The company posted a stellar quarterly earnings report, and this could just be the beginning of even better results in the future.
C3.ai (AI -0.87%) C3.ai was meant to be a big beneficiary of the emergence of ChatGPT and the growing interest in artificial intelligence (AI) — after all, the company offers a wide range of AI services to clients across a variety of industries — but until recently, C3.ai's business hadn't shown any real growth. As a result, enthusiasm for the company's stock has cooled over the past few years.
But C3.ai CEO Tom Siebel still believes interest in AI and chatbots will be a big boost for the company, and based on the company's latest results, that may be the case.
The build vs. buy debate in AI
AI offers businesses powerful new tools and ways to improve their daily operations. But make no mistake: building New AI applications can be daunting and challenging, and while they may seem like an attractive opportunity, building those applications from scratch may not be realistic – it will be time consuming and potentially very costly for companies that are not yet familiar with AI.
That's where C3.ai comes to the rescue. On the most recent earnings call, Siebel argued that executives are already too busy with existing projects to take on complex AI initiatives. “Most CIOs have their hands full installing single sign-on and running security firewalls,” he said. C3.ai can simplify that process for customers with its existing services.
But one reason customers aren't ready to adopt the C3.ai solution is that they're still experimenting with new AI capabilities. “Today, a lot of companies are dabbling in small AI projects or relying on outside integrators to cobble together something that just works,” Siebel said, effectively turning these efforts into “big, expensive experiments.”
Many of C3.ai's customers are starting to convert to purchases
As companies learn about and experiment with AI, C3.ai is finally starting to get a boost from the hype.
The company reported stellar results for its fourth fiscal quarter (ending April 30), beating its own guidance. Revenues of $86.6 million were up 20% year over year, and the company is optimistic about the future. After reporting 16% sales growth for the full year, management expects growth to accelerate to 23% in fiscal 2025 (midpoint of the range). It's taken a while, but C3.ai's growth rate is finally starting to show strength at a time when demand for AI is surging.
Data by YCharts.
Has C3.ai become a growth stock worth buying?
C3.ai shares rose following its fourth-quarter results, but are still down 3% year to date. Despite the strong earnings report, this remains a fairly shaky investment, down more than 80% from its all-time high.
Many investors are still not convinced that C3.ai has nailed it in AI, and a strong first quarter hasn't changed that outlook: The business remains unprofitable, and it wasn't that long ago that its growth rate plummeted.
For investors considering buying C3.ai stock, a wait-and-see approach may be the most appropriate option: the company needs to build on its recent performance to prove its long-term prospects as an AI growth stock, and it needs at least a few more quarters of strong momentum to convince investors.
