Summary
Revenue for C3.ai's fiscal 2023 fourth quarter was $72.41 million, essentially flat against the prior-year quarter. Full-year revenue reached $266.80 million, up 5.6%. That top-line stability did not carry through to profitability. Gross profit fell 13.6% to $47.50 million in the quarter, and gross margin was 65.6%, down 10.4 percentage points from the prior-year quarter. For the full year, gross profit was $180.46 million, down 4.5%, with a gross margin of 67.6%, down 7.2 percentage points. Operating loss widened to $73.28 million in the quarter, and operating margin was -101.2%, down 23.0 percentage points. The full-year operating loss was $290.49 million, with an operating margin of -108.9%, down 31.3 percentage points. Net loss widened to $64.96 million in the quarter, and the full-year net loss was $268.84 million, widened from the prior fiscal year. Diluted EPS for the fiscal year was -$2.45, down from the prior fiscal year's loss per share.
Cash flow offered a mixed picture. Operating cash flow was positive $27.05 million in the quarter, up 305.5% from the prior-year quarter. For the full year, operating cash flow was -$115.69 million, down 33.8%. Capital expenditures rose 568.6% to $10.75 million in the quarter and 1760.1% to $70.52 million for the full year. The press release reported positive free cash flow of $18.0 million to $19.4 million for the quarter, but negative free cash flow of $184.2 million to $185.6 million for the fiscal year. Deferred revenue was $47.90 million, down 2.4% from the prior-year quarter, and remaining performance obligations were $381.40 million, down 20.1%. The 10-K explains that the shift to consumption-based pricing lowers near-term revenue growth and decreases RPO. Deferred revenue and RPO both declined as the company moved new customers to consumption pricing.
Operational activity was strong on several fronts. C3.ai closed 43 deals in the quarter, including 19 pilots initiated in Q4 FY23. The company said qualified enterprise opportunities for closure within 12 months increased by over 100% in the past year. Pilot conversions included Dow, Alberta Treasury Branches, and the Chief Digital and Artificial Intelligence Office. Expansions or continued work included Shell, Koch Industries, the Department of Defense Rapid Sustainment Office, PwC, Ball, Exxon Mobil, Con Edison, the Missile Defense Agency, the Defense Counterintelligence and Security Agency, Baker Hughes, and the New York Power Authority. The partner ecosystem remains active with Google Cloud, AWS, Microsoft, Baker Hughes, and Booz Allen. The Engie partnership sold the Engie Ellipse solution to over 30 customers. C3 Generative AI became generally available, and the company signed three new C3 Generative AI application agreements with large enterprises in the quarter. The C3 AI predictive maintenance application was designated as the system of record for all predictive maintenance applications in the U.S. Air Force.
Guidance context points to a company still balancing growth and profitability. Fourth-quarter revenue came in against prior guidance of $70.0 million to $72.0 million. Full-year revenue came in against prior guidance of $264.0 million to $266.0 million. The company expected non-GAAP loss from operations of $23.7 million to $23.9 million for the quarter, against prior guidance of $24.0 million to $28.0 million, and $68.2 million to $68.4 million for the full year, against prior guidance of $69.0 million to $73.0 million. The company did not provide numeric guidance for fiscal 2024 in this release; it said full fiscal 2024 guidance and additional details would come on May 31, 2023. The stated goal is a non-GAAP profitable business by the end of fiscal year 2024, ending April 30, 2024.
Risks remain substantial. The 10-K cites a history of operating losses, dependence on a limited number of existing customers that account for a substantial portion of revenue, and the need to attract new customers and retain existing ones. Market awareness and acceptance of enterprise AI solutions in general and the company's products in particular are uncertain. 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. The company also warns that it may need additional capital to execute its strategy, and that the transition to consumption-based pricing can pressure near-term revenue growth and RPO. Management believes existing cash, cash equivalents, and investments will support working capital and capital expenditure requirements for at least the next 12 months. The quarter showed improving cash generation and a rich pipeline, but the widening losses and shrinking backlog metrics show that the path to sustainable profitability is still under construction.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $72.4M | $66.7M | +8.6% | $72.3M | +0.1% |
| Gross profit | $47.5M | $44.4M | +7.0% | $55.0M | -13.6% |
| Gross margin | 65.6% | 66.6% | -1.0 pp | 76.0% | -10.4 pp |
| Research & development | $49.7M | $55.1M | -9.8% | $46.4M | +7.1% |
| Sales & marketing | $51.7M | $43.5M | +18.9% | $47.5M | +9.0% |
| General & administrative | $19.4M | $17.9M | +8.5% | $17.6M | +9.9% |
| Total operating expenses | $120.8M | $116.4M | +3.7% | $111.5M | +8.3% |
| Operating income (loss) | -$73.3M | -$72.0M | -1.7% | -$56.5M | -29.6% |
| Operating margin | -101.2% | -108.0% | +6.8 pp | -78.2% | -23.0 pp |
| Net income (loss) | -$65.0M | -$63.2M | -2.8% | -$58.4M | -11.2% |
| Net margin | -89.7% | -94.7% | +5.0 pp | -80.8% | -8.9 pp |
Risks
The company announced a change in Q2 FY2023 to a consumption-based pricing model tied to monthly vCPU and vGPU hours. MD&A states this transition lowers near-term revenue growth and decreases RPO and reduces visibility into the timing of revenue recognition because customers control the pace of consumption.
Risk factors state that a limited number of customers have historically accounted for a substantial portion of revenue, and average total subscription contract value is decreasing. RPO decreased 20.1% to $381.4 million as of April 30, 2023 from $477.4 million as of April 30, 2022.
Gross margin declined to 67.6% for FY2023 year to date from 74.8% for FY2022 year to date, down 7.2 percentage points. MD&A attributes the decline in subscription margin to higher personnel-related costs, increased stock-based compensation, and higher data center costs.
Net loss widened to $268.8 million for FY2023 from $192.1 million for FY2022, and operating cash flow was negative $115.7 million for FY2023 year to date. MD&A states the company expects to continue to incur operating losses and negative cash flows from operations in the next few quarters.
Risk factors describe intense competition from internal IT organizations, commercial software providers, open source providers, public cloud providers, and larger competitors that may bundle products or sell at zero or negative margins. MD&A highlights the C3 Generative AI Product Suite as the company's latest innovation in a rapidly evolving market.
Risk factors disclose a short seller report published April 4, 2023 containing allegations against the company, a March 2022 putative securities class action about the Baker Hughes partnership and other matters, and the possibility of SEC or U.S. Department of Justice inquiries.
MD&A says 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. The company also states the COVID-19 pandemic had a significant adverse impact on new and additional business agreements in 2022, 2021, and 2020.
Risk factors state the sales cycle from initial evaluation to payment is approximately 3.7 months but can vary substantially and extend over years for some customers. Individual sales can represent a large proportion of overall sales, making quarterly results difficult to predict and plan for.
Baker Hughes is the exclusive channel partner and reseller in oil and gas, with the arrangement most recently revised in January 2023 and continuing until April 30, 2025. MD&A reports RPO related to Baker Hughes was $162.1 million as of April 30, 2023, down from $215.2 million as of April 30, 2022.
Risk factors state 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 described as intense.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from C3.ai, Inc.'s SEC filings for Q4 FY2023 (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.