Summary
C3.ai released preliminary fiscal 2026 first quarter results on August 8, 2025, for the period ended July 31, 2025. Total revenue was $70.3 million, down 19.4% from $87.2 million in the prior-year quarter. Gross profit fell to $26.4 million from $52.2 million, a 49.3% decline. Gross margin was 37.6%, down from 59.8%. The operating loss widened to $124.8 million from $72.6 million. The net loss widened to $116.8 million from $62.8 million. Diluted loss per share widened to $0.86 from $0.50. Operating margin was -177.7%, down from -83.2%. The company said the results are preliminary estimates and have not been reviewed by its independent auditors.
Cash generation and contracted backlog moved in opposite directions. Operating cash flow was -$33.5 million, down from $8.0 million in the prior-year quarter. Capital expenditures were $0.8 million, down 17.7% from $0.9 million. Deferred revenue was $29.9 million, down 25.8% from $40.3 million. Remaining performance obligations, or RPO, were $223.2 million, up 9.1% from $204.5 million. The company said RPO provides insight into committed revenue but may not accurately reflect future revenue growth, particularly for pay-as-you-go consumption pricing agreements. It also noted that RPO can be affected by the timing of renewals, the conversion of initial production deployments into recurring subscription contracts, purchases of additional capacity, average contract terms, and seasonality. RPO should be reviewed alongside revenue and other financial metrics.
The quarter included a major sales and services reorganization. C3 AI restructured its global sales and services organization during the quarter, and the company said the restructuring is complete. New leadership includes Rob Schilling as EVP and Chief Commercial Officer, effective June 16, 2025; John Kitchingman as General Manager, EMEA, effective June 30, 2025; Jeff Cosseboom as Group Vice President, North America East Sales; and Lars Farnstrom as Group Vice President, Nordics. Schilling is responsible for all Sales, customer-facing teams, and Alliances. Alex Amato was promoted to lead professional services and customer service operations. The company executed 28 initial production deployment agreements during the quarter, down from 52 in the prior-year quarter. CEO Thomas Siebel called the sales results completely unacceptable. He attributed them to the disruptive effect of the reorganization and to his health issues, including multiple hospitalizations and vision impairment, which limited his participation in the sales process.
Management also announced a CEO transition. Stephen Ehikian was appointed CEO effective September 1, 2025, and the company announced the appointment on September 3, 2025. Thomas Siebel plans to continue as Executive Chairman. On the same date, the company said it would provide completed financial results, an update on fiscal 2026 guidance, and additional details on September 3, 2025. The preliminary press release reported a non-GAAP loss from operations of $57.7 million to $57.9 million. Risks include the company's history of losses and ability to achieve and maintain profitability, its historic dependence on a limited number of existing customers, its ability to attract and retain customers, market awareness and acceptance of enterprise AI solutions, and the length and unpredictability of sales cycles. The company also cited macroeconomic conditions, geopolitical instability, a potential U.S. government shutdown, delays in budget approvals, and increased tariffs or global trade tensions. Management expects to continue incurring operating losses and negative cash flows from operations in the next few quarters. It said existing cash, cash equivalents, and marketable securities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. The company also said it may be required to seek additional equity or debt financing if it cannot generate cash flows necessary to expand operations. The restructuring's effect on future productivity and the CEO transition remain key execution risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $70.3M | $108.7M | -35.4% | $87.2M | -19.4% |
| Gross profit | $26.4M | $67.5M | -60.8% | $52.2M | -49.3% |
| Gross margin | 37.6% | 62.1% | -24.5 pp | 59.8% | -22.2 pp |
| Research & development | $64.7M | $58.4M | +10.7% | $52.9M | +22.2% |
| Sales & marketing | $62.5M | $70.7M | -11.6% | $52.1M | +19.9% |
| General & administrative | $24.1M | $27.4M | -12.0% | $19.7M | +22.3% |
| Total operating expenses | $151.3M | $156.5M | -3.3% | $124.8M | +21.3% |
| Operating income (loss) | -$124.8M | -$89.0M | -40.3% | -$72.6M | -72.0% |
| Operating margin | -177.7% | -81.8% | -95.8 pp | -83.2% | -94.4 pp |
| Net income (loss) | -$116.8M | -$79.7M | -46.5% | -$62.8M | -85.9% |
| Net margin | -166.2% | -73.3% | -92.9 pp | -72.0% | -94.1 pp |
| Diluted EPS | -$0.86 | -$0.62 | -$0.24 | -$0.50 | -$0.36 |
Risks
The company restructured its global sales and services organization in Q1 FY2026, and the filing states the restructuring had a disruptive effect on financial performance. Revenue declined 19.4% year over year to $70.26 million, and the operating loss widened to $124.82 million from $72.59 million.
Stephen Ehikian succeeded Thomas M. Siebel as CEO effective September 1, 2025, while Mr. Siebel remains Executive Chairman. The filing states the CEO transition may disrupt execution of the business strategy and that the company may be unable to successfully manage and grow the business until the new CEO is integrated.
Executive Chairman Thomas M. Siebel's unanticipated health limitations during Q1 FY2026 prevented him from participating in the sales process as actively as in the past, which the filing says may have negatively affected sales results. The filing also states results may continue to be negatively impacted by his ability to engage in oversight of the sales and marketing organization.
Historically a limited number of customers have accounted for a substantial portion of revenue, and average total subscription contract value is decreasing and expected to continue decreasing as the customer base shifts to smaller customers. If existing customers do not renew or relationships with largest customers are impaired, revenue and remaining performance obligations could decline.
Operating cash flow swung to negative $33.54 million in Q1 FY2026 from positive $8.04 million in the prior-year quarter. The company expects to continue incurring operating losses and negative cash flows for the next few quarters and may require additional capital, which may not be available on acceptable terms or at all.
Gross margin fell to 37.6% in Q1 FY2026 from 59.8% in the prior-year quarter, down 22.2 percentage points, driven by lower subscription and professional services margins. MD&A attributes the subscription margin decline to lower subscription revenue and higher payroll and contractor costs supporting initial production deployment projects.
The company executed 28 initial production deployment agreements in Q1 FY2026 compared with 52 in the prior-year quarter, and the filing presents this metric as reflecting trends in market penetration and customer acquisition. Growth depends on attracting new customers and expanding existing subscriptions.
RPO was $223.2 million as of July 31, 2025, up 9.1% from $204.5 million a year earlier, but down from $235.1 million as of April 30, 2025. Deferred revenue declined 25.8% year over year to $29.9 million, and management cautions RPO may not accurately reflect future revenue growth, especially for usage-based consumption agreements.
MD&A highlights adverse macroeconomic conditions including inflation, higher interest rates, geopolitical instability, a potential U.S. government shutdown, delays in budget approvals, and increased tariffs or global trade tensions. These conditions could reduce demand, lengthen sales cycles, and cause difficulties in collections.
The market is intensely competitive, and larger competitors can bundle products, sell at zero or negative margins, or leverage broader distribution. New AI platforms or entirely new technologies could make C3 AI Software obsolete or reduce demand.
SaaS KPIs
All quarters →RPO
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q1 FY2026 (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.