Summary
C3 AI posted total revenue of $78.4 million for its fiscal 2024 third quarter ended January 31, 2024, up 17.6% from $66.7 million in the prior-year quarter. Year-to-date revenue was $224.0 million, up 15.2%. Gross profit came in at $45.3 million, up 2.0% from $44.4 million, while gross margin fell to 57.8% from 66.6%, a drop of 8.8 percentage points. The operating loss widened to $82.5 million from $72.0 million a year earlier. The net loss widened to $72.6 million from $63.2 million. GAAP diluted EPS was $(0.60) versus $(0.57). Operating margin was -105.3%, an improvement of 2.8 percentage points from -108.1%. Revenue growth did not translate into a smaller bottom-line loss, as subscription costs and sales and marketing spending rose faster than the top line.
Operational momentum was the strongest part of the release. Customer Engagement reached 445, up 80% from 247 one year earlier. C3 AI closed 50 agreements, an increase of 85% year over year, including 29 new pilots, up 71%. Partner-supported bookings grew 337% year over year and 62% quarter over quarter, and the qualified opportunity pipeline increased 73% year over year, with C3 Generative AI opportunities exceeding opportunities for any other product. Federal revenue rose over 100% year over year and Federal bookings rose 85% year over year. The company closed 17 C3 Generative AI pilots across industries and moved pilots into production with Indorama, Pantaleon, Riverside County in California, and Groupe Atlantic. Holcim signed a four-year agreement to scale C3 AI Reliability across more than 100 cement plants. State and local government bookings set a record, with agreements signed with San Mateo County, Daly City, and Riverside County.
Cash generation was still negative but improved. Operating cash flow was -$39.1 million for the quarter, up 24.8% from -$51.9 million in the prior-year quarter. For the nine months ended January 31, 2024, operating cash flow was -$83.7 million, up 41.4% from -$142.7 million. Capital expenditures were $6.1 million in the quarter, down 69.2% from $19.8 million, and $22.7 million for the nine months, down 62.0% from $59.8 million. Free cash flow, a non-GAAP measure, was -$109.2 million for the nine months, compared with -$203.5 million. Deferred revenue was $41.3 million, up 6.2% from $38.9 million. Remaining performance obligations, or RPO, were $286.9 million, down 28.8% from $403.2 million a year earlier. The shift to consumption-based pricing has lowered average selling prices and reduced multiperiod commitments, and management says RPO is decreasing in importance as a key business metric.
Management issued guidance for the fourth quarter of fiscal 2024 and for full-year fiscal 2024, covering total revenue and non-GAAP loss from operations. The company expects to keep investing heavily in generative AI, brand awareness, and its go-to-market partner ecosystem. Risks include dependence on a limited number of existing customers that account for a substantial portion of revenue, a history of operating losses, and the need to attract new customers and retain existing ones. Macroeconomic conditions such as inflation, higher interest rates, and volatility in capital markets could push customers to optimize consumption and rationalize budgets. Management expects operating losses and negative cash flows from operations to continue in the next few quarters, and notes the company may need additional capital.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $78.4M | $73.2M | +7.1% | $66.7M | +17.6% |
| Gross profit | $45.3M | $41.1M | +10.2% | $44.4M | +2.0% |
| Gross margin | 57.8% | 56.1% | +1.6 pp | 66.6% | -8.8 pp |
| Research & development | $49.5M | $50.4M | -1.8% | $55.1M | -10.1% |
| Sales & marketing | $57.1M | $49.9M | +14.5% | $43.5M | +31.4% |
| General & administrative | $21.2M | $20.2M | +4.9% | $17.9M | +18.6% |
| Total operating expenses | $127.8M | $120.5M | +6.1% | $116.4M | +9.8% |
| Operating income (loss) | -$82.5M | -$79.4M | -4.0% | -$72.0M | -14.6% |
| Operating margin | -105.3% | -108.4% | +3.1 pp | -108.0% | +2.8 pp |
| Net income (loss) | -$72.6M | -$69.8M | -4.1% | -$63.2M | -15.0% |
| Net margin | -92.6% | -95.3% | +2.7 pp | -94.7% | +2.1 pp |
| Diluted EPS | -$0.60 | -$0.59 | -$0.01 | -$0.57 | -$0.03 |
Risks
MD&A states the shift from subscription-based to consumption-based pricing was expected to have a short-to-medium term negative effect on revenue growth and RPO, and that RPO decreased to $286.9 million as of January 31, 2024 from $403.2 million in the prior-year quarter, down 28.8%. The filing also warns that consumption-based customers have flexibility in the timing of consumption, reducing visibility into revenue recognition.
Risk Factors state a limited number of customers have historically accounted for a substantial portion of revenue, and that average total subscription contract value is decreasing and is expected to continue decreasing as the customer base expands to smaller customers. MD&A notes lighthouse customers as a percentage of total revenue is decreasing.
Gross margin declined to 57.8% in FY2024 Q3 from 66.6% in FY2023 Q3, down 8.8 percentage points, and declined to 56.7% year to date from 68.4%, down 11.7 percentage points. MD&A attributes the decrease to lower subscription margin from higher personnel-related costs, stock-based compensation, and cloud services costs.
Risk Factors describe intense competition from internal IT, commercial software providers, open source, public cloud providers, system integrators, and strategic partners, with larger competitors able to bundle offerings or sell at zero or negative margins. MD&A says the company expects to invest heavily in generative AI to address the evolving enterprise AI market.
Risk Factors state sales cycles can be long and unpredictable, particularly for large subscriptions, and individual sales may represent a large proportion of overall sales in a period, making it difficult to project when deals close. MD&A describes a complex sales tapestry with pilots, consumption-based pricing, and multi-million-dollar enterprise agreements.
Risk Factors disclose that a short seller report was published on April 4, 2023 containing allegations against the company, and that any SEC or U.S. Department of Justice inquiry could cause material diversion of management time and materially adversely affect the business.
Risk Factors state the founder and CEO, Thomas M. Siebel, is critical to management, sales strategy, culture, strategic direction, engineering, and operations, and the company maintains no key person life insurance. Competition for AI, data science, engineering, and sales personnel is intense.
MD&A states business and financial condition have been and may continue to be impacted by adverse macroeconomic conditions, including labor shortages, supply chain disruptions, inflation, higher interest rates, and capital market volatility, causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Non-GAAP Gross Margin
Cancellable backlog
Non-GAAP loss from operations
Agreements Closed
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q3 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.