Shares of artificial intelligence (AI) software company C3.ai (NYSE:AI) fell 11.3% in the after market session after the company reported fourth-quarter results that beat analysts' revenue and earnings per share expectations. Note that the company positively pre-announced some key Q4 metrics on May 15, 2023, about two weeks prior to officially reporting the quarter. With the full details of the quarter, key negatives included misses on key topline metrics like subscription revenue and remaining performance obligations (RPO, a leading indicator of revenue). The headline total revenue beat that was pre-announced was therefore driven by professional services revenue and considered a lower-quality beat (as opposed to a beat driven by subscription revenue, which is recurring in nature). Guidance was also mediocre. C3.ai's revenue guidance for the next quarter was roughly in line, but non-GAAP operating loss guidance was worse. Full year revenue guidance missed analysts' expectations. Non-GAAP operating loss guidance for the full year was roughly in line despite the revenue guidance miss. Overall, the results could have been better, especially given the hope baked into a stock whose ticker is AI and who has spoken at length about the AI tailwinds to the business.
What is the market telling us:
C3.ai's shares are very volatile and over the last year have had 72 moves greater than 5%. But moves this big are very rare even for C3.ai and that is indicating to us that this news had a significant impact on the market's perception of the business. The previous big move was about two months ago, when the company dropped 14.4% on the news that short seller, Sahm Adrangi of Kerrisdale Capital, sent a letter to Deloitte & Touche, conveying worries about alleged accounting problems at the firm.
C3.ai is up 188% since the beginning of the year, but at $32.10 per share it is still trading 27% below its 52-week high of $43.95 from May 2023. Investors who bought $1,000 worth of C3.ai's shares at the IPO in December 2020 would now be looking at an investment worth $345.12.
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