C3.ai Q1 2026 Earnings Call Transcript

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Provided by Quartr
September 3, 2025

Key Takeaways

  • Negative Sentiment: In Q1 total revenue declined 19% year-over-year to $70.3 M, with a non-GAAP operating loss of $57.8 M, net loss of $49.8 M and negative free cash flow of $34.3 M.
  • Positive Sentiment: Secured multiyear AI partnerships with Nucor, Chimerica and HII, and the US Army deployed a contested logistics application on the C3AI platform.
  • Neutral Sentiment: Closed Q1 with $711.9 M in cash, cash equivalents and marketable securities, and signed 374 cumulative IPDs, of which 266 remain active.
  • Positive Sentiment: Appointed Steven Ahikian as new CEO and reorganized global sales and services under a Chief Commercial Officer to improve execution and customer experience.
  • Neutral Sentiment: Provided Q2 guidance of $72–80 M in revenue and a non-GAAP operating loss of $49.5–57.5 M, while withdrawing previous full-year guidance.
AI Generated. May Contain Errors.
Earnings Conference Call
C3.ai Q1 2026
00:00 / 00:00

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Amit Berry
Amit Berry
Senior Director - IR at C3.ai

Good afternoon, and welcome to C3AI's earnings call for the 2026, which ended on 07/31/2025. My name is Amit Bedi, and I lead Investor Relations at C3AI. With me on the call today are Tom Siebel, Executive Chairman Stephen Ahikian, Chief Executive Officer and Hitesh Latt, Chief Financial Officer. After the market closed today, we issued a press release with details regarding our first quarter results as well as a supplemental to our results, both of which can be accessed through the Investor Relations section of our website @ir.c3.ai. This call is being webcast and a replay will be available on our IR website following the conclusion of the call.

Amit Berry
Amit Berry
Senior Director - IR at C3.ai

During today's call, we will make statements related to our business that may be considered forward looking under federal securities laws. 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 most recent annual report on Form 10 ks filed with the SEC as it may be supplemented by other filings and reports we make with SEC from time to time, including our quarterly report on Form 10 Q that will be filed for the fiscal quarter ended 07/31/2025.

Amit Berry
Amit Berry
Senior Director - IR at C3.ai

All financial results will be discussed on a non GAAP basis unless otherwise noted. A reconciliation of GAAP to non GAAP financial measures to the extent reasonably available is included in our press release. Finally, at times in our prepared remarks, 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 and our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. And with that, let me turn the call over to Hitesh.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Good afternoon, everyone, and thank you for joining our call today. I will share our financial results and provide additional color on our business. All figures are non GAAP unless otherwise noted. Total revenue for the quarter was $70,300,000 a decrease of 19% year over year. Subscription revenue for the quarter was $60,300,000 representing 86% of total revenue.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Revenue from sale of software licenses that are demonstration versions of C3AI applications was $17,900,000 during the quarter, which was sequentially lower by $15,900,000 We sell these licenses at the request of our distribution partners to enable them to demonstrate our software effectively to their customers and at the request of our large strategic customers to enable them to accelerate C3AI application adoption across their companies. Professional services revenue was $10,000,000 of which $8,700,000 was revenue from Prioritized Engineering Services or PES. Professional services represent 14% of total revenue during the quarter. Our subscription and PES revenue combined was $69,000,000 and accounted for 98% of total revenue. I'll now walk you through some of our strategic customer wins this quarter.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Nucor has expanded its commitment with C3AI in a multiyear partnership to build an enterprise wide AI program across their facilities. We are supporting and optimizing day to day planning, inventory and scheduling decisions and now expanding to additional plants and use cases. Chimerica, a global leader in chemicals, launched its first enterprise scale AI program with C3AI. After initial success improving yield in its salt business, Chimerica is now scaling to 100 assets and multiple use cases, the start of a company wide AI transformation. HII, America's largest military shipbuilder, is expanding its partnership with C3AI to accelerate throughput at Ingalls and Newport News.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Initial deployments cut complex shipbuilding timelines and we are now scaling these AI capabilities across HII shipyards to strengthen US Navy fleet readiness. The US Army Rapid Capabilities and Critical Technologies Office is deploying a contested logistics application built on the C3 AgenTeq AI platform to support frontline vehicles in high risk environments. This system applies AgenTeq and generative AI to enhance sustainment, readiness and decision speed in contested environments. I'll now move on to rest of the financial results. Non GAAP gross profit for the quarter was $36,300,000 and non GAAP gross margin was 52%.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Non GAAP gross margin for professional services remained high at over 80%. Non GAAP operating loss for the quarter was $57,800,000 Non GAAP net loss for the quarter was $49,800,000 and non GAAP net loss per share was $0.37 Our net cash used in operating activities was $33,500,000 Free cash flow for the quarter was negative $34,300,000 We continue to be well capitalized and closed the quarter with $711,900,000 in cash, cash equivalents and marketable securities. During the first quarter, we signed 28 initial production deployments or IPDs. At the end of the quarter, we had cumulatively signed three seventy four IPDs, of which two sixty six are still active. This means they are either in their original three to six month term or extended for some duration or converted to ongoing subscription or consumption contract or are currently being negotiated for conversion to ongoing subscription or consumption contract.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Non GAAP gross margin declined this quarter to 52%, primarily due to a higher mix of IPD related cost, a lower mix of demonstration license revenue and PES revenue and lower economies of scale. As compared to fiscal twenty twenty five, we expect to continue to see moderated gross margins in the near term due to higher mix of IPDs, which carry a greater cost of revenue during the initial production deployment phase of the customer lifecycle due to our investments in expanding our support capacity and lower economies of scale. Now I'll move on to our guidance for the next quarter. Our revenue guidance for 2026 is $72,000,000 to $80,000,000 Our guidance for non GAAP loss from operations for 2026 is $49,500,000 to $57,500,000 Given the appointment of our new Chief Executive Officer and the recent restructuring of the sales and services organizations, we are withdrawing our previous guidance. We plan on providing guidance for the 2026 and full year fiscal twenty twenty six when we announce our financial results for the 2026.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

With that, I'd like to turn the call over to Tom.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Thank you, Hitesh, and good afternoon, everyone. As Hitesh reported, the financial results of the first quarter were completely unacceptable and completely unacceptable in virtually every respect. I've given this a lot of thought as to, you know, what the root cause of this is. Okay? Is there a market?

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

The market is huge. Is there some new competitor to change the competitive dynamics of the space? There is not. Is there some secular change in the market that we haven't seen before? There is not.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

The fact of the matter is that it boiled down to poor sales execution and poor resource coordination. It's clear that the new leadership that we brought into the organization in the that globally in sales and service, in the service organization, in EMEA, in federal, in North America, kind of mid quarter, and it caused confusion in the sales process. As I have previously announced, I ran into some unanticipated health issues. And as a result of these health issues, I was unable to participate as actively as I used to in the sales processes and the coordination of resources necessary to make these sales processes successful and come to closure. In hindsight, it's clear that my active involvement, that sales process had a greater impact than any of us knew.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

The good news is that we have completely restructured our sales and service organizations globally. We have brought in new highly experienced leadership across the board, okay, to drive growth and to drive customer satisfaction. Even better, consistent with our announcement last July, we have completed the search and we have appointed a new chief executive officer in the person of Steven Hickian, who is highly experienced and well equipped to drive the details of this business to coordinate resources and to accelerate growth. In the sales and service organizations, we have combined, these organizations under a new leader and the person of a chief commercial officer to bring a more seamless experience focused on delivering value for each and every one of our customers. In addition to a chief commercial officer, we brought in a new general manager of EMEA.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

We brought in a new group vice president for North American operations, and we brought significant leadership into the federal business operations. By combining the sales and service organizations into a cohesive whole, we are assuring a focus on delivering rapid economic benefit to each and one of our customer engagements to ensure their continued success. As we entered q two, we have installed new leadership across the board. We have reorganized our sales and service organizations with a tightly integrated detailed execution plan going forward where everybody knows where they sit, what their job responsibilities are, and we've assured that everybody has the resources to do their job. We have a product that is unmatched in technical sophistication and functionality.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

We have over a 131 turnkey enterprise AI applications in the market. I believe we have the highest levels of customer satisfaction as measured by net promoter scores in the application software industry. We have a huge and rapidly growing addressable market opportunity. We have the leadership in place and we are positioned to grow. We are we are in position to gain market share and we are in a position to assure the success of each and every one of our customer engagements.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

An important development in q one was the introduction of our strategic integrator program. This is a software OEM program whereby we are licensing the c three AgenTik AI platform to others enabling them to design, develop, provision, and operate the industry and domain specific applications for their markets. We're finding that the strategic integrator program is being well received by OEMs, systems integrators, service providers into the defense intelligence and civilian government communities, and we expect this to be a large and rapidly growing line of business for c three AI going forward. The use of the Genetic AI platform enables them to use all of the assets that they've developed in the last couple of decades, be these machine learning models. And so it's an entirely open architecture that allows them to use any of the capabilities they have, any new capabilities that the market may bring going forward.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Since an entirely open model driven architecture enabling complete flexibility going forward and avoiding vendor lock in. It's difficult to overestimate the scale of the generative AI and agentic AI opportunity that is before us. As of the end of the first quarter, I think we're involved in approximately 60 large scale customer engagements in state and local local government, in manufacturing, in federal government, in defense, intelligence, manufacturing, what have you. Many of you are familiar with the MIT report that shows that order of 95% of these LLM projects run into a dead end and are unsuccessful. Our experience is that the majority of our LLM deployments are successful across industries and across use cases.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

The reason for the success is the combination of these generative free chain transformers with the c three AgenTeq AI platform solves all the hobgoblins that associated with generative AI. These hobgoblins include data exfiltration, cybersecurity risk, hallucination, the inability to enforce data access controls, the inability to take advantage of omni modal integration. All of these problems are solved by c three generative AI resulting in a very, very high success rate associated with our projects. Q one twenty twenty five was our nineteenth quarter operating as a public company. This is the first quarter into which we have missed our revenue guidance.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Know that we take that very seriously, and we will take that seriously going forward. Candidly, there is no excuse for the economic results that we delivered in the first quarter. That being said, going forward, our objective remains the same. We're here to establish and maintain a market leadership position globally in enterprise AI applications, not in infrastructure, not in semiconductors, not in machine learning models, not in professional services implementations. Okay?

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

We're we're here to establish a market leadership position in enterprise AI software, both with the c three AgenTeq AI platform and with the enterprise AI application footprint that we have in place and will be expanded. We have tried, tested, and proven products. We have incredibly sophisticated architecture in the AgenTik AI platform. We're establishing clear leadership in AgenTik AI, a concept a concept for which you know that we hold the patents. We have tried, tested, and proven executive leadership in place.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

We have highly satisfied customers. We have a large and expansive addressable market opportunity before us that some estimate approaches the $2,000,000,000,000 a year. Okay? And we are geared up to grow our product footprint, grow our market share, increase our market penetration, and operate a rapidly growing cash positive profitable business. Going forward, I will continue to remain to be engaged in the business now in the role as executive chairman.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

In that role, I will particularly focus on strategic partner relationships, strategic customer relationships, and keep an eye on direction and product strategy going forward. I'm most enthusiastic to announce the appointment of Steven Ahitian as the new chief executive officer of c three AI. Steven brings a superlative educational background, a wealth of industry experience having guarded and built and grown two successful AI companies that he sold to Salesforce. Steven is also an experienced and accomplished public sector leader having served as president Trump's appointee as the acting administrator of the General Services Administration where Steven was responsible for performing the general services administration, performing the acquisition activities of all the divisions of the federal government, and driving president Trump's AI strategy across the federal government. On behalf of the board of directors of c three AI, the executive leadership of c three AI, and the, I don't know, 11 or 1,200 employees of c three AI, whatever that number may be, I can tell you we're all enthusiastic about working closely with Steven in his new leadership role to ensure that he is successful in bringing more creativity to the process, more energy to the process, more drive to the process as we accelerate growth, accelerate market penetration, and accelerate market leadership in enterprise AI.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Ladies and gentlemen, thank you so much for your time. And now I'll turn this back to Kitesh to field your questions.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Thank you, Tom. Operator, could you please open the line for questions?

Operator

Thank you. And our first question will come from the line of Roddy Sultan with UBS. Your line is open.

Radi Sultan
Radi Sultan
Director - Software Equity Research at UBS Group

Awesome. Thank you. First for Tom, your involvement in the sales process has obviously been very critical here. I mean, there any way to more concretely understand how involved you're planning on being in the sales process going forward? And what you're doing to ensure a smooth hand off to Steven and the new sales leadership?

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

I am here to do everything I can to ensure that Steven is successful. Okay? And so now we have a new, you know, an entire new layer of senior leadership in the jump in the company who are tried, tested, and proven at selling enterprise AI globally. And I suspect with Steven's leadership, they're gonna be enormously successful. That being said, okay, I will continue to be involved as necessary, okay, in monitoring that process and assisting that process to ensure that this transition goes very smoothly.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

And we dramatically ramp up the sales and service capacity globally.

Radi Sultan
Radi Sultan
Director - Software Equity Research at UBS Group

Awesome. And then second for Hitesh. Obviously, a lot of moving parts in the quarter. What are you seeing that's giving you confidence in the Q2 guide? And then as you think about Q3 and Q4, like what is the right starting point to think about that sort of back half outlook?

Radi Sultan
Radi Sultan
Director - Software Equity Research at UBS Group

Any sort of building blocks would be helpful as we calibrate numbers.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

Yes. Sure, Redi. Our Q2 guidance is based on the sales activity we've seen in the month of August as well as our review of sales pipeline for rest of the quarter with the new sales leadership. As it relates to period beyond Q2, while we're not providing any guidance at this point, we note that most analysts who have updated their revenue forecast for the year are forecasting fiscal twenty twenty six revenue ranging from $290,000,000 to $300,000,000 And at this point, I would not argue against any number within that range. As it relates to path to profitability, we acknowledge our performance in Q1 has put us behind, but we remain committed to achieving non GAAP profitability and free cash flow.

Hitesh Lath
Hitesh Lath
SVP & CFO at C3.ai

We are still bullish about the business, as Tom said. And we will get to profitability and free cash flow with the right scale and that is a matter of time.

Radi Sultan
Radi Sultan
Director - Software Equity Research at UBS Group

Awesome. Thank you.

Operator

Thank you. One moment for our next question. And that will come from the line of Patrick Walravens with Citizens.

Analyst

This is Nick on for Pat. Tom, one quick one for you. You guys closed 40 partner led deals this quarter. How do you see the mix of partner led versus direct sales evolving?

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

That's a great question. I think something like Amit, correct me. Is it 80 or 9090% this quarter. And 90% of the business that we closed this quarter was with partners, particularly Azure and AWS and GCP and McKinsey Quantum Black. And you can expect that our investment in those partnerships going forward is going to be big time.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

I think there are you know, what certainly, without quoting a number, there's certainly tens of thousands of salespeople at Azure alone, and we are amping up our go to market activities with Microsoft, with AWS, with GCP in a big way globally. And so we would we'd hope we're going from, say, hundreds of engagements that we're involved in today where we're trying to selling, and we hope that will go to soon to thousands. So that is a major, major advantage that we have, this partner ecosystem, and we fully intend to exploit that advantage.

Analyst

Great. Thank you. And then as a follow-up, I heard Steven was in the room. If I could ask him a quick one, that would be fantastic. How did Steven great to meet you, looking forward to working with you.

Analyst

Did you choose C3 and why was it a compelling opportunity?

Stephen Ehikian
Stephen Ehikian
CEO at C3.ai

Yeah. Well, first, the market opportunity here for enterprise AI is enormous. Every company, every government is exploring how to transition away from testing and experimenting with AI to actually rolling out across their core operations and workflows. What's exciting for me is C3 has the technology platform and applications that customers need today. Their technology is being deployed across some of the most valuable customers in the world in some most challenging environments.

Stephen Ehikian
Stephen Ehikian
CEO at C3.ai

So for me, top of all that, the ability to learn from Tom Siebel, who invented this entire enterprise AI market, as well as with the extraordinary team here was honestly an easy decision to say yes to.

Analyst

Awesome. Thank you very much. Looking forward to working with you.

Stephen Ehikian
Stephen Ehikian
CEO at C3.ai

Likewise. Thank you.

Operator

And one moment for our next question. And that will come from the line of Matthew Colitri with Needham and Co. Your line is open.

Matthew Calitri
Matthew Calitri
Equity Research Associate at Needham & Company

Hi, This is Matt Colitri on for Mike Cikos over at Needham. Thanks for taking our questions. Tom, how would you weight the underperformance this quarter between sales disruption and your impact on the sales process?

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

I think it was a combination of both, but I would put it probably 70% sales disruption and 30% my not being as involved in the details as I have previously been. And, you know, I think that, you know, so those are the facts. And, you know, the quarter is the quarter was dreadful. Okay. And now we need to pick ourselves up, test ourselves off, and get on with business, which is exactly what we're going to do.

Matthew Calitri
Matthew Calitri
Equity Research Associate at Needham & Company

Understood. And then looking at the execution steps, how would you categorize them as far as signing pilots or converting them into contracts? What exactly were you seeing there?

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

It's all of the above, Matt. I mean, there are a lot of new people involved. There is new leadership involved. I think when you do that, sometimes channels get crossed a little bit and these things get confused. And, you know, we were, you know, we were, you know, driving the car down the road and replacing the engine, the transmission at the wheels at the same time.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

And the guy who used to drive the car wasn't there. So it was a bad quarter. It happens. I mean, come on, I was at Oracle in 1989 when Oracle had its first miss. I think that the stock went from 27 to three as I recall, and it was the end of the world.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Well, since then, as you know, Oracle has missed 34 quarters and it's still not the end of the world. And NVIDIA has missed 10. Amazon has missed 23. Salesforce has missed a few, certainly six months ago and twelve months ago. And today, nobody remembers any of that.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Six months from now, nobody will remember this because we're going to be rocking.

Matthew Calitri
Matthew Calitri
Equity Research Associate at Needham & Company

Thank

Operator

you. That is all the time we have for Q and A today. I would now like to turn the call back over Seibel for any closing remarks.

Thomas Siebel
Thomas Siebel
Founder & Executive Chairman at C3.ai

Ladies, gentlemen, thank you for your time this afternoon. We really appreciate your attention. Keep your eye on the screen. There's going to be a lot of things happening at C3AI, and it's exciting. We're encouraged, and we are going for it, people. So stay tuned. And thank you. You. Thank you.

Operator

Ladies and gentlemen, this concludes today's program. Thank you all for participating. You may now disconnect.

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