“We are downgrading shares of C3 AI to Underweight as we see an unfavorable risk/reward,” wrote KeyBanc analyst Eric Heath

A C3.ai billboard is seen in South San Francisco, California.

C3.ai Inc. was downgraded to underweight by KeyBanc Capital Markets Thursday, with the analyst firm citing concerns about the enterprise software company’s subscription revenue growth. 

“We are downgrading shares of C3.ai to Underweight as we see an unfavorable risk/reward,” wrote KeyBanc analyst Eric Heath, noting that the company’s shares are trading at 13.3 times Enterprise Value-to-Revenue versus 7.3 times at its “10-20% growth peers.”

KeyBanc highlighted concerns that consensus fiscal year 2026 and 2027 revenue estimates may be too high. Subscription revenue growth excluding upfront license moderated to -1% year-over-year in C3.ai’s recent fiscal second quarter, wrote Heath. The analyst also pointed to the company’s “large operating losses” and potential risks if its agreement with energy technology company Baker Hughes Co. is not renewed in fiscal year 2026 and if its Microsoft Corp. partnership “does not yield material results.”

KeyBanc set a $29 price target for C3.ai. Of 16 analysts surveyed by FactSet, four have a buy rating, five have a hold rating, and six have an underweight or sell rating for the business software and artificial-intelligence play. 

Earlier this month C3.ai reported reported a narrower-than-expected fiscal second-quarter loss as revenue jumped 29% year-over-year.

J.P. Morgan raised its C3.ai price target to $28 from $19 following the results but said that the company is “extremely unprofitable” compared to peers Cloudflare Inc., CrowdStrike Holdings Inc., Datadog Inc., Snowflake Inc., GitLab Inc., Zscaler Inc., CyberArk Software Ltd., and SentinelOne.

In November C3.ai expanded its partnership with Microsoft when the companies announced a strategic alliance to accelerate the adoption of Enterprise AI on the software giant’s Azure platform.

Shares of C3.ai are down 2.2% in premarket trades. The stock is up 38.2% in 2024.