Summary
C3 AI reported fiscal 2025 second quarter total revenue of $94.34 million, up 28.8% from the prior-year quarter. Year-to-date revenue was $181.55 million, up 24.7% from the first half of fiscal 2024. Gross profit rose 40.7% to $57.84 million in the quarter, and gross margin expanded to 61.3%, up 5.2 percentage points. The company remains lossmaking, but the losses narrowed. Operating loss was $75.29 million, a 5.2% improvement from the prior-year quarter. Net loss was $65.97 million, a 5.5% narrowing. Diluted EPS was -$0.52, an 11.9% narrowing. Operating margin improved to -79.8%, up 28.6 percentage points.
Operational momentum centered on the consumption-based pricing transition. C3 AI executed 36 pilots and trials during the quarter, unchanged from the prior-year quarter. Those agreements generally last up to six months and may include developer access to the C3 AI Platform, one C3 AI Application or C3 Generative AI, and COE support services. After the pilot phase, customers either pay monthly fees plus consumption charges based on vCPU and vGPU hours or sign a time-certain multi-period commitment. Remaining performance obligations were $260.50 million as of October 31, 2024, down 14.2% from the prior-year quarter. Deferred revenue was $35.80 million, down 11.8% from the prior-year quarter. Management said RPO is not necessarily indicative of future revenue growth because it does not apply to pay-as-you-go consumption pricing agreements. RPO also excludes monthly usage-based runtime and hosting charges. The company expects RPO to continue to decline as it moves toward lower average selling price subscription contracts and consumption pricing.
Cash flow showed improvement. Operating cash flow was negative $38.69 million in the quarter, up 20.4% from the prior-year quarter. Year-to-date operating cash flow was negative $30.65 million, up 31.4% from the first half of fiscal 2024. Capital expenditures fell to $0.82 million in the quarter, down 84.6% from the prior-year quarter. For the six months, free cash flow was negative $32.39 million, compared with negative $64.04 million in the prior-year period, according to the MD&A reconciliation. Management said it expects to continue incurring operating losses and negative cash flows from operations. It also expects to keep investing heavily in generative AI, research and development, and brand awareness. Over the long term, it anticipates research and development and marketing spending to decline as a percentage of total revenue.
The main risks remain tied to the pricing transition and customer concentration. C3 AI said the shift from a primarily subscription-based model to consumption-based pricing was expected to have a short-to-medium term negative effect on revenue growth, and that transition is still underway. RPO will keep declining under the new model, and the metric carries less predictive value for future revenue. The company also depends on a relatively small number of large lighthouse customers, so revenue growth can vary with the timing of customer acquisition, product mix, contract durations, renewals, or terminations. Management expects the number of customers to increase compared with prior fiscal years, while average total subscription contract value and revenue from lighthouse customers as a percentage of total revenue decrease. Macroeconomic conditions, including budget rationalization and cash flow prioritization by customers, could pressure demand. Management noted that it may need additional capital if it cannot generate sufficient cash flow to support its strategic initiatives. On the product side, C3 AI continued to push generative AI. In October 2024, it was awarded a U.S. patent for agentic technology that orchestrates multiple AI agents using multimodal foundation models. The Microsoft alliance is intended to expand distribution of C3 Enterprise AI solutions through Azure sales channels. Even with those efforts, the quarter's results show a business growing revenue quickly while still posting large GAAP losses and burning cash.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $94.3M | $87.2M | +8.2% | $73.2M | +28.8% |
| Gross profit | $57.8M | $52.2M | +10.9% | $41.1M | +40.7% |
| Gross margin | 61.3% | 59.8% | +1.5 pp | 56.1% | +5.2 pp |
| Research & development | $55.7M | $52.9M | +5.3% | $50.4M | +10.5% |
| Sales & marketing | $55.6M | $52.1M | +6.7% | $49.9M | +11.5% |
| General & administrative | $21.8M | $19.7M | +10.5% | $20.2M | +7.7% |
| Total operating expenses | $133.1M | $124.8M | +6.7% | $120.5M | +10.5% |
| Operating income (loss) | -$75.3M | -$72.6M | -3.7% | -$79.4M | +5.2% |
| Operating margin | -79.8% | -83.2% | +3.4 pp | -108.4% | +28.6 pp |
| Net income (loss) | -$66.0M | -$62.8M | -5.0% | -$69.8M | +5.5% |
| Net margin | -69.9% | -72.0% | +2.1 pp | -95.3% | +25.4 pp |
| Diluted EPS | -$0.52 | -$0.50 | -$0.02 | -$0.59 | +$0.07 |
Risks
The transition to consumption-based pricing reduces average sales price and often lacks time-certain multi-period commitments, and MD&A states RPO is expected to continue to decline; RPO was $260.5 million as of October 31, 2024, down 14.2% from $303.6 million in the prior-year quarter.
Historically a limited number of customers account for a substantial portion of revenue, some large customers have reduced spend or not renewed, and average total subscription contract value is decreasing; loss or non-renewal of a major customer would adversely affect revenue.
Growth depends on strategic relationships such as Baker Hughes, which is the exclusive channel partner and reseller in oil and gas through April 30, 2025 with options to renew; partners may prioritize competing platforms or fail to devote sufficient resources, and failure to renew on comparable terms could harm results.
Rapid AI platform and application changes and larger competitors with greater resources, including those that can bundle offerings or sell at zero or negative margins, could make C3 AI Software obsolete or reduce demand; MD&A emphasizes continued heavy investment in generative AI and new applications.
Sales cycles can be long and unpredictable, especially for large subscriptions, and large individual sales represent a large proportion of overall sales, making it difficult to forecast quarterly close timing and manage cash flows and margins.
The company has limited historical experience supporting smaller non-enterprise customers and plans lower entry price offerings such as C3 AI Ex Machina; if smaller customers do not renew or expand, revenue may grow more slowly than expected.
MD&A states adverse macroeconomic conditions including labor shortages, supply chain disruptions, inflation, higher interest rates, and capital market volatility are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q2 FY2025 (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.