Summary
C3.ai's fiscal third quarter ended January 31, 2022 delivered strong revenue growth but much larger losses. Total revenue was $69.8 million, up 42.1% from $49.1 million in the prior-year quarter. For the first nine months, revenue was $180.4 million, up 37.8% from $130.9 million. Gross profit was $52.4 million in the quarter, up 42.1% from $36.9 million. The gross margin was 75.1%, flat against the prior-year quarter. For the first nine months, gross profit was $134.1 million, up 36.7% from $98.1 million. The operating loss widened to $47.4 million from $18.5 million in the quarter, and the operating margin fell to -67.9% from -37.7%. For the first nine months, the operating loss widened to $139.6 million from $36.4 million. Net loss widened to $39.4 million from $16.9 million in the quarter and to $133.6 million from $31.6 million for the first nine months. Diluted EPS was -$0.38 for the quarter and -$1.29 for the year to date.
Operational momentum came from large enterprise and government deals. Shell expanded its C3 AI footprint to more than 10,000 monitored devices and 23 large-scale assets in production, including Pernis and Nigeria LNG, and processes 1.3 trillion predictions per month. The Department of Defense awarded C3 AI a five-year, $500 million transaction agreement. LyondellBasell signed a five-year, significantly expanded contract. Royal Philips closed a new contract on the C3 AI Supply Chain Suite. Cargill, ENGIE, and Swift also expanded or extended relationships. Customer-Entities were 50 as of January 31, 2022 and 39 a year earlier. Under a revised calculation, Customer count was 218 versus 120, while the prior calculation showed 110 versus 75. RPO was $469.3 million, up 89.6% from $247.5 million. Deferred revenue was $59.45 million, down 4.6% from $62.31 million.
Guidance now points to full fiscal 2022 revenue growth of 38% over fiscal 2021, alongside a guided non-GAAP loss from operations for the full year. The company raised its fiscal 2022 revenue guidance. It did not provide next-quarter guidance in the release. Management tied the increase to a refocused sales organization, a larger customer count, and industry diversification for its AI products.
Cash generation remains a weak point. Operating cash flow was -$55.4 million in the quarter, down from -$24.7 million a year earlier. Year-to-date operating cash flow was -$73.3 million, down from -$5.8 million. Capital expenditures were $0.75 million in the quarter, up from $0.25 million, and $2.18 million for the year to date, up from $1.17 million. The MD&A cites COVID-19 disruption, uneven global IT spending, longer sales cycles, and customer concentration as risks. Baker Hughes remains a major contract counterparty, with $46.4 million of commitments not yet contracted as of January 31, 2022. The company also changed its Customer count methodology, and it warns the revised data is not comparable to historical counts in earlier filings. Management expects to keep investing in research and development, sales, and marketing, and it may need additional capital if operating losses and negative cash flows continue.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $69.8M | $58.3M | +19.8% | $49.1M | +42.1% |
| Gross profit | $52.4M | $42.3M | +23.9% | $36.9M | +42.1% |
| Gross margin | 75.1% | 72.6% | +2.5 pp | 75.1% | +0.0 pp |
| Research & development | $40.9M | $36.5M | +12.1% | $18.7M | +118.3% |
| Sales & marketing | $43.1M | $46.2M | -6.5% | $28.4M | +51.7% |
| General & administrative | $15.7M | $15.3M | +3.1% | $8.2M | +92.4% |
| Total operating expenses | $99.8M | $98.0M | +1.9% | $55.4M | +80.2% |
| Operating income (loss) | -$47.4M | -$55.7M | +14.9% | -$18.5M | -156.3% |
| Operating margin | -67.9% | -95.6% | +27.6 pp | -37.7% | -30.3 pp |
| Net income (loss) | -$39.4M | -$56.7M | +30.5% | -$16.9M | -134.1% |
| Net margin | -56.5% | -97.4% | +40.8 pp | -34.3% | -22.2 pp |
Risks
MD&A states the COVID-19 pandemic had a significant adverse impact on concluding 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 subscription renewals, and negatively impact collections.
Historically a limited number of customers have accounted for a substantial portion of revenue, and the average total subscription contract value is decreasing. The company expects this average to continue decreasing as it expands beyond a small number of large customers, increasing exposure if large customers do not renew or reduce spend.
The sales cycle is generally six to nine months but can vary substantially and extend over years for some customers. Individual sales can represent a large proportion of overall sales in a period, making it difficult to project deal timing and adjust fixed costs if expectations are not met.
The Enterprise AI market is intensely competitive, with competitors including internal IT organizations, commercial software providers, open source offerings, public cloud providers, and system integrators. Larger competitors may bundle competing functionality or sell at zero or negative margins, which could reduce demand and pressure gross margins.
The company relies on Baker Hughes as the exclusive channel partner and reseller in the oil and gas industry, and the arrangement was revised in October 2021 to extend the term to the fiscal year ending April 30, 2025 while modifying annual commitments. Termination, expiration, or renegotiation could cause loss of co-brand rights and sales opportunities in oil and gas.
Success depends heavily on founder and CEO Thomas M. Siebel, who is critical to management, sales strategy, culture, strategic direction, engineering, and operations. All executive officers are at-will employees, and the company does not maintain key person life insurance policies.
The company has a limited operating history and expects revenue growth to slow in future periods. Factors that could adversely impact growth include reduced demand for C3 AI Software, increased competition, market contraction, and inability to accurately forecast demand.
Changes in subscription or pricing models could adversely affect operating results. Large customers may demand higher price discounts, and the company may need to reduce prices, offer shorter contract durations, or offer alternative pricing models, especially as it expands into smaller non-enterprise customers.
Subscription revenue is recognized over the contract term, so declines in new or renewed subscriptions may not be immediately reflected in current results but can negatively affect future periods. Reported deferred revenue was $59.45 million in the current quarter, down 4.6% versus the prior-year quarter.
As of January 31, 2022, Mr. Siebel and related entities beneficially owned approximately 58.2% of the voting power of outstanding capital stock. This concentrated control limits other stockholders' ability to influence corporate matters and may make the Class A common stock ineligible for certain indices.
The company will cease to be an emerging growth company as of April 30, 2022 and expects to become a large accelerated filer, which will require auditor attestation over internal control over financial reporting. Failure to maintain effective disclosure controls and internal control over financial reporting could impair timely and accurate financial reporting or lead to restatement.
SaaS KPIs
All quarters →Non-GAAP Gross Margin
Non-GAAP RPO
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q3 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.