C3.ai’s Growth Boosted by Microsoft Partnership And AI Expansion Drive, Analysts Up Price Forecast
On Monday, C3.AI Inc (NYSE:AI) reported second-quarter income of $93.34 million, beating analyst consensus of $91.02 million. The firm reported a quarterly EPS lack of 6 cents, beating analyst loss estimates of 16 cents.
Analysts rerated the inventory after the print, with some elevating their worth targets.
Related Read: C3.ai Stock Rallies After Q2 Results, ‘Seventh Consecutive Quarter Of Accelerating Revenue Growth’
JMP Securities analyst Aaron Kimson maintained C3.ai with a Market Outperform ranking and raised the value goal from $40 to $55.
Needham analyst Mike Cikos reiterated C3.ai with a Hold ranking. JP Morgan analyst Pinjalim Bora maintained a Neutral ranking on C3.ai with a worth goal of $28, up from $19.
JMP Securities: While C3.ai continues to face a number of dangers, together with its dependency on Baker Hughes, which has represented about 20% of fiscal 2025 income and whose present contract expires in June 2025, general, Kimson continues to love this story for a number of causes. The firm has now had seven quarters of accelerating income development. It provides a broad vary of AI functions for enterprises in fields like manufacturing, protection, authorities, and oil and gasoline and has deep AI area experience, as mirrored partly by a brand new patent, which covers agentic AI and strengthens the corporate’s market place dramatically.
C3.ai introduced a broad new six-year partnership with Microsoft Corp that establishes “C3.ai as a most popular AI utility accomplice on Azure” and permits Microsoft clients to purchase C3.ai functions via the Azure Portal and “on Microsoft Paper,” which ought to make contracting a lot, a lot simpler for C3.ai.
The firm is lowering its income dependency on Baker Hughes, which was 35% of C3.ai’s income in fiscal 2023, 27% in fiscal 2024, 22% in fiscal first-quarter of 2025 and 18% in fiscal second-quarter of 2025.
The firm is anticipating to see elevated demand in areas like federal and protection following the brand new authorities administration, with founder and CEO Tom Siebel noting that there was a shift in curiosity from “submarines and carriers and house, and plane” to the “AI functions, AI functions, AI functions, AI functions, after which cyber.”
Founder and CEO Thomas M. Siebel has deep expertise within the software program trade and navigated his prior firm, Siebel Systems, to a superb end result in its sale to Oracle Corp in 2006 for $5.8 billion.
At the closing worth, C3.ai trades at a calendar 2025 Enterprise Value to income a number of of 10.7 occasions and a calendar 2026 Enterprise Value to income a number of of 8.6 occasions, whereas the brand new worth goal implies a calendar 2026 Enterprise Value to income a number of of 10.8 occasions (beforehand calendar 2025 10.0 occasions), consistent with the peer group median that he famous is merited by C3.ai’s speedy development, domain-specific AI capabilities, and potential strategic worth. Kimson projected a third-quarter income of $99.0 million and an EPS lack of $(0.26).
Needham: C3.ai’s second-quarter outcomes exceeded the excessive finish of income steerage, with a narrower working loss than anticipated as sure bills pushed to the second half of fiscal 2025.
The foremost speaking level from administration was the Microsoft partnership introduced in late September, which meaningfully expands the corporate’s addressable alternative. C3.ai guided fiscal 2025 working losses to $120.0 million on the midpoint (-31% working margin), – $10 million wider than administration’s earlier outlook to help the initiative. C3.ai will spend money on buyer success, go-to-market, and analysis and improvement.
Management now not expects to generate constructive free money stream for fiscal 2025. RPO elevated for the primary time because the first quarter of fiscal 2024 however must be extra significant with the transition to the pilot program. Meanwhile, incremental churned pilots stay elevated because the energetic pilot depend moderates. Cikos projected a third-quarter income of $98.1 million and an EPS lack of $(0.25).
JP Morgan: Bora up to date his AI mannequin to incorporate fiscal outcomes for the second quarter of 2025. The worth goal displays ~7 occasions Enterprise Value to calendar 2026 income (beforehand ~5 occasions Enterprise Value to calendar 2025) relative to infrastructure software program firms rising ahead twelve months (FTM) income over 20% (Cloudflare, Inc, CrowdStrike Holdings, Inc, Datadog, Inc, Snowflake Inc, GitLab Inc, Zscaler, Inc, CyberArk Software Ltd, SentinelOne, Inc) buying and selling at ~10 occasions Enterprise Value to calendar 2026 income.
The analyst famous AI ought to commerce at a major low cost to this group as a result of its development is analogous however at a a lot smaller scale for AI, and AI is extraordinarily unprofitable in comparison with the comps.
While AI is anticipated to develop FTM income at a comparable development stage (25% versus 24% for comps median), AI is 80% smaller than the median scale of the comp group. Additionally, AI is anticipated to have (10%) FTM free money stream margin driving a development plus margin profile of 14%, versus comps at +23% unlevered free money stream margin driving a development plus margin of +46%. Furthermore, the calendar 2025 proforma working margin for AI is anticipated to be (30%) versus comps at +15%.
Bora projected a third-quarter income of $98.0 million and an EPS lack of $(0.26).
Price Action: AI inventory is up 7.87% at $44.89 finally test Tuesday.
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Date
Firm
Action
From
To
Mar 2022
Deutsche Bank
Downgrades
Hold
Sell
Mar 2022
Wedbush
Maintains
Outperform
Mar 2022
JMP Securities
Maintains
Market Outperform
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This article C3.ai’s Growth Boosted by Microsoft Partnership And AI Expansion Drive, Analysts Up Price Forecast initially appeared on Benzinga.com
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