• Total Revenue: $98.8 million, a 26% increase year-over-year.
• Subscription Revenue: $85.7 million, a 22% increase year-over-year, representing 87% of total revenue.
• Non-GAAP Gross Profit: $68.2 million, with a 69% gross margin.
• Non-GAAP Operating Loss: $23.1 million, better than guidance of $38.6 million to $46.6 million.
• Net Loss: $15.8 million for the quarter.
• Non-GAAP Net Loss Per Share: $0.12.
• Free Cash Flow: Negative $22.4 million, improved from negative $45.1 million in the same quarter last year.
• Cash, Cash Equivalents, and Marketable Securities: $724.3 million at the end of the quarter.
• Accounts Receivable: $180.4 million, including unbilled receivables of $89.8 million.
• Guidance for Q4 Revenue: $103.6 million to $113.6 million.
• Full Fiscal Year 2025 Revenue Guidance: $383.9 million to $393.9 million.
• Guidance for Non-GAAP Loss from Operations for Q4: $30 million to $40 million.
• Full Fiscal Year 2025 Non-GAAP Loss from Operations Guidance: $87 million to $97 million.

• Warning! GuruFocus has detected 6 Warning Signs with AI.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• C3.ai Inc (NYSE:AI) reported a 26% year-over-year increase in total revenue for Q3, reaching $98.8 million.
• The company achieved a 69% gross margin, with non-GAAP gross profit at $68.2 million.
• C3.ai Inc (NYSE:AI) expanded its strategic alliances, notably with Microsoft, AWS, and McKinsey QuantumBlack, enhancing its market reach and execution speed.
• The partnership with Microsoft led to a 450% increase in agreements quarter-over-quarter, with 28 agreements closed across nine industries.
• C3.ai Inc (NYSE:AI) secured new and expanded agreements with major clients such as the US Department of Defense, ExxonMobil, and Shell, demonstrating strong customer traction.

Negative Points

• C3.ai Inc (NYSE:AI) reported a non-GAAP operating loss of $23.1 million, although this was better than the guidance range.
• The company expects some moderation in gross margins due to a higher mix of pilots, which carry greater costs during the pilot phase.
• C3.ai Inc (NYSE:AI) anticipates being free cash flow negative for fiscal year 2025, despite improvements in free cash flow compared to the previous year.
• The company is making additional investments in sales force, partner ecosystem, and R&D, which may impact operating margins in the near term.
• C3.ai Inc (NYSE:AI) noted that remaining performance obligations (RPO) are expected to decline in the near term, indicating potential challenges in future revenue visibility.

Q & A Highlights

Q: Can you provide more details on the number of pitches and pipeline with Microsoft, and when these might convert to revenue? A: Thomas Siebel, CEO: We are currently involved in over 600 engagements with Microsoft, where we are the preferred enterprise AI solution. These engagements span across various regions and industries. Since the agreement with Microsoft was signed, we have already closed 28 agreements, indicating a quick conversion to revenue.

Q: Can you discuss the trends in remaining performance obligations and what to expect going forward? A: Hitesh Lath, CFO: At the end of the quarter, our total remaining performance obligations (RPO) were around $208 million. RPO is not a leading indicator of our business, and we expect some decline in RPO in the near term.

Q: Could you elaborate on the health setback mentioned in your February 18 note and its impact on business operations? A: Thomas Siebel, CEO: I experienced flu-like symptoms that developed into an autoimmune disease affecting my optical nerve, impairing my vision. Despite this, I remain fully engaged in managing the business daily, with accommodations in place to assist with tasks like reading emails. Jim Snabe, a distinguished director, is assisting with travel and events I cannot attend.

Q: What drove the outperformance in professional services revenue this quarter? A: Hitesh Lath, CFO: The increase in professional services revenue was due to higher revenue from consulting services, paid implementation services, and training services during the quarter.

Q: Why have demonstration licenses been outperforming recently, and what is driving this trend? A: Thomas Siebel, CEO: The demand for demonstration licenses has increased due to the need to equip our partners, such as Azure and AWS, with complete sales kits, including demonstration software. This enables them to effectively demonstrate our solutions independently, which is crucial for our sales strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.