C3.ai stock sank on Wednesday on a bearish call from J.P. Morgan Research, with analysts citing the stock’s potential to underperform their coverage in 2025.

C3 ai stock fell after analysts at J.P. Morgan Research downgraded it to Underweight from Neutral.

Analysts led by Pinjalim Bora downgraded shares of C3.ai to Underweight from Neutral while maintaining a price target of $28.

The stock tumbled 8.5% to $38.18 on Wednesday, snapping a three-day winning streak and putting it for its largest same-day percent decrease since Sep. 5, according to Dow Jones Market Data.

“While we understand that C3.ai is going after a massive and rapidly evolving opportunity around Artificial Intelligence, we think its uneven and subpar growth-plus-margin performance leaves a lot to be desired,” the analysts wrote.

The California-based company specializes in enterprise AI software for government and businesses, offering its flagship C3 AI Platform as well as a slate of ready-to-use “turnkey” applications.

For its fiscal second quarter ended Oct. 31, C3.ai reported a loss of 6 cents a share, compared with consensus that called for a loss of 16 cents. Revenue came in at $94.3 million, beating analysts’ forecasts for $91 million.

While revenue growth has improved as of late, the incremental costs to drive that growth appear high, the analysts wrote.

J.P. Morgan nodded to C3.ai’s strategic partnership with energy tech company Baker Hughes. The alliance accounted for 27% of total revenue in the fiscal year ended April 30, 2024, C3.ai said, but it currently hangs in the balance as the contract is set to expire next June.

If Baker Hughes decides against renewal, this headwind may be partially offset by C3.ai’s expanded partnership with Microsoft, the analysts noted.

Under the terms of that agreement, which ends in March 2030, Microsoft Azure salespeople can sell C3.ai solutions globally. They will receive commissions and special bonuses on all sales.

“While the Microsoft relationship could be beneficial to growth, we await to see proof points before underwriting its success,” the analysts wrote.