects to continue to incur operating losses and generate negative cash flows from operations in the next few quarters. Macroeconomic conditions such as labor shortages, supply chain disruptions, inflation, higher interest rates, and capital markets volatility are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management. RPO is not necessarily indicative of future revenue growth because it does not account for the timing of customers' consumption or their consumption of more than their contracted capacity. Customer acquisition, retention, and expansion remain critical to sustaining growth. Market awareness and acceptance of enterprise AI solutions in general and C3 AI products in particular also affect results. The company's ability to attract new customers and retain existing customers is central to its outlook.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $72.4M | $72.4M | -0.1% | $65.3M | +10.8% |
| Gross profit | $40.5M | $47.5M | -14.6% | $46.9M | -13.5% |
| Gross margin | 56.0% | 65.6% | -9.6 pp | 71.8% | -15.8 pp |
| Research & development | $50.9M | $49.7M | +2.4% | $55.9M | -9.0% |
| Sales & marketing | $43.9M | $51.7M | -15.1% | $43.0M | +2.1% |
| General & administrative | $19.9M | $19.4M | +2.5% | $21.2M | -6.4% |
| Total operating expenses | $114.6M | $120.8M | -5.1% | $120.1M | -4.6% |
| Operating income (loss) | -$74.1M | -$73.3M | -1.1% | -$73.2M | -1.2% |
| Operating margin | -102.4% | -101.2% | -1.2 pp | -112.1% | +9.7 pp |
| Net income (loss) | -$64.4M | -$65.0M | +0.9% | -$71.9M | +10.5% |
| Net margin | -88.9% | -89.7% | +0.8 pp | -110.0% | +21.1 pp |
| Diluted EPS | -$0.56 | — | — | -$0.67 | +$0.11 |
Risks
The shift from subscription-based pricing to consumption-based pricing for new customers reduces visibility because revenue is recognized on consumption and customers may consume the platform more slowly than expected. MD&A states the transition's immediate-term effect lowers revenue growth and decreases RPO, and RPO was $334.6 million in FY2024 Q1, down 27.0% versus the prior-year quarter and down from $381.4 million at April 30, 2023.
Historically a limited number of customers have accounted for a substantial portion of revenue, some have reduced spend or decided not to renew, and average total subscription contract value is decreasing. MD&A notes subscription revenue from existing customers included a decrease of $5.7 million related to the Baker Hughes arrangement for the three months ended July 31, 2023 compared to the same period last year.
Total gross margin declined to 56.0% in FY2024 Q1 from 71.8% in the prior-year quarter, down 15.8 percentage points, and gross profit decreased 13.5% as subscription margin fell on higher personnel-related costs and stock-based compensation. This margin compression could continue as costs increase to support growth.
Macroeconomic uncertainties including inflation, higher interest rates, bank failures, supply chain disruptions, and recession risks have had and could continue to have an adverse impact, causing customers to optimize consumption and rationalize budgets. MD&A states these conditions may reduce demand, lengthen sales cycles, and create collection difficulties.
The Enterprise AI market is intensely competitive, and larger competitors with broader offerings and greater resources may bundle products, sell at zero or negative margins, or acquire businesses to accelerate adoption. Competitive pressures could reduce demand, revenue, gross margins, and market share.
A putative class action filed in March 2022 alleges violations of federal securities laws regarding statements about the Baker Hughes partnership, strategic alliances, market potential, and product uptake. An April 4, 2023 short seller report and any SEC or Department of Justice inquiries could cause material management distraction and adversely affect the business.
Revenue growth depends on strategic relationships including Baker Hughes, AWS, FIS, Google Cloud, Microsoft, and Raytheon, but these partners may not prioritize C3 AI Software, may offer competing products, and the Baker Hughes oil and gas exclusivity arrangement continues only until April 30, 2025. If partners do not perform, revenue growth may be harmed.
Sales cycles are long and unpredictable, with the length from initial evaluation to payment approximately 3.7 months but capable of extending over a number of years for some customers. Large individual sales represent a large proportion of overall sales and may close in later periods or not at all, making cash flows and margins difficult to plan.
Success depends heavily on founder and CEO Thomas M. Siebel and other senior management, all of whom are at-will employees and none covered by key person life insurance. Intense competition for AI, data science, engineering, and sales personnel could make it difficult to attract and retain qualified staff.
C3 AI processes personal and sensitive data subject to evolving U.S. and foreign privacy laws including CCPA, CPRA, GDPR, and UK GDPR, with potential fines up to EUR 20 million or 4% of annual global revenue and private litigation risk. Compliance obligations could increase costs and disrupt operations.
SaaS KPIs
All quarters →RPO
Non-GAAP Gross Margin
Free Cash Flow
Non-GAAP loss from operations
Customer Engagement
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.