C3.ai's Growth Influenced by Microsoft Partnership and AI Expansion

On Monday, C3.AI Inc (NYSE: AI) announced its second-quarter revenue, which reached $93.34 million. This figure exceeded the analyst consensus of $91.02 million, showcasing the company's strong performance in the AI sector. Furthermore, C3.AI reported a quarterly earnings per share (EPS) loss of 6 cents, which was better than the analyst estimates predicting a loss of 16 cents.

In response to these results, analysts have reevaluated C3.ai’s stock, with some raising their price targets. For instance, JMP Securities analyst Aaron Kimson maintained a 'Market Outperform' rating on C3.ai and increased the price target from $40 to $55. On the other hand, Needham analyst Mike Cikos reiterated a 'Hold' rating, while JP Morgan's Pinjalim Bora maintained a 'Neutral' rating but increased the price target from $19 to $28.

Partnership with Microsoft

C3.ai announced a significant new six-year partnership with Microsoft Corp. This collaboration establishes C3.ai as a preferred AI application partner on Azure, Microsoft's cloud platform. This deal enables Microsoft customers to purchase C3.ai applications directly through the Azure Portal, simplifying the contracting process for C3.ai.

Revenue Diversification

The company has been actively working to decrease its reliance on Baker Hughes, which accounted for a substantial portion of its revenue in previous fiscal years. Specifically, Baker Hughes represented 35% of C3.ai’s revenue in fiscal 2023, but that number is expected to drop to 18% by the second-quarter of fiscal 2025.

Additionally, C3.ai is anticipating increased demand from sectors such as federal and defense, which has recently shifted focus toward AI applications. C3.ai CEO Tom Siebel highlighted this shift as a strategic area of growth.

Analysts' Projections

In terms of financial outlook, there are various projections for C3.ai's upcoming quarters. Kimson at JMP Securities expects the company to report third-quarter revenue of $99.0 million and an EPS loss of $(0.26). Meanwhile, Needham's Cikos anticipates a third-quarter revenue of $98.1 million and an EPS loss of $(0.25). JP Morgan’s Bora also projects third-quarter revenue of $98.0 million with a similar EPS loss expectation.

Market Reaction

Following these developments, C3.ai's stock has seen a positive uptick, rising by 7.87% to reach $44.89 as of the latest trading session.

C3.ai continues to demonstrate its potential in the rapidly evolving AI landscape, driven by partnerships and a diversified approach to revenue generation.

C3.ai, Microsoft, Partnership