Summary
C3.ai closed its fiscal 2025 third quarter, ended January 31, 2025, with $98.8 million of revenue, up 26% from a year earlier. Nine-month revenue reached $280.3 million, up 25%. Subscription revenue was 87% of the quarter's total, down from 90% a year ago, while professional services grew to 13% of revenue from 10%. The mix kept tilting toward services work, and the company said it remains in the middle of its transition to consumption-based pricing, a shift it has long said would hold back revenue growth over the short to medium term.
Gross profit for the quarter was $58.3 million, up 29%, and gross margin improved to 59.1% from 57.8%. Over the nine months, gross profit rose 33% to $168.4 million, and gross margin was 60.1% versus 56.7%. The gain came mostly from subscription margin, which the company attributed to subscription revenue growth slightly outpacing cost growth and a higher mix of revenue from demonstration licenses. Professional services margin moved the other way on higher personnel-related costs tied to more service projects.
The bottom line kept slipping in dollar terms. The quarter produced an operating loss of $87.6 million, wider than a year earlier, and a net loss of $80.2 million. Diluted earnings per share were -$0.62, compared with -$0.60. The nine-month picture was flatter. The operating loss was $235.5 million, essentially flat versus the prior-year period, while the net loss widened to $209.0 million. Diluted earnings per share for the nine months improved to -$1.64.
Operating margin for the quarter was -88.7%, better than -105.3% a year earlier, because revenue grew faster than the cost base. Operating expenses still climbed, with sales and marketing, research and development, and general and administrative costs all higher than a year earlier, led by payroll and stock-based compensation. Headcount and equity awards are the main drivers behind the expense build.
Cash use improved. Operating cash flow was -$22.0 million in the quarter, compared with -$39.1 million a year earlier, and -$52.7 million for the nine months versus -$83.7 million. Capital expenditures dropped to $0.4 million in the quarter from $6.1 million. Free cash flow, which the company reports as a non-GAAP measure, was -$54.8 million for the nine months, compared with -$109.2 million in the prior-year period.
Backlog kept shrinking. Deferred revenue stood at $33.0 million at January 31, 2025, down 20.1% from a year earlier, and remaining performance obligations were $208.2 million, down 27.4% from a year earlier. RPO included $175.2 million of commitments from non-cancellable contracts and $33.0 million of deferred revenue. Management expects RPO to keep declining as the business moves to consumption-based pricing.
Demand signals were mixed. C3.ai executed 50 pilots and trials in the quarter, up from 29 a year earlier, the metric management uses to track customer acquisition. The partner channel expanded with a global alliance with Microsoft that names C3 AI a preferred application software provider on Azure, plus a strategic alliance with McKinsey, alongside existing relationships with Baker Hughes, AWS, Google Cloud and Booz Allen. The company was awarded a foundational U.S. patent for generative AI agent technology in October 2024. International customers provided 14% of quarterly revenue, the same share as a year earlier.
Risks cluster around the pricing transition. RPO is not a clean read on future revenue because pay-as-you-go consumption agreements fall outside it, and renewals, contract terms and seasonality swing the number. The customer base remains concentrated in a small number of large lighthouse accounts, so growth depends on the timing of new contracts and renewals. Management also pointed to macroeconomic pressure, including inflation, higher interest rates and volatile capital markets, that has customers optimizing consumption and rationalizing budgets. The company carried an accumulated deficit of $1.3 billion and said it expects to keep posting operating losses and negative cash flow from operations in the next few quarters and may need to raise additional capital.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $98.8M | $94.3M | +4.7% | $78.4M | +26.0% |
| Gross profit | $58.3M | $57.8M | +0.9% | $45.3M | +28.8% |
| Gross margin | 59.1% | 61.3% | -2.2 pp | 57.8% | +1.3 pp |
| Research & development | $59.4M | $55.7M | +6.5% | $49.5M | +20.0% |
| Sales & marketing | $61.2M | $55.6M | +10.0% | $57.1M | +7.1% |
| General & administrative | $25.4M | $21.8M | +16.6% | $21.2M | +19.6% |
| Total operating expenses | $145.9M | $133.1M | +9.6% | $127.8M | +14.2% |
| Operating income (loss) | -$87.6M | -$75.3M | -16.3% | -$82.5M | -6.1% |
| Operating margin | -88.7% | -79.8% | -8.8 pp | -105.3% | +16.6 pp |
| Net income (loss) | -$80.2M | -$66.0M | -21.6% | -$72.6M | -10.4% |
| Net margin | -81.2% | -69.9% | -11.3 pp | -92.6% | +11.5 pp |
| Diluted EPS | -$0.62 | -$0.52 | -$0.10 | -$0.60 | -$0.02 |
Risks
On February 18, 2025, founder and CEO Thomas M. Siebel disclosed an autoimmune disease and significant vision impairment; he stated it was not impacting his ability to manage the business and Jim H. Snabe assumed an interim Special Advisor to the CEO role, but the company has no key person life insurance and depends on Mr. Siebel for strategy, sales, and product direction.
Revenue depends on a limited number of large customers, average total subscription contract value is decreasing and expected to continue decreasing as the company expands to smaller customers, and RPO declined 27.4% year over year to $208.2 million in FY2025 Q3 while deferred revenue declined 20.1% year over year to $33.0 million, which could pressure future revenue if large customers do not renew or reduce spend.
The transition from subscription-based to consumption-based pricing is expected to continue hurting revenue growth in the short-to-medium term because of lower average sales prices, lack of time-certain multi-period commitments, and less visibility into the timing of consumption-based revenue recognition; MD&A states RPO is not applicable to pay-as-you-go agreements and expects RPO to continue to decline.
Long and unpredictable sales cycles, especially for large subscriptions, make it difficult to forecast quarterly results; individual sales can represent a large proportion of overall sales and may close in later quarters or not at all after substantial upfront sales investment.
Intense competition from internal IT, commercial and point solution software providers, open source, public cloud providers, system integrators, and larger competitors that can bundle products or sell at zero or negative margins; rapid AI technological change may make C3 AI Software obsolete if the company fails to innovate.
Dependence on strategic relationships, including Baker Hughes as exclusive channel partner and reseller in oil and gas, with the Baker Hughes arrangement continuing only until April 30, 2025 with options to renew; failure to renew or replace partners on comparable terms could harm revenue, and partners may prioritize competing platforms.
The company executed 50 and 29 pilots and trials in the quarters ended January 31, 2025 and 2024, respectively, but after pilots or trials customers have no obligation to continue, and limited experience with renewals of AI products means conversion and retention rates are difficult to predict.
Adverse macroeconomic conditions including labor shortages, supply chain disruptions, inflation, higher interest rates, and capital markets volatility are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management, which can slow customer expansion and revenue growth.
The dual-class structure concentrates voting control with Mr. Siebel, who beneficially owned approximately 53.3% of voting power as of January 31, 2025, limiting stockholder influence; Class B conversion triggers include six months after death or incapacity, which creates uncertainty given the disclosed CEO health issue.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q3 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.