Summary
C3.ai reported fiscal 2022 second quarter revenue of $58.3 million, up 41% from the prior-year quarter. Year-to-date revenue reached $110.7 million, up 35.3%. Gross profit was $42.3 million for the quarter, up 35.3%, while year-to-date gross profit was $81.7 million, up 33.4%. Gross margin slipped to 72.6% from the prior-year quarter, a decline of 3.0 percentage points. Year-to-date gross margin was 73.8%, down 1.0 percentage point.
The bottom line deteriorated sharply. Operating loss widened to $55.7 million for the quarter, and operating margin was negative 95.6%, down 60.4 percentage points from the prior-year quarter. Net loss widened to $56.7 million. Diluted loss per share was negative $0.55. For the first six months, operating loss was $92.2 million, net loss was $94.2 million, and diluted loss per share was negative $0.91. Year-to-date operating margin was negative 83.3%, down 61.5 percentage points. Operating cash flow turned negative, with $18.9 million used in the quarter compared with $1.8 million provided in the prior-year quarter. Year-to-date operating cash flow was negative $17.9 million, down from $18.8 million provided in the prior-year period. Capital expenditures were $0.92 million in the quarter, up 246.4%, and $1.43 million year to date, up 55.5%. Deferred revenue stood at $72.9 million, down 11.1% from the prior-year quarter. Remaining performance obligations were $465.5 million.
Operational momentum centered on the Baker Hughes relationship. The company expanded and restructured the agreement for the second time, increasing its value by $45 million to $495 million, extending the term from five to six years, and guaranteeing a minimum revenue commitment over the next 3.5 years. The new structure also introduced a pricing model and selling structure intended to accelerate sales into the Baker Hughes customer base. Customer count reached 104, up 63% year over year. Production applications spanned 14 industries, up from 7 a year ago. Public sector growth was 33%, and management expects that rate to accelerate substantially in the second half. C3 AI launched C3 AI Data Vision and introduced two property appraisal applications for country tax assessors. The Google Cloud partnership built a pipeline of more than 100 qualified deals and closed its first deal as a trial in financial services. C3 AI ended the quarter with 668 full-time employees, up 39% year over year, and received over 18,000 employment applications. New production deployments included Cargill, Johnson Controls, and Shell, while new contracts were signed with CNH Industrial, Liberty Mutual, and a top 5 life sciences company. The company also added business with Cargill, Enel, FIS, Mosaic, and PTT Global Chemical, and expanded public sector work with the U.S. Air Force, U.S. Space Force, and Missile Defense Agency. The C3 AI Digital Transformation Institute expanded university relations with Microsoft, Lawrence Berkeley Labs, UC Berkeley, University of Illinois-Urbana, MIT, Carnegie Mellon, Princeton, Stanford, and KTH in Sweden.
Management issued guidance for the third quarter of fiscal 2022 and the full fiscal year. Third quarter total revenue is expected to be $66.0 million to $68.0 million. Full-year fiscal 2022 total revenue is expected to be $248.0 million to $251.0 million. Non-GAAP loss from operations is guided to $26.0 million to $30.0 million for the third quarter and $100.0 million to $108.0 million for the full year. The company raised its full-year revenue growth guidance to 35% to 37%, up from 17% growth in fiscal 2021. Risks include the widening operating and net losses, negative operating cash flow, and a decline in deferred revenue. The company also depends heavily on Baker Hughes for a large portion of its business. The COVID-19 pandemic continues to create uncertainty around IT spending, sales cycles, and customer demand. Management noted that it may need additional capital to fund strategic initiatives. C3 AI expects operating expenses as a percentage of revenue to increase as it invests to grow the business, though it anticipates those percentages to stabilize and then move lower over the long term.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $58.3M | $52.4M | +11.2% | — | — |
| Gross profit | $42.3M | $39.4M | +7.4% | — | — |
| Gross margin | 72.6% | 75.2% | -2.6 pp | — | — |
| Research & development | $36.5M | $26.7M | +36.7% | — | — |
| Sales & marketing | $46.2M | $36.8M | +25.4% | — | — |
| General & administrative | $15.3M | $12.4M | +23.6% | — | — |
| Total operating expenses | $98.0M | $75.9M | +29.1% | — | — |
| Operating income (loss) | -$55.7M | -$36.5M | -52.5% | — | — |
| Operating margin | -95.6% | -69.7% | -25.9 pp | — | — |
| Net income (loss) | -$56.7M | -$37.5M | -51.5% | — | — |
| Net margin | -97.4% | -71.5% | -25.9 pp | — | — |
| Customers | 104 | 98 | +6.1% | — | — |
Risks
The top two market partners, each with enterprise agreements that may cover multiple customers, together accounted for 39% of revenue for the three months ended October 31, 2021 and 29% for the three months ended October 31, 2020, and 37% and 29% for the respective six-month periods. Baker Hughes and Engie each exceeded 10% of revenue in the three and six months ended October 31, 2021 and 2020, so impairment or non-renewal of either relationship could materially reduce revenue.
Sales cycles are long and unpredictable, generally six to nine months from initial evaluation to payment and can extend over a number of years for large customers. Individual sales are large as a proportion of overall sales, and large deals have in some cases occurred in quarters or years later than anticipated or not at all, making quarterly results and cash flows difficult to forecast.
Customers have no obligation to renew, upgrade, or expand subscriptions after expiration, and average total subscription contract value is decreasing as C3.ai expands beyond a small number of large customers to a larger number of smaller customers. C3.ai expects that decrease to continue, which may slow revenue growth or cause revenue to decline if renewals or expansions do not offset it.
The market for C3 AI Software is intensely competitive, with larger, more established competitors that have greater resources, broader product lines, and the ability to bundle offerings or sell at zero or negative margins. Competitive pressure may result in fewer orders, reduced revenue and gross margins, and loss of market share.
C3.ai derives substantially all revenue from C3 AI Software, and broader market acceptance of Enterprise AI solutions is uncertain. Customers may have made significant investments in legacy analytics systems and may be unwilling to adopt new platforms, so if the market fails to grow or grows more slowly than expected, business and results of operations would be harmed.
Baker Hughes is both a significant customer and the exclusive channel partner and reseller of C3 AI Software in oil and gas. The arrangement was revised in October 2021 to extend to April 30, 2025, and Baker Hughes met its FY2022 commitment, earning a $16.0 million sales commission recognized as deferred costs in the quarter ended October 31, 2021; termination or expiration could impair co-branding and oil and gas sales.
C3.ai incurred net losses of approximately $56.7 million and $14.9 million for the three months ended October 31, 2021 and 2020, respectively, and $94.2 million and $14.8 million for the six months ended October 31, 2021 and 2020, respectively, with an accumulated deficit of $443.5 million as of October 31, 2021. It expects to continue incurring net losses for the foreseeable future and may need additional capital.
Operating cash flow was negative $17.9 million for the six months ended October 31, 2021, down from positive $18.8 million for the prior-year period. Management expects to continue to incur operating losses and may generate negative cash flows from operations for the foreseeable future, and may require additional capital to execute strategic initiatives.
Competition for executives, data scientists, engineers, software developers, and sales personnel is intense, and C3.ai is highly selective in its hiring process. Post-IPO candidates may not perceive the compensation package, including equity awards, as favorably, which could impair recruitment and retention.
The COVID-19 pandemic had a significant adverse impact on the conclusion of new and additional business agreements in 2021 and 2020 and may continue to pose challenges. It could affect global IT spending, lengthen sales cycles, reduce the value or duration of subscriptions, and negatively impact collections.
Based on the stock price on October 31, 2021, C3.ai will no longer qualify as an emerging growth company as of April 30, 2022 and expects to become a large accelerated filer. Compliance with additional public company requirements, including auditor attestation over internal control over financial reporting, could increase costs and strain resources.
SaaS KPIs
All quarters →RPO
Non-GAAP RPO
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q2 FY2022 (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.