5 Must-Read Analyst Questions From C3.ai's Q2 Earnings Call

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.

Is now the time to buy AI? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From C3.ai’s Q2 Earnings Call

• Roddy Sultan (UBS) asked Tom Siebel about his future involvement in sales, given its historical importance. Siebel replied he will remain actively engaged in supporting new leadership and ensuring a smooth transition.
• Roddy Sultan (UBS) questioned CFO Hitesh Lath on the basis for Q2 guidance and assumptions for the second half. Lath cited improved sales activity and pipeline visibility but stopped short of giving guidance beyond next quarter.
• Patrick Walravens (Citizens) probed the mix between partner-led and direct sales. Siebel noted that 90% of deals were partner-driven this quarter, with plans to increase investment in these channels.
• Patrick Walravens (Citizens) invited CEO Stephen Ehigian to discuss his decision to join C3.ai. Ehigian emphasized the scale of the enterprise AI opportunity and the strength of C3.ai’s technology platform.
• Matt Calitri (Needham) asked Siebel to attribute the quarter’s underperformance between sales disruption and his reduced involvement. Siebel estimated it was 70% due to sales disruption and 30% due to his limited engagement.

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 $15.73, down from $16.69 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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