Artificial intelligence (AI) software company C3.ai (NYSE:AI) reported Q3 CY2024 results topping the market’s revenue expectations, with sales up 28.8% year on year to $94.34 million. The company expects next quarter’s revenue to be around $98 million, close to analysts’ estimates. Its non-GAAP loss of $0.06 per share was 62.9% above analysts’ consensus estimates.
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C3.ai (AI) Q3 CY2024 Highlights:
- Revenue: $94.34 million vs analyst estimates of $91.02 million (28.8% year-on-year growth, 3.6% beat)
- Adjusted EPS: -$0.06 vs analyst estimates of -$0.16 (62.9% beat)
- Adjusted Operating Income: -$17.16 million vs analyst estimates of -$30.29 million (-18.2% margin, 43.4% beat)
- Q4 revenue guidance $98.0 million at the midpoint vs analyst estimates of $97.6 million (slight beat)
- The company lifted its revenue guidance for the full year to $388 million at the midpoint from $382.5 million, a 1.4% increase
- Operating Margin: -79.8%, up from -108% in the same quarter last year
- Free Cash Flow was -$39.51 million, down from $7.12 million in the previous quarter
- Market Capitalization: $5.15 billion
“We had an outstanding quarter with strong top- and bottom-line performance to mark our seventh consecutive quarter of accelerating revenue growth,” said Thomas M. Siebel, Chairman and CEO, C3 AI.
Company Overview
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE:AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Data Infrastructure
Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, C3.ai grew its sales at a 17.8% compounded annual growth rate. Although this growth is solid on an absolute basis, it fell slightly short of our benchmark for the software sector.
This quarter, C3.ai reported robust year-on-year revenue growth of 28.8%, and its $94.34 million of revenue topped Wall Street estimates by 3.6%. Company management is currently guiding for a 25% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 21% over the next 12 months, an acceleration versus the last three years. This projection is noteworthy and implies its newer products and services will spur better top-line performance.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
It’s very expensive for C3.ai to acquire new customers as its CAC payback period checked in at 157.5 months this quarter. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between C3.ai’s products and its peers.
Key Takeaways from C3.ai’s Q3 Results
It was encouraging to see C3.ai beat analysts’ revenue expectations this quarter. Next quarter's revenue guidance was slightly ahead of expectations, and we were also glad its full-year revenue guidance was raised and came in slightly higher than Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 17.9% to $49.30 immediately after reporting.
C3.ai put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
