For this pioneering company, the opportunity for artificial intelligence (AI) has never been greater.
While artificial intelligence (AI) is relatively new to most businesses, C3.ai (AI 3.50%)The company has been developing the technology since 2009 and was one of the first enterprise software providers in the burgeoning AI industry.
Today, companies across 19 industries are using C3.ai to accelerate their AI adoption, and the company's revenue growth is accelerating as demand surges.
C3.ai shares are currently trading at $25.90, but could rise significantly in the long term as AI becomes more widespread. Here's why investors with spare cash they don't need for immediate expenses might want to allocate at least $30 to this opportunity:
Image credit: C3.ai.
A unique initiative in the enterprise AI industry
Cloud software giant Amazon and Microsoft It has become synonymous with AI as it offers businesses a choice of hundreds of pre-built large-scale language models (LLMs) that they can use to build their own applications.
C3.ai's strategy is a bit different. The company offers more than 40 turnkey AI applications that companies can quickly integrate into their operations. What's more, C3.ai can be customized to fit specific needs upon request. For example, manufacturers use C3.ai to forecast revenue, control costs, and even predict equipment failures to reduce the chance of downtime.
Similarly, oil and gas giants shell The company uses C3.ai's applications to monitor thousands of pieces of equipment and know when to perform preventive maintenance, as failures can have a devastating impact on not only the company's bottom line but also the environment. C3.ai's real-time production optimization software also helps Shell optimize pressure, temperature, and flow rates at its liquefied natural gas plants, leading to significant reductions in carbon emissions.
In its most recent fiscal fourth quarter (ended April 30), C3.ai secured 487 customer engagements, up 70% from the same period last year. The company signed 115 of the deals exclusively through its partnership network, which includes tech giants such as Amazon and Microsoft, which provide C3.ai's applications to customers on their clouds.
It's a win-win for all parties: C3.ai gets access to a much larger potential customer base, and partners can delight their enterprise customers with more AI options on their platform.
C3.ai's Revenues Continue to Accelerate
Two years ago, C3.ai changed its revenue model to foster long-term growth. Previously, the company charged customers on a subscription basis, which required lengthy negotiations over contract terms and pricing. Now, the company has a consumption model, which allows companies to subscribe and cancel when they want, pay only for what they use, and provides a smoother and faster onboarding process.
C3.ai warned investors that it will take time to scale up consumption, so revenue growth will slow temporarily while it converts existing customers to the new model. The company's revenue for the third quarter of fiscal 2023 (ending Jan. 31, 2023) is actually projected to grow by 1.2%. Shrunk Up 4% from the previous year.
But since then, C3.ai's revenue growth has accelerated steadily, in line with management's predictions.
Image credit: C3.ai.
Fourth-quarter revenue hit a record $86.6 million, with a 20% growth rate that was the fastest in two years, and the company's forecast for the first quarter of fiscal 2025 (ending July 31) suggests that growth could accelerate further to 23%.
Why C3.ai Stock is a Great Long-Term Buy
First, it's important to highlight that C3.ai continues to post losses. The company's fourth-quarter net loss was $72.9 million, up from the same period last year as it spent more on operating expenses (mainly marketing) to drive sales. On a non-GAAP basis, which excludes one-time and non-cash expenses like stock-based compensation, C3.ai's loss was $14 million, which is a bit more palatable.
The company has $750.3 million in cash, cash equivalents, and marketable securities on its balance sheet, which allows it to withstand losses for now, but it ultimately needs to prove to investors that it can generate profits along with accelerating revenue growth.
Meanwhile, Wall Street predicts that AI could add $7 trillion to $200 trillion in value to the global economy over the next decade. Capturing as much of that value as possible could lead to big long-term gains for investors. So C3.ai's aggressive investment in customer acquisition at the expense of short-term profitability isn't necessarily a bad thing.
C3.ai's stock price hit an all-time high of $161 shortly after it went public in 2020, so its current price of $25.90 represents an 83% decline. To be clear, the company's valuation at the time was completely irrational, but since then the company has continued to grow its revenue and customer base. What's more, the company's opportunity in the AI space has never been greater.
Therefore, this could be a great opportunity for investors to invest in C3.ai with the intention of holding for the next 10 years as the AI story unfolds.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a director of The Motley Fool. Anthony DiPizio has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Microsoft. The Motley Fool recommends C3.ai and recommends the following: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
