C3.ai, Inc. (NYSE:AI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The company's revenue growth, strategic alliances, and strong cash position are positive indicators. Despite an operating loss, the guidance suggests improvement in cash flow and profitability in future quarters. The Q&A revealed some concerns about the lack of clarity on specific deals and guidance, but overall sentiment remains positive due to strong revenue growth and strategic partnerships. The stock's market cap suggests a moderate reaction, leading to a positive prediction.
Key Financial Performance
Total Revenue Q4 2025 $108.7 million, a 26% increase from $86.6 million in Q4 2024.
Subscription Revenue Q4 2025 $87.3 million, up 9% from $79.9 million a year ago.
Combined Subscription and Prioritized Engineering Services Revenue Q4 2025 $104.4 million, a 22% increase from $85.7 million in Q4 2024.
Non-GAAP Gross Profit Q4 2025 $75.2 million, with a gross margin of approximately 69%.
Non-GAAP Operating Loss Q4 2025 $31.2 million, within the guidance range of $30 million to $40 million.
Non-GAAP Net Loss per Share Q4 2025 $0.16.
Free Cash Flow Q4 2025 $10.3 million, compared to $18.8 million in Q4 2024.
Total Revenue FY 2025 $389.1 million, a 25% increase from $310.6 million in FY 2024.
Subscription Revenue FY 2025 $327.6 million, an 18% increase from $278.1 million in FY 2024.
Non-Oil and Gas Revenue Growth FY 2025 Increased by 48% year over year.
Professional Services Revenue Q4 2025 $21.4 million, with $17 million from prioritized engineering services.
Cash, Cash Equivalents, and Investments Q4 2025 $742.7 million, largely unchanged from a year ago.
Bookings Q4 2025 $135.4 million, increased from $42 million in Q4 2024.
Non-GAAP Free Cash Flow FY 2025 Improved to negative $44.4 million, compared to negative $90.4 million last year.
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Operating Highlights
New Product Offerings: C3.ai has developed over 130 turnkey enterprise AI applications to solve real business problems, including predictive maintenance, supply chain optimization, and fraud detection.
Generative AI Solutions: C3 Generative AI revenue grew more than 100% in FY 2025, with 66 initial production deployments across 16 industries.
Agentic AI Solutions: C3.ai owns the patent for Agentic AI, with over 100 solutions deployed, generating approximately $60 million in annual recurring revenue.
Market Expansion: C3.ai expanded its partner ecosystem significantly, closing 193 agreements through partners, a 68% increase from the prior year.
Federal Contracts: C3.ai secured a $450 million contract ceiling with the US Air Force to scale the deployment of sensor-based algorithms on the Panda predictive maintenance platform.
Diverse Industry Growth: Non-oil and gas revenue increased by 48% year over year, with significant growth in manufacturing, state and local government, and life sciences.
Operational Efficiency: C3.ai's focus on expense management has resulted in a non-GAAP operating loss of $31.2 million, better than guidance.
Cash Management: C3.ai maintained $742.7 million in cash, cash equivalents, and investments, unchanged from the previous year.
Strategic Partnerships: C3.ai renewed and expanded its partnership with Baker Hughes, generating over $500 million in revenue from this vertical.
New Alliances: C3.ai formed a new strategic alliance with PwC to target key industries such as financial services and manufacturing.
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Risk or Challenges
Competitive Pressures: C3.ai, Inc. faces significant competition in the enterprise AI market, with numerous players attempting to deliver similar solutions. The company emphasizes its unique position as an enterprise AI application pure play, but acknowledges the need to continuously innovate and differentiate to maintain its competitive edge.
Regulatory Issues: The company highlights potential risks associated with geopolitical stability and regulatory changes, particularly in relation to government contracts and funding. Any disruptions in government operations or trade friction could adversely impact business results.
Supply Chain Challenges: C3.ai, Inc. is involved in sectors like oil and gas, manufacturing, and government, which may face supply chain disruptions. The company has developed applications to optimize supply chain operations, but external factors could still pose risks.
Economic Factors: The company notes that economic conditions, including global trade dynamics and government budget approvals, could impact revenue growth and operational stability. The reliance on government contracts introduces additional economic risks.
Cash Flow Management: Despite a strong cash position, the company has faced scrutiny regarding its cash management and operational losses. The focus on expense management and achieving profitability is critical to mitigate risks associated with cash flow.
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Guidance & Outlook
Strategic Partnerships: C3.ai has formed strategic partnerships with major players like Microsoft Azure, AWS, and GCP to enhance market reach and sales effectiveness. The partnership with Azure has been particularly significant, as C3.ai applications are now preferred solutions on Azure's price list.
Baker Hughes Agreement: The strategic partnership with Baker Hughes has been renewed through 2028, generating over half a billion dollars in revenue and enhancing credibility in the oil and gas sector.
Agentic AI Solutions: C3.ai has developed over 100 Agentic AI solutions, with a growing annual recurring revenue (ARR) of approximately $60 million, positioning the company to capitalize on the expanding Agentic AI market.
Expansion into New Verticals: C3.ai has diversified its revenue streams, with non-oil and gas revenue increasing by 48% year-over-year, particularly in manufacturing, state and local government, and life sciences.
Demonstration Licenses: C3.ai has invested in demonstration licenses, which accounted for nearly 30% of revenue in Q4, to facilitate customer adoption and accelerate change management.
Revenue Guidance Q1 FY 2026: C3.ai anticipates revenue between $100 million to $109 million for Q1 of fiscal 2026.
Full Year Revenue Guidance FY 2026: For the full fiscal 2026, revenue is expected to range from $447.5 million to $484.5 million.
Non-GAAP Loss from Operations Guidance: Guidance for non-GAAP loss from operations for Q1 is between $23.5 million to $33.5 million, and for the full year, it is projected to be between $65 million to $100 million.
Profitability Outlook: C3.ai expects to achieve non-GAAP profitability in the second half of fiscal 2027 and anticipates being free cash flow positive in Q4 of fiscal 2026.
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Shareholder Return Plan
Free Cash Flow: Generated free cash flow of $10.3 million in Q4.
Cash Position: Closed Q4 with $742.7 million in cash, cash equivalents, and investments.
Revenue Growth: Total revenue for Q4 reached $108.7 million, reflecting a 26% increase year-over-year.
Subscription Revenue: Subscription revenue for Q4 was $87.3 million, up 9% from the previous year.
Operating Loss: Non-GAAP operating loss was $31.2 million for the quarter.
Net Loss Per Share: Non-GAAP net loss per share was $0.16.
Revenue Guidance for Q1 FY 2026: Revenue guidance for Q1 FY 2026 is $100 million to $109 million.
Revenue Guidance for FY 2026: Anticipating revenue in the range of $447.5 million to $484.5 million for FY 2026.
Profitability Expectations: Expect to cross into non-GAAP profitability during the second half of fiscal 2027.
Free Cash Flow Expectations: Expect to be free cash flow positive in Q4 of fiscal 2026 and in successive years thereafter.
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Key Q&A
Q:How do you go about activating tens of thousands of Azure sales reps to actually deliver C3.ai, Inc.?
A:We are charting our order of a hundred salespeople to each reach out and form partnerships with ten Azure salespeople. Our sales guys are focused on engaging with the Azure reps to help them retire their quota and make their customers successful.
Q:Can you provide some color on what the economics of the new deal with Baker Hughes look like and how they might differ compared to your prior engagements?
A:It’s covered under NDA, so I can’t get into specifics. However, the partnership has broadened significantly, and we are continuing to develop solutions together.
Q:How did you think through guidance construction this quarter, and what needs to happen to achieve the high end of that band versus the low end?
A:We acknowledge real market risks, including geopolitical and budget risks, which is why we have a broader range than usual for our guidance.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details regarding the economics of the new deal with Baker Hughes due to NDA restrictions, which lacked clarity on the financial implications. Additionally, while discussing guidance construction, the response included vague references to risks without specific data or examples.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI application
AI market
AI solution
AWS GCP
Agentic AI
Cai Inc
Excel
Inc today
McKinsey Quantum
Pluto
PwC
Quantum Black
benefit
collaboration
demand
demonstration license
dollar cash
enterprise AI
enterprise application
hundred
manufacturing
oil gas
optimization
paper
production
provider
quarter dollar
stack
supply chain
tailwind
ten
thousand
utility
value
vertical
work
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The earnings call summary presents mixed signals: strong revenue growth and bookings contrast with operational losses and cash flow deficits. The strategic focus on expanding markets and partnerships provides optimism, but gross margin pressures and economic uncertainties pose risks. The Q&A reveals confidence in future growth but lacks concrete guidance. Given the company's mid-sized market cap, the stock is likely to experience a neutral reaction (-2% to 2%) as positive and negative factors balance each other out.
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Unknown9-3
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Positive5-29
The company's revenue growth, strategic alliances, and strong cash position are positive indicators. Despite an operating loss, the guidance suggests improvement in cash flow and profitability in future quarters. The Q&A revealed some concerns about the lack of clarity on specific deals and guidance, but overall sentiment remains positive due to strong revenue growth and strategic partnerships. The stock's market cap suggests a moderate reaction, leading to a positive prediction.
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Frequently Asked Questions
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