C3.ai inventory reveals a transparent development main as much as earnings stories.
Over the previous couple of weeks, corporations have been reporting earnings for the fourth quarter and full calendar 12 months 2024. For many know-how traders, large tech shares within the “Magnificent Seven,” in addition to rising gamers akin to Palantir Applied sciences, obtained a lot of the consideration throughout Wall Road.
With earnings season coming to an in depth, there are nonetheless just a few corporations within the synthetic intelligence (AI) race price watching. One firm typically in comparison with Palantir is a software program enterprise known as C3.ai (AI -4.68%).
On Feb. 26, C3.ai is scheduled to announce monetary outcomes for its fiscal third quarter (interval ending Jan. 31). Is C3.ai inventory a purchase earlier than it stories earnings subsequent week? Let’s take a look at some current developments on the firm and analyze historic tendencies to assist us discover out.
C3.ai has some good issues going for it, however…
The chart illustrates C3.ai’s quarterly income tendencies over the past three years. Not solely is the corporate witnessing spectacular progress, however its gross sales are literally accelerating — indicated by the steepening slope of the road.
AI Income (Quarterly) information by YCharts
A method C3.ai has been capable of jump-start its income is thru a companion ecosystem. The corporate works intently with cloud hyperscalers akin to Microsoft, Alphabet, and Amazon, along with main consulting corporations Booz Allen Hamilton and McKinsey & Firm.
Final quarter, over 60% of C3.ai’s enterprise got here by way of its companion community. Given hovering demand for AI functions and an growing involvement from consulting corporations serving to companies combine their AI platforms, I believe C3.ai is positioned to proceed benefiting from these companions.
Picture supply: Getty Pictures.
… the corporate has a protracted approach to go
Whereas C3.ai’s numerous partnerships have helped the corporate diversify its income base and speed up gross sales, the tendencies depicted within the chart beneath inform a distinct aspect to the corporate’s story.
AI Web Earnings (Quarterly) information by YCharts
Regardless of fast progress throughout the highest line, C3.ai stays unprofitable. The consistency of the corporate’s internet losses and destructive free money move aren’t notably encouraging. Whereas many progress shares will expertise durations of money burn, ultimately accelerating income ought to assist widen margins and ultimately result in profitability. Per the chart, that is not actually the case with C3.ai.
Given the corporate is materially smaller than its software program friends — specifically Palantir — and its lack of profitability, it is arduous to justify a compelling purpose to purchase this inventory. Nonetheless, let’s assess some historic tendencies round C3.ai and its earnings stories earlier than making a closing judgment.
Is C3.ai inventory a purchase proper now?
The chart illustrates C3.ai’s inventory motion over the past three years. As well as, I’ve annotated the chart to depict the corporate’s earnings stories — as illustrated by the purple circles with the letter “E” within the center.
I see a reasonably clear development right here. It appears like C3.ai inventory typically begins to rise previous to reporting earnings — solely to fall instantly afterward. In my view, it is a inventory that traders wish to like, however constantly are let down. What’s extra is that given its speculative nature, C3.ai comes throughout as extra of a inventory to commerce relatively than personal.
In my eyes, it’s not price getting caught up in a momentum inventory like C3.ai — there’s simply an excessive amount of threat. As an alternative, I might search for extra established gamers within the AI software program realm that characteristic a mix of strong income progress, constant profitability, and robust ahead steerage. Sadly, C3.ai doesn’t meet these standards. For these causes, I might not purchase the inventory earlier than the corporate stories earnings on Feb. 26.
John Mackey, former CEO of Entire Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Palantir Applied sciences. The Motley Idiot has positions in and recommends Alphabet, Amazon, Microsoft, and Palantir Applied sciences. The Motley Idiot recommends Booz Allen Hamilton and C3.ai and recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
