C3.ai (NYSE: AI) was an early enterprise artificial intelligence (AI) company when it was founded in 2009. It has developed a portfolio of over 40 ready-made and customizable AI applications for businesses in more than 10 different industries to accelerate their adoption of this game-changing technology.
C3.ai has recently undergone a transformation in its revenue model, which has led to accelerating revenue growth. The stock has surged 78% over the past year, trading at $36.97 as of this writing. Despite this increase, it remains 77% below its best-ever level of $161, set during the tech frenzy in late 2020. However, the company is on the right track, and here’s why the stock might be a great buy now.
C3.ai is experiencing a surge in demand for its AI applications, serving clients across various sectors, including government, energy, financial services, and manufacturing. Its AI models can predict things such as fraudulent transactions and equipment failures, saving its customers millions of dollars in downtime and lost income. For example, a global cement manufacturer saved $10 million each year by using C3.ai’s machine-learning models to predict equipment failures.
Oil and gas company Shell is another example of a successful partnership with C3.ai. By using 100 AI applications, Shell not only monitored equipment for potential failures but also reduced carbon emissions in its production processes. The partnership helped reduce carbon emissions by 355 tons per day at one of Shell’s natural gas facilities.
The partnerships with major cloud providers like Amazon Web Services, Microsoft Azure, and Google Cloud have also been instrumental in C3.ai’s growth. These partnerships helped close 27 of the 50 new deals that C3.ai secured in the recent fiscal 2024 third quarter, highlighting the increasing interest in AI in the corporate sector.
Revenue growth for C3.ai is accelerating, driven by a shift to a consumption-based revenue model. This change allows businesses to pay for what they use, resulting in faster onboarding and increased flexibility. While the transition to the new model initially caused a dip in revenue growth, it is now reaccelerating. In the most recent fiscal 2024 third quarter, revenue reached a record high of $78.4 million, marking an 18% increase from the previous year.
Despite ongoing losses, C3.ai has a strong balance sheet with $723.3 million in cash, equivalents, and short-term investments. The company’s management forecasts continued revenue growth, driven by an increase in customer engagements and the growing demand for AI technology. With the AI market projected to add trillions to the global economy in the coming years, C3.ai is well-positioned for future profitability.
In conclusion, while C3.ai stock has seen significant growth, it still trades at a considerable discount to its all-time high. With the company’s recent positive results and potential for future growth, now may be an ideal time for investors to consider C3.ai as a promising investment in the AI sector.
