Artificial intelligence (AI) software company C3.ai (NYSE:AI) reported Q3 FY2022 results beating Wall St's expectations, with revenue up 42% year on year to $69.7 million. C3.ai made a GAAP loss of $39.4 million, down on its loss of $16.8 million, in the same quarter last year.
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C3.ai (AI) Q3 FY2022 Highlights:
- Revenue: $69.7 million vs analyst estimates of $67.1 million (3.89% beat)
- EPS (non-GAAP): -$0.07 vs analyst estimates of -$0.25 ($0.18 beat)
- Free cash flow of $175.1 million, up from negative free cash flow of $19.8 million in previous quarter
- Gross Margin (GAAP): 75.1%, in line with same quarter last year
“Our third quarter results displayed strength in all aspects of our business, including revenue growth of 42% year over year,” said CEO Thomas M. Siebel.
Founded in 2009 by enterprise software veteran Tom Seibel, C3.ai (NYSE:AI) provides software that makes it easy for organizations to add artificial intelligence technology to their applications.
Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.
Sales Growth
As you can see below, C3.ai's revenue growth has been very strong over the last year, growing from quarterly revenue of $49.1 million, to $69.7 million.
And unsurprisingly, this was another great quarter for C3.ai with revenue up 42% year on year. On top of that, revenue increased $11.5 million quarter on quarter, a very strong improvement on the $5.85 million increase in Q2 2022, and a sign of re-acceleration of growth.
Ahead of the earnings results the analysts covering the company were estimating sales to grow 33.3% over the next twelve months.
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Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. C3.ai's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 75.1% in Q3.
That means that for every $1 in revenue the company had $0.75 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a good gross margin that allows companies like C3.ai to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.
Key Takeaways from C3.ai's Q3 Results
With a market capitalization of $2.31 billion C3.ai is among smaller companies, but its more than $968.6 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
We enjoyed seeing C3.ai’s impressive revenue growth this quarter. And we were also glad to see the improvement in gross margin. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 1.89% on the results and currently trades at $23.11 per share.
C3.ai may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.