C3.ai Stock Plunges to a Multi-Year Low. Is It a No-Brainer Buy?

Key Points

• C3.ai recently released preliminary numbers for the first quarter, which came in well below its guidance.

• The company's CEO is stepping down due to health issues, and that has played a role in the worse-than-expected results.

• Siebel's participation in the company's sales process highlights a big risk and vulnerability within the business.

• 10 stocks we like better than C3.ai ›

Artificial intelligence (AI) company C3.ai (NYSE: AI) has been struggling this year, to put it lightly. As of Wednesday, the stock has lost just over half of its value since January. Not only have the company's recent results been disappointing, but it's also in the midst of a search for a new CEO after founder Tom Siebel announced he would be resigning due to health reasons.

With bad news continuing to pile onto the stock, C3.ai stock has not only plunged to a new 52-week low, it has hit levels it hasn't been at in more than two years. Is this a golden buying opportunity for investors, or could more of a decline be in the cards for C3.ai?

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Shares drop due to a concerning forecast

C3.ai isn't expected to report its first-quarter earnings for fiscal 2026 for a couple of weeks, but it did offer some preliminary results that point to a big miss forthcoming, and investors are spooked. The AI company's preliminary estimates indicate the recently completed quarter (which ended on July 31) will result in revenue of between $70.2 million and $70.4 million. In May, management forecasted quarterly revenue in the range of $100 million to $109 million.

It's a massive miss on the company's own guidance, and it means that the top line will be down nearly 20% year over year. But what's perhaps even more surprising is the reasoning behind the significant shortfall.

Siebel says the performance is "completely unacceptable." He says that part of it is due to the company's reorganization and his own health issues, as he says they have prevented him from taking a more active role in the sales process.

Why does the news raise more questions than answers?

A change in CEO can sometimes cause disruptions in businesses, but it shouldn't disrupt the sales process to this extreme a level. C3.ai claims it offers clients turnkey AI solutions, which, in theory, should be easy to implement for a business. But if sales are highly dependent on Siebel leading the process, that may not be the case. After all, if a product were convincing enough on its own, it should be able to sell itself without the need for significant interventions from the sales team.

This raises another concern -- who will take over as CEO? If the new person doesn't have the same selling skills or relationships that Siebel has, C3.ai may continue struggling to grow its sales. While Siebel helps find a successor, it highlights just how uniquely important the CEO role may be to C3.ai's growth. It introduces a level of risk that investors may not have previously factored into their investment thesis.

C3.ai looks like an even riskier stock to own right now

When a CEO has such a significant effect on a company's sales, that's a big red flag for investors. A CEO should provide guidance and help with a business's overall long-term strategy, but being an integral part of the sales process is not something I would have expected from C3.ai or any other large tech company. It makes this already risky stock a potentially even more volatile investment to hold on to.

Given all the question marks around C3.ai's financials, its lack of profitability, and whether it can grow without Siebel at the helm, this is a stock I'd stay far away from. The preliminary Q1 guidance and the explanation for the deep reduction in sales offer no reassurance for investors. C3.ai may seem like a cheap stock to buy, but it's looking more and more like it's just a value trap.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.