2025 started rough for C3.ai (AI 0.32%) with shares of the enterprise artificial intelligence (AI) software provider dropping 35% year to date, but a closer look at its business indicates that the market may not be giving this company its due.

C3.ai's enterprise AI software solutions are gaining traction among customers, which is evident from the company's recent quarterly results. More importantly, a closer look at C3.ai's latest results suggests that the software specialist is setting itself up for solid, long-term growth.

Let's look at the reasons why investors should consider adding this AI stock to their portfolios before the market starts appreciating its robust growth, sending its shares soaring in the long run.

C3.ai stock fell following its report, but investors should focus on the bigger picture

C3.ai released its fiscal 2025 third-quarter results (for the three months ended Jan. 31) on Feb. 26. Though the company reported healthy growth and exceeded consensus estimates on revenue and earnings, the stock price fell nearly 10% the following day.

C3.ai's top line jumped 26% year over year to almost $99 million. This probably weighed on investors' sentiment as the software specialist delivered slightly faster growth of 29% in fiscal Q2. However, the sell-off in C3.ai stock seems like an overreaction as its top line was slightly higher than what Wall Street was anticipating.

Moreover, C3.ai's fiscal Q3 growth was far stronger than the 18% year-over-year growth it reported in the same quarter last year. The company, therefore, needs to be given credit for the fact that its growth profile is much better than it was in the same quarter last year. The midpoint of C3.ai's revenue guidance for the current quarter points toward a year-over-year increase of 25%, which would be an improvement over the 20% growth it reported in the same quarter last year.

The company is on track to finish the current fiscal year with a top-line jump of 25%, which would again be better than the 16% growth it clocked in the previous fiscal year. Looking ahead, C3.ai's pace of growth could continue improving thanks to the huge AI software market that it is targeting on account of its improving deal activity.

The company reported that it closed 66 agreements with customers last year, an increase of 72% from the year-ago period. Even better, C3.ai management pointed out on the latest earnings conference call that its existing customers, which include both commercial and federal, are expanding the usage of its AI software solutions:

In Q3, we secured new and expanded agreements with clients such as Flex, Worley, New York Power Authority, Sanofi, Nucor Corporation, Holcim, Shell, ExxonMobil, GSK, Quest Diagnostics, and Swift, among others. In the federal sector, we closed agreements with the U.S. Department of Defense, the U.S. Air Force, the U.S. Navy, and the Missile Defense Agency. We also expanded our work with state and local governments closing 21 agreements across various states. Our focus on generative AI continues to drive innovation and customer traction.

It is also worth noting that C3.ai is engaged in pilot projects as well with large corporations and several government agencies, which could contribute toward stronger revenue growth in the long run. All this explains why C3.ai management believes that it can deliver "continually expanded growth and market share" over the next couple of fiscal years.

With the AI software market expected to clock annual growth of 30% through 2033, C3.ai is operating in a fast-growing market that should allow it to sustain healthy levels of growth in the long run.

Why it makes sense to buy the stock now

C3.ai is trading at a very attractive valuation unlike other significantly expensive AI software plays. The stock has a price-to-sales (P/S) ratio of 8, which is significantly lower than peer Palantir Technologies which is trading at 73 times sales. What's worth noting here is that there isn't a huge gap between the growth rates of Palantir and C3.ai to justify the former's massively expensive valuation.

What this means is that investors can get their hands on C3.ai at relatively attractive levels right now. They should consider grabbing this opportunity with both hands since C3.ai's 12-month price target of $27.50, as per 17 analysts covering the stock, points toward a 17% jump from current levels. More importantly, this AI stock could deliver remarkable returns in the long run as well thanks to the reasons discussed above, which is why it may be a good idea to buy it while it remains beaten down.