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C3.ai's Q1 Top Line Takes a Hit: Can Growth Reaccelerate in FY26?
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Key Takeaways
{\"0\":\"AI\'s Q1 top line was hurt by softer demo license demand and leadership transitions.\",\"1\":\"Subscription sales made up 86% of revenues, while demo licenses fell $15.9M sequentially.\",\"2\":\"C3.ai closed 28 new deployments, with 90% of deals partner-led by major cloud providers.\"}
C3.ai, Inc. (AI - Free Report) began fiscal 2026 on a weak note, reporting first-quarter revenues of $70.3 million, reflecting a decline of 19% year over year. The dismal performance was attributed primarily to softer demand for demonstration licenses and disruption caused by organizational changes and leadership transitions.
Within the quarter, subscription revenues totaled $60.3 million and accounted for 86% of overall sales, reflecting the stickiness of long-term contracts. However, demonstration licenses, which had been a meaningful contributor in prior periods, declined by $15.9 million sequentially, significantly pressuring the top line.
Professional services added $10 million, largely from prioritized engineering services, but this contribution was insufficient to offset the top-line decline. Management acknowledged the uneven revenue mix, emphasizing the importance of converting pilot deployments into long-term subscription contracts to drive sustainable growth.
Despite the setback, customer momentum and partner activity remained encouraging. The company signed 28 new initial production deployments (IPDs) in the quarter, bringing the total to 374, with 266 still active. Approximately 90% of deals were partner-led, underscoring the growing influence of alliances with Microsoft Azure, AWS and Google Cloud. Notable enterprise-scale wins with Nucor, Qemetica and HII also validated the platform’s broad applicability across manufacturing and defense verticals. Also, emphasis on the newly launched Strategic Integrator Program bodes well for top-line expansion.
Looking ahead, management guided fiscal second-quarter revenues to be in the range of $72 million to $80 million, indicating a modest sequential improvement. While C3.ai’s near-term revenue trajectory remains pressured by execution missteps and reliance on pilot-phase deployments, the combination of strong partner-led momentum, large enterprise wins and a growing pipeline of IPDs offers a potential path to revenue stabilization as fiscal 2026 progresses.
AI’s Price Performance, Valuation & Estimates
C3.ai shares have declined 27.6% in the past three months compared with the industry’s fall of 7.4%. In the same time frame, other industry players like Leidos Holdings, Inc. (LDOS - Free Report) , Vertiv Holdings Co (VRT - Free Report) and Draganfly Inc. (DPRO - Free Report) have gained 23.1%, 14.8% and 125.9%, respectively.
AI Three-Month Price Performance
Image Source: Zacks Investment Research
AI stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 7.50, well below the industry average of 17.10, indicating an attractive investment opportunity. Then again, other industry players, such as Leidos, Vertiv and Draganfly, have P/S ratios of 1.33, 4.70 and 2.78, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for C3.ai’s fiscal 2026 loss per share has widened from 37 cents to $1.33 over the past 60 days.
Image Source: Zacks Investment Research
The company is likely to report dismal earnings, with projections indicating a 224.4% fall in fiscal 2026. Conversely, industry players like Leidos, Vertiv and Draganfly are likely to witness growth of 4.8%, 26.9% and 67.4%, respectively, year over year in fiscal 2026 earnings.
Image: Bigstock
C3.ai's Q1 Top Line Takes a Hit: Can Growth Reaccelerate in FY26?
Key Takeaways
C3.ai, Inc. (AI - Free Report) began fiscal 2026 on a weak note, reporting first-quarter revenues of $70.3 million, reflecting a decline of 19% year over year. The dismal performance was attributed primarily to softer demand for demonstration licenses and disruption caused by organizational changes and leadership transitions.
Within the quarter, subscription revenues totaled $60.3 million and accounted for 86% of overall sales, reflecting the stickiness of long-term contracts. However, demonstration licenses, which had been a meaningful contributor in prior periods, declined by $15.9 million sequentially, significantly pressuring the top line.
Professional services added $10 million, largely from prioritized engineering services, but this contribution was insufficient to offset the top-line decline. Management acknowledged the uneven revenue mix, emphasizing the importance of converting pilot deployments into long-term subscription contracts to drive sustainable growth.
Despite the setback, customer momentum and partner activity remained encouraging. The company signed 28 new initial production deployments (IPDs) in the quarter, bringing the total to 374, with 266 still active. Approximately 90% of deals were partner-led, underscoring the growing influence of alliances with Microsoft Azure, AWS and Google Cloud. Notable enterprise-scale wins with Nucor, Qemetica and HII also validated the platform’s broad applicability across manufacturing and defense verticals. Also, emphasis on the newly launched Strategic Integrator Program bodes well for top-line expansion.
Looking ahead, management guided fiscal second-quarter revenues to be in the range of $72 million to $80 million, indicating a modest sequential improvement. While C3.ai’s near-term revenue trajectory remains pressured by execution missteps and reliance on pilot-phase deployments, the combination of strong partner-led momentum, large enterprise wins and a growing pipeline of IPDs offers a potential path to revenue stabilization as fiscal 2026 progresses.
AI’s Price Performance, Valuation & Estimates
C3.ai shares have declined 27.6% in the past three months compared with the industry’s fall of 7.4%. In the same time frame, other industry players like Leidos Holdings, Inc. (LDOS - Free Report) , Vertiv Holdings Co (VRT - Free Report) and Draganfly Inc. (DPRO - Free Report) have gained 23.1%, 14.8% and 125.9%, respectively.
AI Three-Month Price Performance
Image Source: Zacks Investment Research
AI stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 7.50, well below the industry average of 17.10, indicating an attractive investment opportunity. Then again, other industry players, such as Leidos, Vertiv and Draganfly, have P/S ratios of 1.33, 4.70 and 2.78, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for C3.ai’s fiscal 2026 loss per share has widened from 37 cents to $1.33 over the past 60 days.
Image Source: Zacks Investment Research
The company is likely to report dismal earnings, with projections indicating a 224.4% fall in fiscal 2026. Conversely, industry players like Leidos, Vertiv and Draganfly are likely to witness growth of 4.8%, 26.9% and 67.4%, respectively, year over year in fiscal 2026 earnings.
AI currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.