C3.ai (AI -0.63%) is a pure artificial intelligence (AI) stock that has been in the spotlight this year. Its value has risen more than three times as much as his, and with the excitement surrounding ChatGPT and the potential for AI solutions to transform the industry, the company expects significant growth ahead.
But one criticism of the business is its dependence on oil and gas customers. Is it an issue that investors should worry about? Let’s see.
Oil and gas accounts for a third of bookings
C3.ai recently released its year-end earnings numbers (fiscal year ended April 30). Of the company’s bookings this year, 33.8% were from companies in the oil and gas industry. And that’s one of the big concerns surrounding C3.ai. Perhaps C3.ai has become overly dependent on oil and gas, especially his partnership with C3.ai. baker fuse.
The firm said it closed 10 new oil and gas accounts in fiscal 2023, including deals with industry giants, backed by Baker Hughes. exxon mobil. C3.ai’s total revenue for his fiscal year 2023 surpassed his $267 million, up 5.6% year-over-year.
But bookings may now be trending in a different direction
During the last three months of the fiscal year, C3.ai secured pilot and trial contracts with a wider range of industries compared to its usual customer mix. Below is a breakdown of the company’s bookings and contracts by industry for FY2023.
Source: Company submissions. Chart by author.
While this is an early indicator, it appears to be becoming less reliant on oil and gas and more mixed. In particular, the US government could be an even bigger customer for his C3.ai in the future. The company announced in April that the U.S. Air Force has designated an application under development at C3.ai for use as a system of record for predictive maintenance.
This is good news for investors. Significant growth opportunities could open up for C3.ai, meaning that stable customers like the U.S. Air Force could play a bigger role in the future.
Should I buy C3.ai?
These are encouraging developments for C3.ai, as diversifying from the historically volatile oil and gas industry will reduce some of the risk of investing in the business. But an investor concerned about this risk might want to wait another quarter or two to see if this is the start of a new trend or just an anomaly.
C3.ai forecasts revenue of $295 million to $320 million in 2024, suggesting about 15% growth at the midpoint. That’s higher than the growth rate it achieved in fiscal 2023, but it may not be the speed investors were expecting given all the AI hype. This could indicate that the company may not be expecting a surge in business from the government or other customers, despite its more diversified results last quarter.
If you’re bullish on AI, C3.ai could be a good investment, but if you want to minimize risk, at least see if the customer mix stays the way it is. It may be better to refrain from purchasing. As diverse as the previous quarter.
