Shares of C3.ai (AI -2.01%) pulled back through the first half of the year The software-as-a-service (SaaS) company bills itself as offering “AI for the Enterprise” as well as AI-based application software. It continued to post wide losses in its earnings report and fell sharply in February as business and consumer sentiment began to weaken on fears of a trade war.
While the stock recovered a bit in the second quarter of the year, it wasn’t enough to make up for its struggles earlier in the year. According to data from S&P Global Market Intelligence, the stock was down 29% through the first half of the year.
The chart below shows how the stock’s losses came during a brief period in February.
C3.ai’s troubles continue
The stock started to slide in February on signs of weakening business and consumer sentiment and as the broad market fell from its peak. C3.ai stock then fell 10% on Feb. 27 as the company posted another wide loss in its Q3 earnings report.
Revenue rose 26% to $98.8 million. On the bottom line, the company continued to be unprofitable as it reported an adjusted loss per share of $0.12. However, its generally accepted accounting principles (GAAP) net loss of $80.2 million shows it’s still losing nearly as much money as it’s making in revenue, and its unit economics are barely improving as that loss rose from $72.6 million in the quarter a year ago.
C3.ai has spent heavily on share-based compensation historically, and that pattern continued with $174.4 million in share-based compensation through the first three quarters of the year, or nearly 75% of revenue for that period.
In its Q4 report in May, C3.ai posted similar numbers with revenue up 26% to $108.7 million and an adjusted loss of $0.16 per share. Its GAAP net loss came in at $79.7 million, up from $72.9 million.
While the company made progress with its partnerships and added new customers, the business doesn’t seem to be growing fast enough to offset the losses, and its gross margins remain low for a software company at 62% in Q4.
Image source: Getty Images.
What’s next for C3.ai
The company’s revenue growth has improved, but C3.ai still seems to have a long way to go to build the scale necessary to generate a profit and prove its viability.
Given its exposure to AI and its growth, the stock has potential over the long term, but the downside risks and the share dilution seem to outweigh those for now.
