C3.ai’s Stock Plummets as Layoffs and Revenue Miss Signal Troubled Waters
C3.ai, a prominent player in the enterprise artificial intelligence space, saw its stock price tumble by as much as 17% on Thursday, hitting a new all-time low. This sharp decline follows the company’s announcement of significantly disappointing fiscal third-quarter results and a substantial reduction in its workforce, impacting over a quarter of its employees.
The AI firm, trading under the ticker AI, reported third-quarter revenue of $53 million, a stark miss against the $76 million anticipated by analysts polled by LSEG. The financial picture was further clouded by a reported loss of 40 cents per share, exceeding the consensus estimate of a 29-cent loss.
CEO Stephen Ehikian acknowledged the challenges during the company’s earnings call, stating, “What I consistently hear is that every CEO is making AI a top strategic priority, and they want to realize measurable economic value from it. That is exactly what our products deliver. That said, it became clear to me that our cost structure was simply too high, and we were not organized correctly for the opportunity.”
In line with this sentiment, C3.ai revealed a significant restructuring plan that includes eliminating 26% of its global workforce. The company detailed in a regulatory filing that this initiative, spearheaded by Ehikian, is “intended to materially improve its operating efficiency.” The restructuring also encompasses a 30% reduction in non-employee operational costs.
Ehikian assumed the CEO role in September, succeeding former CEO Thomas Siebel, who stepped down due to vision impairment stemming from an autoimmune condition.
Looking ahead, C3.ai projects fourth-quarter revenue to range between $48 million and $52 million, falling considerably short of LSEG’s $78 million estimate. The company also anticipates a wider operating loss in the fourth quarter, projecting a deficit between $56 million and $64 million, compared to the $48 million loss estimated by analysts.
In response to the bleak outlook, Citizens downgraded C3.ai from “market outperform” to “market perform” on Thursday. Analyst Patrick Walravens, in a note to investors, indicated the firm is “stepping to the sidelines,” citing near-term challenges in securing new business and an increasingly competitive landscape.
C3.ai’s public debut in December 2020 was met with significant enthusiasm, with shares opening at $100 and quickly trading around $180. The company’s current valuation, hovering around $10 per share, reflects a dramatic reversal of fortune for the once high-flying AI stock. The broader market sentiment towards generative AI and its commercial viability continues to be a key factor for investors, and C3.ai’s recent performance highlights the hurdles companies in this sector face in translating technological promise into consistent financial success. The company’s ability to navigate these challenges, particularly in a rapidly evolving market, will be closely watched by industry observers and investors alike.
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