C3.ai AI is set to release its third-quarter fiscal 2025 results on Feb. 26.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

For third-quarter fiscal 2025, C3.ai expects revenues between $95.5 million and $100.5 million. 

The Zacks Consensus Estimate for revenues is pegged at $97.97 million, indicating an increase of 27.96% from the year-ago quarter’s reported figure.

The consensus mark for loss has been stable in the past 30 days at 25 cents per share. The figure calls for a year-over-year decline of 92.31%

The company beat the Zacks Consensus Estimate in the each of the last four quarters, delivering an average earnings surprise of 60.53%.

Let’s see how things have shaped up before the announcement.

Key Factors to Note for AI Earnings

C3.ai’s third-quarter performance is likely to have gained from C3 Generative AI solutions and increased demand for its Enterprise AI software.

Strong momentum across generative AI solutions, owing to its introduction of C3 Generative AI to address challenges in large language models and provide multimodal solutions, is expected to have aided the company’s performance in the to-be-reported quarter.

C3.ai has seen growing interest in generative AI applications, particularly in industries like manufacturing, pharmaceuticals and energy. The company’s Generative AI Accelerator program, which helps organizations integrate AI more rapidly, is likely to fuel new agreements and conversions from pilots to full-scale implementations.

The company’s efforts to diversify its customer base and engage with clients across various industries, such as manufacturing, federal, defense, aerospace, and pharmaceuticals, are expected to have contributed significantly to revenue growth.

C3.ai closed 58 agreements in the fiscal second quarter, including new and expanded deals with major corporations like Exxon Mobil, Dow, Rolls-Royce, and Duke Energy. The momentum from these deals is expected to carry into the next quarter.

AI Trading at a Premium

C3.ai shares have plunged 8.3% in the year-to-date period, underperforming the Zacks Computer & Technology sector’s return of 0.8%.

Year-to-Date Performance

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C3.ai stock is also not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

AI stock is trading at a premium with a forward 12-month Price/Sales of 7.95X compared with the sector’s 6.45X.

Price/Sales (F12M)

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AI’s Strong Partner Base Boosts Prospects

C3.ai has been one of the prominent AI stocks in recent times thanks to strong demand for C3 Generative AI solutions and an expanding partner base that includes the three big cloud providers Amazon AMZN, Alphabet GOOGL and Microsoft MSFT. This robust network of partners is likely to have driven growth during the fiscal third quarter.

Partnerships with hyperscalers like Google Cloud, Amazon Web Services and Microsoft Azure have driven 62% of the company’s agreements in the second quarter of fiscal 2025. This indicates that C3.ai’s partner network is critical in driving revenues and adopting its solutions.

In the fiscal second quarter of 2025, C3.ai, in collaboration with Alphabet’s cloud business Google Cloud, closed 20 agreements, marking a 180% year-over-year increase. It was featured at Google’s Public Sector Summit in Washington, DC, while jointly hosting six executive roundtable discussions across North America and LATAM.

The expanded partnership with Microsoft Azure is a major positive, as it significantly boosts C3.ai’s sales channels. Microsoft’s global sales teams actively selling C3 AI solutions are expected to have generated more enterprise-level adoption and reduced sales cycles, driving increased revenues in the to-be-reported quarter.

AI Expands US Government Partnerships With AI Solutions

C3.ai’s growing presence in the government and defense sector, including new contracts with U.S. federal agencies, presents a steady revenue stream. With continued federal AI investments, this sector is likely to provide further opportunities in the third quarter of fiscal 2025.

Building on this momentum in December 2024, C3.ai, in partnership with ECS, secured a task order from the U.S. Army’s Program Manager for Intelligence Systems & Analytics to modernize information collection management processes. 

The task order focuses on deploying the AI-driven C3 AI Decision Advantage application to optimize intelligence operations and reduce soldier workload.

The company’s federal business also saw strong growth in the second quarter of fiscal 2025, securing new and expanded agreements with the U.S. Department of Defense, the U.S. Air Force, the U.S. Navy, the U.S. Army, the U.S. Marine Corps, the Defense Logistics Agency, the Chief Digital Artificial Intelligence Office, and the National Science Foundation.

What Should Investors Do With AI Stock?

Despite strong demand for C3 Generative AI solutions and an expanding partner base, C3.ai is suffering from stiff competition in the enterprise AI sector. This intense competition clouds C3.ai’s efforts to gain a stronger foothold in the market.

As a result, C3.ai has made plans to invest aggressively in its offerings to secure market share. However, this strategy is expected to keep margins under pressure in the near term, making the stock risky for investors.

AI is also suffering from macroeconomic uncertainties, which are impacting its development, adoption, and integration across industries. Stretched Valuation also remains a concern.

C3.ai currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable time to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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