Previously, the AI-focused stock of C3.ai (down by 0.78%) was a highly sought-after investment. In less than two weeks from its initial public offering (IPO) price of $42 in December 2020, it skyrocketed to an impressive peak of $177.47. During this period, investors were enticed by its remarkable growth rates, appealing stock symbol, and the background of Tom Siebel, who had previously led Siebel Systems before selling it to Oracle for $5.8 billion in 2006. The surge in interest towards meme and growth stocks fueled these substantial increases in value.
Today, C3.ai’s stock is trading around $26. After experiencing growth slowdown, accumulating significant losses, and facing inflation of its valuations due to rising interest rates, it has failed to surpass its initial public offering (IPO) price since last December. Over the past year, it has dropped approximately 12%. As we look forward, let’s examine where this stock might go in the next twelve months.
How does C3.ai make money?
C3.ai’s AI components can seamlessly integrate with an organization’s current software setup to gather and scrutinize diverse data types. These components can also function independently as individual services. They are frequently employed to identify potential safety hazards, fraudulent activities, and operational inefficiencies. Primarily catering to government agencies and major corporate clients from the energy, industrial, and financial sectors, C3.ai’s most prominent client is the energy technology titan Baker Hughes.
Back in 2022, I was thrilled when C3.ai expanded their pricing model to include consumption-based fees. With rising interest rates creating some tough economic conditions, this move was a game-changer for us enthusiasts! By offering flexible payment options, they’ve managed to attract a wider range of customers, including smaller businesses and budget-conscious organizations.
Although this shift may have impacted their recurring revenues and the stickiness of their ecosystem, it’s clear that C3.ai is thinking ahead and adapting to meet the needs of today’s market. Their forward-thinking approach has opened up new opportunities for growth and success!
Why were its last few years challenging?
In the financial year wrapping up in April 2023, C3.ai experienced a relatively modest 6% increase in revenue. This slow growth was due to intense competition, an adverse economic climate, and a phenomenon where its subscription services were being replaced by its consumption-based fees, thereby limiting its expansion. Additionally, the company’s adjusted gross margin dropped by 2 percentage points, reaching 77%, as its ability to set prices diminished.
In the years 2024 and 2025, C3.ai’s revenue experienced a significant boost, increasing by 16% and 25%, respectively. This growth was primarily fueled by new federal contracts, strategic collaborations such as those with Microsoft, Amazon Web Services (AWS), and McKinsey, and the introduction of additional generative AI application modules.
In the fiscal year 2024, the company’s gross margin, after adjustments, decreased by 8 percentage points to 69%, due to an increase in low-margin trial projects aimed at attracting more customers. However, in fiscal 2025, this figure rose to 70% as these trial programs were converted into full-priced implementations. Additionally, the company broadened its higher-profit subscription offerings once more.
What happened to C3.ai over the past year?
Over the last twelve months, C3.ai has consistently seen its annual revenue increase by more than 20%, thanks to a combination of factors. These include lower interest rates, expansion in the AI market, and an expanding clientele. This positive trend is what fueled their recovery.
| Metric | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 |
|---|---|---|---|---|---|
| Revenue growth (YOY) | 20% | 21% | 29% | 26% | 26% |
| Adjusted gross margin | 69% | 68% | 70% | 70% | 71% |
Most significantly, C3.ai extended its partnership with Baker Hughes in their joint venture, contributing to over 30% of C3.ai’s total income. This extension helped alleviate worries that C3.ai might suddenly lose its major client without first expanding its clientele portfolio.
What will happen over the next year?
C3.ai predicts a growth of 15% to 25% in their quarterly and annual revenue for fiscal 2026. Analysts forecast a full-year revenue increase of 20% to $465 million. Despite its market value of $3.5 billion, C3.ai’s stock price looks reasonable when considering it’s valued at eight times this year’s earnings. However, the company is not anticipated to achieve profitability in the near future as they shifted their focus from becoming profitable by the end of 2024 to increasing investments in their AI-related products instead.
In simpler terms, C3.ai forecasts its adjusted operating loss for the year 2026 to range between $65 million and $100 million, which is not a significant decrease from the adjusted operating loss of $88 million it reported in 2025. The company is projected to continue spending a substantial amount on stock-based compensation, with this expense accounting for approximately 59% of its total revenue in 2025 and increasing by 7%. According to analysts, under generally accepted accounting principles (GAAP), C3.ai’s net loss is expected to grow from $288 million in 2025 to $302 million in 2026.
In simple terms, financial experts predict that for the year 2027, the company’s revenue could increase by 19%. If this prediction comes true and the company continues to trade at a multiple of 8 times its projected future sales, the stock price might increase by approximately 26% to around $33 within the next year. This would represent a good return, but it would still be much lower than its initial public offering (IPO) price and may not match up with some of the market’s faster-growing AI stocks.
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2025-07-16 20:50