AI Q2 Deep Dive: C3.ai Resets Strategy After Leadership Change and Sales Execution Setbacks

Enterprise AI software company C3.ai (NYSE:AI) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 19.4% year on year to $70.26 million. Next quarter’s revenue guidance of $76 million underwhelmed, coming in 24.6% below analysts’ estimates. Its non-GAAP loss of $0.37 per share was 75.3% below analysts’ consensus estimates.

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StockStory’s Take

C3.ai’s second quarter results disappointed investors, with revenue and profitability both falling notably short of Wall Street’s expectations. Management attributed the underperformance to disruptions caused by a major restructuring of the sales and services organization and a period of leadership transition. Executive Chairman Tom Siebel described the financial results as “completely unacceptable,” citing poor sales execution and a lack of resource coordination as the primary causes. The company also experienced a negative impact from a lower mix of demonstration license revenue and higher costs associated with initial production deployments.

Looking ahead, C3.ai’s forward guidance reflects management’s focus on stabilizing operations and rebuilding momentum following the recent organizational changes. New CEO Stephen Ehigian and a revamped executive team are expected to drive tighter execution and improved customer engagement. CFO Hitesh Lath emphasized the company’s commitment to achieving non-GAAP profitability and free cash flow, highlighting ongoing investments in sales leadership and channel partnerships. Management believes that leveraging its strategic integrator program and expanding partner-led sales will be key to regaining growth in a rapidly evolving enterprise AI market.

Key Insights from Management’s Remarks

Management identified sales process disruption and leadership transition as the foremost drivers of the quarter’s underperformance, but also highlighted new executive hires and product initiatives as foundations for recovery.

• Sales execution challenges: Executive Chairman Tom Siebel acknowledged that confusion arising from new leadership and restructuring in the sales and service organizations led to missed opportunities and slower deal closures.
• Leadership transition: The appointment of Stephen Ehigian as CEO and the introduction of a Chief Commercial Officer, new EMEA General Manager, and Group Vice President for North America represent a comprehensive overhaul of the company’s top management layer.
• Partner-led sales expansion: Management reported that 90% of closed business this quarter came through partnerships, especially with cloud providers like Microsoft Azure, Amazon Web Services, and Google Cloud Platform. Siebel expects this channel to be a major contributor to future growth.
• Strategic integrator program launch: C3.ai introduced a program enabling OEMs and systems integrators to build industry-specific AI applications on the C3 Agentic AI platform, which management believes will create new recurring revenue streams.
• Customer engagement highlights: The company cited expanded deployments with customers such as Nucor, Comerica, HII, and the US Army, showing continued interest in scaling AI solutions despite overall sales weakness.

Drivers of Future Performance

C3.ai’s outlook is shaped by the recent organizational reset, increased partner focus, and ongoing investments in product and market expansion.

• Sales organization realignment: Management expects that new leadership and the merger of sales and service functions under a Chief Commercial Officer will improve execution and customer satisfaction, aiming to reduce the confusion that impacted recent results.
• Growth in partner ecosystem: C3.ai is prioritizing deeper integration with cloud and consulting partners, banking on their extensive salesforces and networks to broaden reach and accelerate deal flow, especially as direct sales stabilize.
• Strategic product initiatives: The newly launched strategic integrator program is intended to create new business lines by allowing third parties to build and deploy specialized applications on C3.ai’s Agentic AI platform, addressing diverse industry needs and potentially enhancing recurring revenue.

Catalysts in Upcoming Quarters

In the coming quarters, our team will focus on (1) evidence that the reorganized sales and service teams are accelerating deal closures, (2) signs that deeper partnerships with cloud providers and integrators are translating into tangible revenue growth, and (3) early traction from the strategic integrator program and new executive leadership. Execution in these areas will be critical to rebuilding investor confidence and driving sustainable improvement in core financial metrics.

C3.ai currently trades at $14.57, down from $16.69 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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