Monday, C3.AI Inc AI reported second-quarter revenue of $93.34 million, beating analysts’ consensus of $91.02 million. The company reported a quarterly EPS loss of 6 cents, beating analysts’ loss estimates of 16 cents.
Analysts re-rated the stock after the release, with some increasing their price targets.
Related reading: C3.ai Stock Recovers After Second Quarter Results, ‘Seventh Consecutive Quarter of Accelerating Revenue Growth’
JMP Securities analyst Aaron Kimson maintained C3.ai with a market outperform rating and raised the rating target price of $40 to $55.
Needham analyst Mike Cikos reiterated C3.ai with a Hold rating. JP Morgan analyst Pinjalim Bora maintained a neutral rating on C3.ai with a price target of $28, up from $19.
JMP titles: While C3.ai continues to face several risks, including its reliance on Baker Hughes, which accounted for approximately 20% of fiscal 2025 revenue and whose current contract expires in June 2025, in Overall, Kimson continues to enjoy this story for several reasons. The company has now seen seven quarters of accelerated revenue growth. It offers a wide range of AI applications to businesses in areas such as manufacturing, defense, government, and oil and gas, and has deep expertise in the field of AI, such as partly evidenced by a new patent, which covers agentic AI and significantly strengthens the company’s position in the market. .
C3.ai announced a new six-year partnership with Microsoft Corp. which makes “C3.ai a preferred partner for AI applications on Azure” and allows Microsoft customers to purchase C3.ai applications through the Azure portal and “on Microsoft Paper”, which should make the procurement contracts much easier for C3.ai.
The company is reducing its revenue dependence on Baker Hughes, which accounted for 35% of C3.ai’s revenue in FY 2023, 27% in FY 2024, 22 % in the first quarter of fiscal 2025 and 18% during the second quarter of fiscal 2025.
The company expects to see increased demand in areas such as federal and defense following the new government administration, with founder and CEO Tom Siebel noting that there has been a shift in interest from “sub- sailors, carriers, space and aircraft” towards “AI”. applications, AI applications, AI applications, AI applications, then cyber.
Founder and CEO Thomas M. Siebel has extensive experience in the software industry and led his former company, Siebel Systems, to a successful outcome when it was sold to Oracle Corp. in 2006 for $5.8 billion.
At the closing price, C3.ai trades at a 2025 calendar enterprise value corresponding to a revenue multiple of 10.7 times and a 2026 calendar enterprise value corresponding to a revenue multiple of 8.6 times, while the new price target implies a 2026 calendar enterprise value at a revenue multiple of 10.8. times (previously 10.0 times for calendar year 2025), in line with the peer group median which it believes is merited by C3.ai’s rapid growth, domain-specific AI capabilities and potential strategic value . Kimson forecasts third-quarter revenue of $99.0 million and an EPS loss of $(0.26).
Needham: C3.ai’s second-quarter results beat higher revenue forecasts, with a smaller-than-expected operating loss, with some expenses pushed to the second half of fiscal 2025.
The main topic of management’s discussion was the partnership with Microsoft announced in late September, which significantly expands the company’s actionable opportunities. C3.ai guided fiscal 2025 operating losses at $120.0 million at the midpoint (-31% operating margin), $10 million higher than management’s previous guidance for support the initiative. C3.ai will invest in customer success, commercialization, and research and development.
Management no longer expects to generate positive free cash flow for fiscal 2025. RPO increased for the first time since the first quarter of fiscal 2024, but is expected to be more meaningful with the transition to the program pilot. Meanwhile, the number of pilots being phased out remains high as the number of active pilots decreases. Cikos forecasts third-quarter revenue of $98.1 million and an EPS loss of $(0.25).
JP Morgan: Bora has updated its AI model to include Q2 2025 fiscal results. Price target reflects approximately 7 times enterprise value to 2026 revenue (previously approximately 5 times enterprise value compared to 2025) compared to infrastructure software companies growth year-over-year (FTM) revenue above 20% (Cloudflare, Inc., CrowdStrike Holdings, Inc., Datadog, Inc., Snowflake Inc, GitLab Inc., Zscaler, Inc., CyberArk Software Ltd., SentinelOne, Inc.) trading at around 10x enterprise value to calendar 2026 earnings.
The analyst noted that AI is expected to trade at a significant discount to this group because its growth is similar but on a much smaller scale for AI, and AI is extremely unprofitable compared to competitors.
While AI is expected to increase FTM revenue at a comparable level of growth (25% vs. 24% comp median), AI is 80% smaller than the median comp group scale. Additionally, AI is expected to have a 10% FTM free cash flow margin, resulting in a 14% growth and margin profile, compared to a compounding of +23% unlevered free cash flow margin, resulting in a growth margin of +46%. In addition, AI’s 2025 pro forma calendar operating margin is expected to be (30%) versus +15%.
Bora forecasts third-quarter revenue of $98.0 million and an EPS loss of $(0.26).
Price action: AI stock is up 7.87% at $44.89 at last check Tuesday.
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