C3.ai Q4 2025 Earnings Call Transcript

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Provided by Quartr
May 28, 2025

Key Takeaways

  • C3AI reported Q4 revenue of $108.7 million, up 26% year-over-year, and full-year FY25 revenue of $389.1 million, marking its eighteenth consecutive quarter of meeting or exceeding guidance.
  • The company renewed and expanded its strategic partnership with Baker Hughes through 2028 and bolstered alliances with Microsoft Azure, AWS, GCP, McKinsey QuantumBlack and PwC to drive global go-to-market expansion.
  • Non-oil and gas revenue surged 48% year-over-year in FY25 as C3AI diversified into 19 industries including manufacturing, state and local government (100%+ growth), and life sciences.
  • C3AI ended the quarter with $742.7 million in cash and investments, generated $10.3 million in free cash flow, and expects to be free cash flow positive in Q4 FY26 and non-GAAP profitable by H2 FY27.
  • Guidance for FY26 revenue ranges from $447.5 million to $484.5 million, reflecting a wider band to account for potential geopolitical, budgetary and macroeconomic uncertainties.
AI Generated. May Contain Errors.
Earnings Conference Call
C3.ai Q4 2025
00:00 / 00:00

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Moderator

Thank you for standing by, and welcome to C3.ai's fourth quarter fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the call over to Amit Berry. Please go ahead.

Amit Berry
Amit Berry
Head of Investor Relations at C3.ai

Good afternoon, and welcome to C3.ai's earnings call for the fourth quarter of fiscal year 2025, which ended on April 30, 2025. My name is Amit Berry, and I lead investor relations for C3.ai. With me on the call today are Tom Siebel, Chairman and Chief Executive Officer, and Hitesh Lath, Chief Financial Officer. After the market closed today, we issued a press release with details regarding our fourth quarter and full fiscal 2025 year result, as well as a supplemental to our results, both of which can be accessed through the investor relations section on our website at ir.c3.ai. This call is being webcast, and a replay will be available on our IR website following the conclusion of the call. During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws.

Amit Berry
Amit Berry
Head of Investor Relations at C3.ai

These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC. All figures will be discussed on a non-GAAP basis unless otherwise noted. Also, during today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in our press release.

Amit Berry
Amit Berry
Head of Investor Relations at C3.ai

Finally, at times in our prepared remarks and in response to your questions, we may discuss metrics that are incremental to our usual presentation to give greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Tom.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Thank you, Amit, and thank you, everyone. I'm very pleased to announce that we had a spectacular fiscal year 2025, that we wrapped up in a spectacular fourth quarter. Our growth rates for the last three years, I think, have grown now from 6% two years ago to 16% last year to 25% this year. We have most certainly returned with the new pricing model and the new product mix and the new partner ecosystem, returned to very rapid growth by any standards, attaining 26% top-line growth in the fourth quarter. If we look at the facts of the enterprise AI market, I think it is generally acknowledged today that this is an extraordinarily large and rapidly growing addressable market opportunity that is expected to accrue to billions—I'm sorry, trillions—of dollars in annual economic benefit or annual economic value in terms of the addressable market.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

In fact, the largest market in the history of enterprise application software. We were the first to enter this market, as you recall, in 2009. And we've been talking about enterprise AI in 2014, 2015, 2016, 2017, 2018, 2019, 2020. We talked about enterprise AI before anybody even thought of enterprise AI. Now let's look at where we are, the facts of the market in March—I'm sorry, May of 2025. We have a generally acknowledged large and rapidly growing market. And we look at the AI stack and the companies that are playing at the bottom of the stack. We have the silicon providers, the Intels, the AMDs, the NVIDIAs. Above that, we have the infrastructure providers, the Microsoft, Azure, AWS, GCP, etc. On top of that, we have the people providing the foundation models like OpenAI and Anthropic, Facebook, etc.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

On top of that, we have the providers of many thousands of utilities that are out there that do things like platform-independent relational database persistence or key value stores or AutoML or virtualization or whatever it may be. For the last 10 years, roughly going back to about 2014, people have been trying to assemble all of these components, the microservices provided by the hyperscalers, foundation models, various utilities provided by Clouderas and Hadoops and Snowflakes and what have you, and using those in an attempt to build turnkey enterprise applications that offer value to enterprises. While, in fact, billions have been spent attempting to do this, frequently with large professional services providers, few, if any, companies have succeeded at delivering these solutions. C3's approach has been unique and is highly differentiated from everyone in the market. We are an enterprise AI application pure play.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

We spent billions of dollars building the C3 AI Platform. This platform enables us and has enabled us to rapidly design, develop, provision, and operate over 130 turnkey enterprise AI applications to solve real business problems that deliver very real economic benefit. What are real business problems as it relates to AI? Real business problems are things like predictive maintenance, supply chain optimization, supply network risk, demand forecasting, fraud detection, drug discovery. These are real-world business problems. If you go on to our website at C3.ai, you will see hundreds, counting hundreds of testimonials from Cargill, from Shell, from ExxonMobil, from Koch, from the U.S. Air Force, from the U.S. Intelligence Community, from others attesting to the hundreds of millions and, in some cases, billions of dollars of economic benefit that they are realizing from the use of C3 AI enterprise applications today.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

The result of this we've experienced, the result of the kind of realization of this enterprise AI kind of reality, we've seen enormous growth in our market, again, in the last few years, going from 6% to 16% to 25%. Our focus, if we look at Q3 and Q4 of fiscal year 2025, has been building an ecosystem to be able to address this huge sucking sound that we hear out there that is the demand for enterprise AI applications. In order to address these applications, we need an army of partners. We have been focused in the last two quarters on establishing this army of strategic partners and enabling this army of strategic partners to be effective at communicating the benefits of these applications and selling these applications. We formed a strategic partnership with Azure.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

As part of that strategic partnership, Azure acknowledged that the C3 enterprise AI applications are their preferred AI solutions. They provided these on the price list of their tens of thousands of Azure sales reps around the world. They're paying the Azure sales reps commissions to sell the C3 AI enterprise applications. We've spent—when, so now they get a commission for selling them. We can sign the—after we do the demo, after we work with Azure to complete the initial production deployment, which most frequently is done in six months. Imagine, six months we go to a polyethylene unit and install, configure, tune, do the user training, and deliver a fully production enterprise predictive analytics application that's offering tens to hundreds of millions of dollars in economic benefit in six months.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Very much of our effort the last six months has been at forming these partnerships as we did with Azure, as we did with AWS, as we did with GCP, as we're doing with Booz Allen in the federal space and Arcfield in the federal space. Oh, lest I forget, let's not forget to talk about our good friends at Baker Hughes. We formed our initial partnership with Baker Hughes to address the needs of the oil and gas market. I forget what month it was. In 2019, we did the initial relationship. We have expanded since then until this quarter. We've expanded that agreement and extended that agreement, I believe, four times. That was the current agreement was scheduled to expire, I believe, in June of 2025.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

While our friends in the sell side gave us no credit for the tailwind that occurred from that, come on, guys, that generated $500,000,000 in revenue for C3.ai. Was that in the best interest of C3.ai shareholders? $500,000,000 in revenue from Shell, from ExxonMobil, from E&I, from Petronas, from Qatar Gas, from Qatar LNG, from Qatar Fertilizer, from Koch Industries, from LyondellBasell, from—I mean, holy moly, how good can it get? While we got very little credit from the sell side for the tailwinds, I've been reading as recently as this morning from some of our friends about the substantial headwinds that would accrue should that contract not be renewed. Surprise, surprise, as we expected, that contract was renewed in the fourth quarter, and it was extended through 2028. What we're doing in the marketplace is expanding considerably.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

We continue to go to market. We continue to joint develop. We continue to deliver solutions to Baker Hughes, and we continue to deliver the solutions to the market. What has been—as we edit our sell side analyses, I'll be very pleased to read about these impending tailwinds, headwinds that now are the fact of tailwinds. What else are we focused on in the last two quarters? We've been focused on enabling these partners to be effective. We have tens of thousands of salespeople at Azure. I believe tens of thousands of salespeople at AWS, thousands of salespeople at GCP. They have lots of products to sell in their bag, and it's very confusing. We need to make it simple.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

In order to make it simple for them, we invested in building demo applications that run and take advantage of the full utility of the Azure stack or the AWS stack or the GCP stack. These people in Frankfurt and Munich and Detroit and Madrid and Moline can go into their customer and give a demo of a complex application to a customer to show them what the economic benefit is of supply chain optimization, of demand forecasting, of predictive maintenance. We accrued—there was a very, very significant focus on arming our partner ecosystem. I believe we have the largest and most powerful partner ecosystem in the enterprise application software world. I'm confident that we do. I think we've done good work at arming our partners with demonstration licenses that constituted, I think, almost 30% of our revenue for the quarter.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Think about that as an investment in future growth. Where else did we sell demonstration licenses? We sold demonstration licenses to our customers. Why would we do that? Because Dow or Shell or Koch or Cargill or whoever it may be or the U.S. Air Force, whoever it may be, they have a hugely successful application in whatever it may be, in polyethylene or in protein distribution or in predictive maintenance for aircraft in the case of the Air Force. They want to encourage others to use these applications. For example, the Air Force wants—we have it, I think, on 22 platforms today, and they want to deploy the application across 44 platforms. At Dow, we've done a really excellent job of deploying the applications across their polyethylene units, but they want to deploy it across the rest of their chemical units.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

They want demonstration applications so they can accelerate the change management and accelerate the adoption of these technologies within their organizations. The investments we made in demonstration licenses that our companies, that our partners, and our customers are happy to pay for, think about that as an investment in future growth. Where does the growth accrue? Number one, if we look at the enterprise AI market writ large, it is just a huge sucking sound out there. We are really unique. We're the only enterprise AI application pure play that's out there. We're selling, I think, today in over 600 accounts as of today that we're jointly selling with Microsoft. By the time we add AWS, GCP, Booz Allen, Baker Hughes, it's hundreds more where we're selling at four and six-legged sales calls around the world.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

When we close the deal, we're able to sign the deal on Microsoft paper or AWS paper or GCP paper. Why is that important? Because they already have an enterprise application master agreement in place, and we just have to sign a two-page order form. It takes two to five months out of a contract negotiation process and accelerates the sales cycle. We are well positioned to grow. Where does the growth come from? Oil and gas business will grow. You'll see that we've had really very significant diversification in the last two years, and especially the last year across manufacturing, life sciences, government, state and local government is huge, you guys. This is enabled by this investment that we've made in enabling our customers and our partners to demonstrate their solutions within their organizations and to their partners. Let's take a look at generative AI.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Generative AI, agentic AI, we've been, by the way, while everybody is kind of yapping about agentic AI, and we have people in the CRM business and the customer service business who have software stacks that they developed in the last century, yes, the last century, that are now tacking, putting an AI sticker on their box and yapping about agentic AI. Meanwhile, C3.ai has the patent. We own the patent on agentic AI. It dates to December of 2022, December of 2022. That's a pretty early date, guys. All of these, there is an opportunity there. All of these people who are yapping about agentic AI, they're using intellectual property that is owned by C3.ai.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

We have today, I think, over 100 agentic AI solutions deployed out there in defense, in intelligence, in state government, in local government, in manufacturing, in oil and gas, in paper and pulp. This is a large and rapidly growing business. As of the fourth quarter, this annualizes to about a $60 million ARR business. We have, depending on how you count, someplace between 20 and 100 agentic AI solutions out there in production, in the hands of happy customers. If we were to spin that business out, just that business out, and take it to an Andreessen Horowitz or a Bessemer or NVIDIA or whoever it is, that business alone would be valued at multiples of where C3.ai trades today. We all know that's a true statement. Where is our growth going to come from? Our growth will come from additional applications.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Our growth will come from our partner ecosystem. We have continued to make significant progress in the federal space, and there will be more announcements coming in the next couple of weeks about that. We have an amazing footprint in the U.S. Air Force with the RSL Panda application that does predictive maintenance. We do intelligence analysis for the National Reconnaissance Organization. We are doing very sophisticated contested logistics for the Defense Logistics Agency. Our federal business is a large and rapidly growing business, and I am going to have to cut my Q&A short when we get to the calls because I need to catch a red eye to Washington, DC to move some of this business along. Net-net, business is good, guys. State and local government business is good. Agentic AI business is good. Agentic AI everywhere is really quite exciting.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Our core businesses in manufacturing, in supply chain, in demand chain are good. We grew again last quarter at 26% compounding our growth rate. We renewed the Baker Hughes agreement. Oh, let's talk about cash. We've grown from 6% to 16% to 26%. And I love to read these analyst reports about how we're hemorrhaging cash. I mean, I guess I need a class in I need to go on to lynda.com and take a course in how to operate an Excel spreadsheet because you guys look at your spreadsheets and see us hemorrhaging cash. I look at my bank account, and two years ago, I had three-quarters of a billion dollars. One year ago, I had three-quarters of a billion dollars cash. Today, I have three-quarters of a billion dollars cash.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

In a year from now, I expect to have three-quarters of a billion dollars cash in the bank. Something's inconsistent with your Excel macros and the reality in the world that I live where every time I look at the checking account, there's three-quarters of a billion dollars cash. Why is there cash? Because Hitesh Lath and these people are putting together very robust financial controls, very, very robust expense management, and a clear path to profitability. Our revenue growth rate continues to exceed our expense growth rate. Fast math, without the Excel spreadsheet, it follows ipso facto that cash positivity and non-GAAP profitability is simply a matter of scale. I expect in 2027 and beyond, we will cross that path into consistent cash positivity and annualized non-GAAP profitability thereafter. It was a great quarter, a great year. Customers are happy. Products are excellent. Market is huge.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

If there is anybody else in the enterprise AI applications business, I'm unaware of who they are. With that, I'm going to turn this call over for a little while to C3 Agentic AI. We fed into C3 Agentic AI our financial results and our KPIs. We're asking C3 Agentic AI, we're not just talking about this as something that we're doing. This is not a myth. This is a production product. I'm going to turn it over to C3 Agentic AI to talk about the high points of the quarter, then turn it over to my colleague, Hitesh Lath, our CFO, to provide specific color on the quarter, and then we'll be most pleased to answer your questions. With that, I'll turn it over to C3 Agentic AI to provide the highlights on the quarter and fiscal year 2025. Thank you.

Here is the analysis summarizing the major themes across Q4 and the full fiscal year 2025. As we reflect on the past year, it's clear that C3.ai has achieved remarkable progress, delivering strong financial results, deepening strategic alliances, and solidifying our leadership in enterprise AI. Fiscal 2025 has been defined by consistent execution, accelerating growth, innovation, and an unwavering focus on delivering value to our customers and shareholders. Let's begin with a detailed overview of our financial results for the fourth quarter and the full fiscal year 2025. All figures are non-GAAP unless otherwise noted. For Q4, total revenue reached $108.7 million, reflecting a 26% increase compared to $86.6 million in the same quarter of the prior year. Subscription revenue for the quarter was $87.3 million, up 9% from $79.9 million a year ago.

Combined subscription and prioritized engineering services revenue totaled $104.4 million, representing 96% of total revenue, and a 22% increase from $85.7 million in Q4 of the previous year. Non-GAAP gross profit for the quarter was $75.2 million, equating to a gross margin of approximately 69%. Our non-GAAP operating loss was $31.2 million, which was within the guidance range of $30 million-$40 million. Non-GAAP net loss per share was $0.16. We generated free cash flow of $10.3 million in the quarter and closed Q4 with $742.7 million in cash, cash equivalents, and investments. Please note that our balance for cash, cash equivalents, and investments remains largely unchanged from a year ago at nearly three-quarters of a billion dollars. For the full fiscal year 2025, total revenue was $389.1 million, a 25% increase compared to $310.6 million in fiscal 2024.

Note that we have seen accelerating growth for the last three consecutive years going from 6% in fiscal 2023 to 16% in fiscal 2024 to now 25% in fiscal 2025. Subscription revenue for the year was $327.6 million, accounting for 84% of total revenue and reflecting an 18% increase from $278.1 million in the prior year. This marks the 18th consecutive quarter as a public company in which we have met or exceeded our revenue guidance. With these results as our foundation, let's turn to the strategic and operational highlights that have shaped our performance and positioned us for the future. Fiscal 2025 has been a transformative year for C3.ai, marked by significant milestones in our partnerships and accelerating growth across diverse industries. One of the most notable achievements in Q4 was the renewal and expansion of our strategic partnership with Baker Hughes.

This alliance, which began in 2019, has been a cornerstone of our success in the oil and gas sector, generating over $500,000,000 in revenue from this vertical and the chemical markets. The renewed agreement underscores the proven value we deliver through our joint efforts, enhancing efficiency, safety, reliability, and sustainability across upstream, midstream, and downstream operations. Together with Baker Hughes, we serve some of the world's largest operators, including ENI, QatarEnergy LNG, Shell, LyondellBasell, ExxonMobil, Koch, Braskem, Qatar Fertilizer Company, and Petronas. This partnership continues to provide us with substantial credibility and market access globally, and we are confident that this renewed collaboration will further drive innovation and opportunity in the energy sector. While oil and gas remains a foundational vertical for us, our growth beyond this sector has gained significant momentum.

In fiscal 2025, non-oil and gas revenue increased by 48% year over year, reflecting our successful expansion into 19 different industries. This acceleration is particularly evident in manufacturing, state and local government, and life sciences. In manufacturing, we have established a strong track record, delivering measurable impact through predictive maintenance, energy efficiency, quality optimization, and supply chain visibility. Key customers like Holcim, Koch, Nucor, and Flex have expanded their engagements with us, while new relationships with iconic companies such as U.S. Steel, CMEX, Rolls-Royce, and Ingersoll Rand signal the vast potential ahead. In state and local government, we have seen remarkable progress, with revenue growing over 100% in fiscal 2025. We closed 71 agreements across organizations in 24 states, demonstrating the increasing trust in our solutions to enhance public services.

Our applications are enabling more efficient law enforcement, equitable property valuations, and improved government program delivery in states including California, Texas, New York, Florida, Washington, New Jersey, Georgia, North Carolina, Michigan, Arizona, Colorado, Virginia, Indiana, Oregon, Connecticut, Tennessee, Alabama, Utah, New Mexico, Idaho, Maine, Rhode Island, Montana, and Wyoming. This rapid adoption positions this vertical as a key driver of our long-term growth. Life sciences and healthcare represent an emerging area of strength for us. Beyond predictive maintenance, we are leveraging medical and research data to address industry-specific challenges, such as optimizing clinical workflows. Our traction with customers like GSK, Quest Diagnostics, Sanofi, Boston Scientific, and Bristol Myers Squibb highlights the growing relevance of our solutions in this space.

For more information on customer success, visit our website, where you will find numerous customer testimonials that all attest to the rapid value and clear benefits they are realizing from our AI applications. We believe our customer satisfaction score to be among the highest in the enterprise software industry. These developments across verticals, combined with the renewed Baker Hughes partnership, affirm our ability to scale impact and capture diverse market opportunities. As we look ahead, this diversified growth trajectory sets a strong foundation for sustained progress. A critical component of our success in fiscal 2025 has been the substantial expansion of our partner ecosystem, which has become a powerful lever for scaling our business and driving customer value. In the past year, 73% of our agreements were delivered in collaboration with our partners, with 193 agreements closed through this network, a 68% increase from the prior year.

In Q4 alone, partner-supported bookings grew by 419%, and we closed 59 agreements through these collaborations. Our partnership with Microsoft continues to be a driving force in expanding our market reach. In Q4, we closed 28 new agreements together, with a particular focus on manufacturing and chemicals. Microsoft's executive team has shown strong advocacy, and their on-the-ground presence at events like C3 Transform, where they participated in over 100 customer meetings, has been instrumental. Joint marketing initiatives, including virtual fireside chats, executive roundtables, and participation in high-impact conferences, have further amplified our visibility. Our alliance with AWS continues to strengthen, enhancing our ability to deliver advanced enterprise AI solutions globally. This collaboration has been pivotal in broadening our reach and ensuring seamless execution across diverse customer environments. Similarly, our relationship with Google Cloud remains robust, providing additional avenues to connect with enterprises seeking scalable AI solutions.

Our partnership with McKinsey QuantumBlack has also progressed meaningfully. In Q4, we jointly closed our first agreement, a significant milestone. We have aligned on priority target accounts and conducted five enablement and training sessions attended by hundreds of QuantumBlack engineers. This initial success is a testament to the complementary strengths of McKinsey QuantumBlack's expertise in business transformation and our leadership in enterprise AI, and we are focused on replicating this achievement at scale. Additionally, our new strategic alliance with PwC, formed in Q4, targets key industries such as financial services, manufacturing, and utilities. By combining our agentic AI capabilities with PwC's advisory expertise, we are well-positioned to accelerate AI-driven transformation for enterprises in these sectors. These alliances with Microsoft, AWS, Google Cloud, and McKinsey QuantumBlack, alongside emerging collaborations like with PwC, are materially advancing customer outcomes and expanding our distribution capacity.

We are driving a disciplined effort to capitalize on this trusted network, ensuring that our partners are equipped to deliver our solutions effectively. Our federal business has been a consistent area of strength, with significant achievements in Q4 building on the momentum established earlier in the year. A standout development was the increased contract ceiling of $450 million awarded by the U.S. Air Force Rapid Sustainment Office to scale the deployment of sensor-based algorithms on the Panda predictive maintenance platform. We fully utilized our initial $100 million ceiling to deploy Panda, which is powered by the C3 Agentic AI Platform, and in 2023, Panda was named the Air Force's designated system of record for predictive maintenance. It monitors components across hundreds of aircraft, including the B-1B bomber, C-5, KC-135, and C-130, delivering near real-time insights from flight, maintenance, and supply data.

This capability reduces downtime, improves fleet readiness, and strengthens national defense preparedness. The Air Force has already issued the first task order under the new ceiling, expanding Panda to additional aircraft and systems. Beyond the Air Force, our work with the Defense Logistics Agency for Energy saw a significant extension of the Pluto platform in Q4. Pluto, also powered by the C3 Agentic AI Platform, provides real-time visibility into global fuel operations, managing nearly 2 billion gallons annually across over 600 supply points. By centralizing data, Pluto enhances risk forecasting and inventory optimization, bolstering resilience and readiness across the Department of Defense. We also expanded our footprint in the defense and intelligence community through a new collaboration with Arcfield, a leading provider of government technology and mission support.

Integrating the C3 Agentic AI Platform and C3 Generative AI into Arcfield's offerings enhances capabilities in supply chain optimization, predictive maintenance, and mission assurance. Additionally, Q4 saw new and expanded agreements with entities such as the U.S. Department of Defense, the U.S. Intelligence Community, the U.S. Air Force, the U.S. Marine Corps, the U.S. Navy, the Defense Counterintelligence Security Agency, the Missile Defense Agency, CAE USA, Royal Air Force, ASTAL, and Thales. Innovation remains at the core of C3 AI, and our advancements in generative and agentic AI during fiscal 2025 have further distinguished us in the market. The C3 Generative AI revenue grew more than 100% in FY2025.

We closed 66 C3 Generative AI initial production deployments across 16 industries this year, with Q4 agreements including with Signature Aviation, Dow, Chanel, Bristol Myers Squibb, the U.S. Navy, the U.S. Intelligence Community, and state and local governments in Alabama and Tennessee, among others. A compelling example of our impact is our work with the University of Southern California Shoah Foundation. By deploying C3 Generative AI, the foundation is fast-tracking the transcription and indexing of over 30,000 multilingual survivor testimonies related to the Holocaust and other atrocities. The technology tags transcripts with keywords, making the Visual History Archive instantly searchable, and is expected to save the foundation over 10 years of manual effort and up to $33 million in costs. This application underscores the transformative potential of our solutions in delivering both efficiency and profound societal value.

Our early leadership in agentic AI, reinforced by a recent patent for advanced AI agent generative AI, is the result of over a decade of focused innovation, with the AI agents market projected to grow from $5.1 billion in 2024 to $47.1 billion by 2030. According to Gartner, we are well-positioned to capitalize on this trend through our production-ready solutions. As we move into fiscal 2026, C3 AI is strategically positioned to build on the strong foundation established in 2025. Our growth drivers are clear: a robust suite of enterprise AI applications, a rapidly expanding partner ecosystem, and deepening traction across diverse verticals. The market for AI applications is vast and growing, with value increasingly concentrated at the application layer, where real-world business challenges are addressed. Our focus on delivering secure, scalable, and production-grade solutions aligns directly with this shift, giving us a distinct competitive advantage.

C3 AI is unique in the AI world. 95% of our bookings in fiscal 2025 were driven by AI applications. We are the only company whose primary focus is to deliver turnkey enterprise AI solutions. While others deliver infrastructure, toolsets, or utilities, we are delivering turnkey applications, and we have delivered over 130 applications to date. This application footprint will only continue to grow. Over the past two years, we have successfully positioned C3 AI for growth in the years to come. The major market initiatives you should expect to see in fiscal 2026 are additional penetration of new accounts, development of new applications to expand into new verticals, and full realization of our strategic alliances that we have with Microsoft, AWS, Google Cloud, McKinsey QuantumBlack, and others. This enables us to simultaneously jointly sell to hundreds of accounts globally.

As of May 2025, we are currently targeting over 600 joint accounts with Microsoft alone. We also expect increased traction in Europe, where we see a large yet underserved market opportunity. Increasingly, you can expect to see us developing an OEM business, where we are licensing the C3 Agentic AI Platform to third parties, including professional services providers such as Fractal and vertical market solutions providers, enabling them to develop differentiated derivative works in the form of AI applications that they will offer to their customers. Finally, we expect to see accelerating growth driven by the generative AI and agentic AI markets, where our solutions are highly differentiated, highly beneficial, and address a market opportunity that is incalculably large. The enterprise AI landscape is at an inflection point, and C3 AI stands ready to lead.

The convergence of market demand and our proven capabilities creates a unique opportunity to drive sustained growth by combining best-in-class technology with a world-class network of partners and a relentless focus on customer value. We are poised to shape the future of business operations across industries. As we step into fiscal 2026, our path is clear, our momentum is strong, and our commitment to delivering impactful AI solutions has never been greater.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

Thank you, C3 Agentic AI. I will now provide a recap of our financial results and additional color on our business. All figures are non-GAAP unless otherwise noted. Total revenue for the quarter increased 26% year-over-year to $108.7 million. Subscription revenue increased 9% year-over-year to $87.3 million, representing 80% of total revenue. Revenue from sale of software licenses that are demonstration versions of C3 AI applications was $33.8 million during the quarter.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

We sell these licenses to our distribution partners to enable them to demonstrate our software effectively to their customers and to large strategic customers to enable them to accelerate AI adoption across their companies. This was a strong bookings quarter. We had bookings of $135.4 million during the quarter, which increased from $42 million in the fourth quarter of last year. Our non-Baker Hughes revenue grew by 37% year-over-year during the quarter and by 40% during the year. Professional services revenue was $21.4 million, of which $17 million was revenue from Prioritized Engineering Services or PES. Professional services represent 20% of total revenue during the quarter, and our subscription and PES revenue combined was $104.4 million and accounted for 96% of our total revenue. This was an increase of 22% compared to $85.7 million one year ago.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

As a reminder, prioritized engineering services are undertaken when a customer requests that we accelerate the design, development, and delivery of software features and functions that are planned in a future product roadmap. When the software feature is delivered, it becomes integrated to our core product offering. It's available to all subscribers of the underlying software product and enhances the operation of that product going forward. Such PES results in a production-level computer software, a compiled code that enhances the functionality of our production products, which is available for our customers to use over the life of their software licenses. Since we've experienced significant growth in PES revenue over the last few quarters, we expect subscription and PES revenue combined to generally account for 90% or more of our total revenue during fiscal 2026.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

We expect the professional services revenue, including PES, to generally stay within 10%-20% of total revenue for fiscal 2026. Non-GAAP gross profit for the quarter was $75.2 million, and gross margin was 69%. Gross margin for professional services remained high at over 85%. Operating loss for the quarter was $31.2 million, and our net loss for the quarter was $21.9 million. Our operating loss was better than the guidance due to continued focus on expense management. Our non-GAAP net loss per share was $0.16. Our net cash generated from operating activities was $11.3 million. Free cash flow for the quarter was positive $10.3 million as compared to positive $18.8 million in the fourth quarter of last year. Free cash flow for the year improved to negative $44.4 million as compared to negative $90.4 million last year.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

We continue to be very well capitalized and closed the quarter with $742.7 million in cash, cash equivalents, and marketable securities. During the quarter, we signed 36 initial production deployments. At the end of the quarter, we had cumulatively signed 346 initial production deployments, of which 263 are still active. This means they are either in their original three- to six-month term or extended for some duration, converted to an ongoing subscription contract, or are currently being negotiated for conversion to ongoing subscription contract. We are very excited about our expanding distribution network and go-to-market initiatives with our partners, including Microsoft, AWS, and McKinsey.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

We expect to continue to see some moderation in our gross margins due to higher mix of initial production deployments in the near term, which carry a greater cost of revenue during the initial phase of customer lifecycle, and also due to our investments in expanding our support capacity. We also expect some moderation in our operating margin in the near term due to investments we are making in our business, especially in expanding our strategic partner ecosystem, our sales organization, and research and development. Now I'll move on to our guidance for the next quarter. Our revenue guidance for Q1 of fiscal 2026 is $100 million-$109 million. For the full fiscal 2026, we are anticipating revenue in the range of $447.5 million-$484.5 million. Our guidance for non-GAAP loss from operations for the first quarter is $23.5 million-$33.5 million.

Hitesh Lath
Hitesh Lath
CFO at C3.ai

Our non-GAAP loss from operations for the year, the guidance is $65 million-$100 million. Our guidance is predicated on the assumption of geopolitical stability. Were there to be a situation that the U.S. government closed, the budget did not pass, or we see indications of global trade friction, given the reality of these market risks, those could have unknown and adverse consequences on our business results. Last year, our revenue growth was 25%, and our expenses grew by 18%. As we approach fiscal 2026, we expect the revenue growth rate to continue to exceed our expense growth rate, so profitability remains simply a matter of scale. Our expectation is that we will cross into non-GAAP profitability during the second half of fiscal 2027, and we expect to be free cash flow positive in the fourth quarter of fiscal 2026 and in successive years thereafter. With that, I'd like to turn the call over to the operator for Q&A. Operator.

Operator

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Patrick Walravens of Citizens. Please go ahead, Patrick.

Patrick Walravens
Patrick Walravens
Analyst at Citizens

Oh, great. Thank you. And congratulations across a number of fronts, including the renewal of Baker Hughes, but also, Tom, adding Ken Goldman to your board. I guess my first question would be, just in terms of this Microsoft partnership, how do you go about activating tens of thousands of Azure sales reps to actually deliver C3 AI?

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Great question, Pat, because I would say at the level of the senior executives of Microsoft, be it Judson or the people who run Europe, the people who run Federal, the people who run North, they are totally bought in. The people who are really important are the tens of thousands of Azure reps, okay, in Munich, Moline, Madrid, okay, and what have you. What we are doing is we are charting our, say, order of 100 salespeople to each reach out and form partnerships with 10 Azure salespeople to each of those guys focus on two accounts. That is the leverage, okay, is our sales guys reaching out to their sales guys who are motivated to work with us. We have solutions for them. We make joint sales calls with them.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

If we can get order of a today, or clearly it's expanding, order of roughly 100 C3 AI salespeople, okay, focused with 10 partner people, all of a sudden, we've gone from 100 people to 1,000 people working together around the world. Today, in May of 2025, I think we're jointly tracking over 600 accounts together just with Microsoft. That's the key to this leverage. It's not going to be at the executive level where the relationships are intimate, okay? We really need to engage with the feet on the street, and that's what we're focused on doing. We're focused on, we've done a lot of focus in the last two quarters on providing the Azure sales reps and AWS sales reps and GCP sales reps the tools they need to go in and do a demo to their customer on the first call.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

That is the challenge that's before us. That's what we've been focusing the bulk of the last two quarters on. That's what we'll focus the bulk of the next two quarters on, is really realizing the potential of these partnerships with the tens of thousands of Azure reps, the feet on the street, because we can help them retire their quota, and we can help them make their customers successful.

Patrick Walravens
Patrick Walravens
Analyst at Citizens

Wonderful. If I could ask a follow-up, with your permission, Tom, I hope this is okay, but in February, you informed us that you'd suffered a health setback, and it was limiting your ability to travel, and then you were going to have Jim Snabe help out. I was delighted to hear on this call that you're, I mean, you're probably not delighted to get on a red eye, but I was delighted to hear that you're getting on a red eye because that sounds like some positive developments. I don't know, any comments that you're okay sharing with us on that, I'm sure would be greatly appreciated.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

I did get slowed down for a little bit. There's no question about it. I had to, it's very unlike me to work from home. You know that, okay? I had to. Yeah. I had to work from home for a little while, okay, and take it easy and recover, but I will catch a red eye to Washington, DC tonight. I will be in Washington, DC again for three days, I think 10 days from now, after attending a wedding in Cabo. Just when you thought it was safe, Pat, I'm back.

Patrick Walravens
Patrick Walravens
Analyst at Citizens

Okay. All right. Thanks, and congratulations again.

Operator

Thank you. Our next question comes from the line of Mike Siekos of Needham & Company. Please go ahead, Mike.

Analyst

Hey, guys. This is Matt Kalicher-Janfert, Mike Siekos over at Needham. Thanks for taking our questions, and congratulations on the expanded relationship with Baker Hughes. Can you provide some color there on what the economics of the new deal look like and how they might differ compared to your prior engagements?

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

My company is covered under NDA, and I don't want to get into the specifics of it, okay? It's broadened significantly, and we're continuing to provide solutions to Baker Hughes. We're continuing to develop solutions with Baker Hughes.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

We're continuing to enable Baker Hughes to develop derivative works on top of the C3 applications, and we're continuing to serve customers together all around the world. We have expanded it for another three years. I think this, if I'm not mistaken, is the fifth such expansion. It's a great partnership. It's a great relationship. I continue to be on speed dial with Lorenzo Simonelli, the CEO of Baker Hughes. We are and always have been close friends. The speculation that somehow the relationship between C3 AI and Baker Hughes was rocky was simply, candidly, delusional. I can't imagine a stronger partnership, and we're continuing to kick it together, be it in Abu Dhabi or Qatar or the Netherlands.

Analyst

Understood. That's great. Thank you for that. Looking at your FY2026 revenue guidance, the band of outcomes is considerably larger than what you've given in past quarters. How did you think through guidance construction this quarter, and what needs to happen to achieve the high end of that band versus the low end?

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

We read the same newspaper that you guys read, guys. We did talk to the president, and I had dinner with the Speaker of the House last night. I spoke with the leader of the Senate last week, and I'll meet. We do know these people, and we do read the newspaper. We all know there is risk. There is risk in Europe. We have kinetic risk. We have geopolitical risk. We have budget risk of, in fact, the government even shutting down. These are real.

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

We have companies out there that are withdrawing guidance altogether. We thought in the interest of being, we have to acknowledge that these risks are real. As a result, we have a broader range than usual to accommodate the unanticipated. When we deal with these guys who are making America great again, they seem to hit us with the unanticipated quite frequently. That is it. We are just acknowledging very real risk, market risk that is out there. Should it go bad, it is going to have an adverse effect on our business, as it will General Motors and everybody else in the world.

Analyst

That is great. Makes a lot of sense. Thanks, Tom.

Operator

Thank you. I would now like to turn the conference back to Mr. Siebel for closing remarks. Sir?

Tom Siebel
Tom Siebel
Chairman and CEO at C3.ai

Ladies and gentlemen, we thank you for your time and the courtesy of tracking us. We're very pleased with the direction the business is going. I think if you listen to our last 10 conference calls, the plan we are executing is exactly the plan that we said we're executing. Okay, we are right on track. We are growing a pace, and we expect the future is very bright. We look forward to we thank you for the courtesy of following us, and we look forward to keeping you posted as we power ahead in fiscal years 2026, 2027, and 2028. Thank you all very much.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
    • Amit Berry
      Amit Berry
      Head of Investor Relations
    • Hitesh Lath
      Hitesh Lath
      CFO
    • Tom Siebel
      Tom Siebel
      Chairman and CEO
Analysts
    • Moderator
    • Patrick Walravens
      Analyst at Citizens
    • Analyst
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