What Happened?
Shares of enterprise AI software company C3.ai (NYSE: AI) fell 3.6% in the morning session after the company reported disappointing second-quarter financial results and issued weak guidance for the upcoming quarter. The enterprise AI company's second-quarter revenue was $70.26 million, a 19.4% decrease year-over-year, falling significantly short of analyst estimates of $94.1 million. Its adjusted loss per share of $0.37 was also wider than the consensus estimate of a $0.21 loss, highlighting struggles with profitability. Compounding the issue, C3.ai provided third-quarter revenue guidance of $76 million, which underwhelmed investors as it came in nearly 25% below Wall Street's expectations of $100.8 million. The report revealed broad weakness, including declining gross margins and negative free cash flow, indicating significant operational and financial challenges.
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What Is The Market Telling Us
C3.ai’s shares are extremely volatile and have had 40 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 3.2% on the news that markets pulled back with the decline concentrated in the tech space as investors engaged in profit-taking following a robust week that saw the S&P 500 hit a new record. Adding to the pressure, new inflation data, specifically the Core PCE, showed an acceleration in July, signaling that rising prices remain a risk despite being in line with expectations. This confluence of factors, including market highs heading into a historically weak September, led to a pullback, with the Nasdaq Composite shedding 1.15%. While the Federal Reserve has hinted at potential rate cuts, the focus on inflation and the jobs market continues to influence investor sentiment.
C3.ai is down 53.6% since the beginning of the year, and at $16.08 per share, it is trading 62.6% below its 52-week high of $42.94 from December 2024. Investors who bought $1,000 worth of C3.ai’s shares at the IPO in December 2020 would now be looking at an investment worth $173.86.
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