C3.ai Inc. reported fiscal second‑quarter 2026 results on December 3 2025, posting revenue of $75.15 million—slightly above the consensus estimate of $74.86 million—and a non‑GAAP loss per share of $0.25, a $0.08 beat over the expected $0.33 loss. The quarter’s revenue grew 7% sequentially but fell 20.3% year‑over‑year, reflecting a broader slowdown in commercial demand while federal and defense contracts continued to expand.
Subscription revenue accounted for $70.2 million, or 93% of total revenue, underscoring the company’s shift toward higher‑margin recurring contracts. Federal and defense revenue surged 89% YoY, driven by new government contracts and the continued ramp‑up of the 43‑day shutdown’s backlog. Professional services contributed $4.9 million, a modest share of the top line but a key driver of operating leverage as the company scales its platform.
Gross margin stood at 54%, a slight compression from the prior quarter, largely due to the cost of initial production deployments (IPDs) and higher support‑service spend. Operating loss guidance for the full year ranges from $180.5 million to $210.5 million, reflecting the company’s continued investment in sales execution and partner ecosystem expansion while maintaining disciplined cost control.
Management guided for Q3 revenue of $72 million to $80 million and full‑year revenue of $289.5 million to $309.5 million, essentially flat to the prior guidance range. The company reiterated its focus on federal growth and high‑value deals, noting that “the quarter was solid, driven by excellent performance in our Federal business and increased high‑value deal activity.” CFO Hitesh Lath highlighted the sequential revenue increase and the strong contribution of subscription revenue as key to the narrowed loss.
Analysts reacted with mixed sentiment. Some maintained their ratings, citing the company’s robust federal momentum and improved margin profile, while others expressed caution over the persistent year‑over‑year revenue decline and the sizable operating loss guidance. The market’s tempered response reflects the balance between the EPS beat and the underlying headwinds in commercial demand and investment spend.
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