C3.ai, Inc. (AI) is an enterprise artificial intelligence (AI) software provider that has established itself as a leader in the rapidly growing Enterprise AI market. The company's C3 AI Platform, C3 AI Applications, and C3 Generative AI Product Suite have enabled it to address a wide range of industry-specific use cases, driving significant customer traction and revenue growth.

Financials

In the fiscal year ended April 30, 2024, C3.ai reported annual revenue of $310.6 million, a 16% increase over the prior year. However, the company continued to operate at a loss, with an annual net income of -$279.7 million and an annual operating cash flow of -$79.7 million. Despite these losses, C3.ai generated annual free cash flow of -$107.7 million, demonstrating its ability to manage its cash flow effectively.

The company's transition to a pay-as-you-go consumption pricing model has had a short-term impact on its revenue growth and remaining performance obligations (RPO), as customers now have more flexibility in their usage and payment terms. This shift has resulted in a decline in the company's average total contract value (TCV) from over $16 million in fiscal year 2019 to $900,000 in the latest quarter. However, C3.ai believes this transition will ultimately lead to increased revenue visibility and predictability, as well as a larger customer base.

During the fourth quarter of fiscal year 2024, C3.ai reported revenue of $86.6 million, a 20% year-over-year increase. Subscription revenue, which accounted for 92% of total revenue, grew by 41% year-over-year to $79.9 million. The company's non-GAAP gross margin for the quarter was 70%, while its non-GAAP operating loss was $23.4 million, better than its guidance.

Business Overview

C3.ai's business is focused on Enterprise AI applications, with 88% of its bookings in fiscal year 2024 driven by AI application sales and the remaining 12% from the C3 AI Platform. The company's pilot count surged to 123 for the year, as it closed 191 agreements across 19 different industries, highlighting the broad applicability of its solutions.

The company's geographic revenue breakdown for the fourth quarter showed that 86% of revenue came from North America, 13% from Europe, the Middle East, and Africa, and 1% from Asia Pacific and the rest of the world. This reflects C3.ai's strong presence in the North American market, which has been a key driver of its growth.

C3.ai has also made significant strides in the federal market, with revenue growing more than 100% in fiscal year 2024. The company closed 65 agreements with federal agencies and made inroads into 10 new federal organizations during the year, underscoring the strong demand for its solutions in the government sector.

The company's partnership strategy has been a key component of its growth, with 115 agreements closed through its partner network in fiscal year 2024, a 62% increase from the prior year. This includes 91 agreements with AWS, Google Cloud, and Microsoft Azure, demonstrating the strength of its relationships with the major cloud providers.

Recent Developments

One of the most exciting developments for C3.ai has been the launch of its C3 Generative AI product suite, which combines the company's enterprise AI expertise with the latest advancements in generative AI technology. The market response has been overwhelming, with the company receiving almost 50,000 inquiries from 3,000 businesses in the fourth quarter alone, each with revenue greater than $500 million. This surge in interest highlights the significant potential of C3.ai's Generative AI offerings.

Outlook

Looking ahead, C3.ai is guiding for continued revenue acceleration in fiscal year 2025, with an expected growth of approximately 23%. The company expects its revenue for the first quarter of fiscal year 2025 to be between $84 million and $90 million, and its full-year revenue to be in the range of $370 million to $395 million. However, the company also expects to continue investing in growth, with a non-GAAP loss from operations guidance of $22 million to $30 million for the first quarter and $95 million to $125 million for the full year.

Conclusion

Despite the near-term pressure on margins, C3.ai's long-term vision and market opportunity remain compelling. The company is well-positioned to capitalize on the growing demand for Enterprise AI solutions, with its differentiated product offerings, strong partner ecosystem, and proven track record of innovation. As the company continues to execute on its strategy and navigate the evolving market dynamics, it could emerge as a dominant player in the rapidly expanding Enterprise AI landscape.