C3.ai vs. Microsoft: Which AI Stock Is the Safer Bet for Investors?

Artificial intelligence has become one of the most closely watched themes in the stock market, drawing attention to both pure-play AI firms and tech giants with deep AI integrations. Among the frequently compared names are C3.ai, Inc. (AI), a company specializing in enterprise AI solutions, and Microsoft Corporation (MSFT), a global powerhouse that embeds AI across its cloud, productivity and software ecosystem.

For investors, the question is not just about growth potential, it is about stability, scalability and which company offers a safer long-term bet in an industry evolving at lightning speed.

The Case For AI

C3.ai has carved out a unique position in the enterprise AI market with its Agentic AI platform and more than 130 ready-to-use applications tailored for industries like manufacturing, defense, and energy. These offerings are not just theoretical; they are being put into practice by major customers such as Nucor, Qemetica and the U.S. Army, proving the technology can deliver real operational value.

The company also highlights that much of its business is now partner-led, with about 90% of recent deals coming through heavyweights like Microsoft Azure, AWS and Google Cloud. This broad partner network gives C3.ai access to large distribution channels without needing to scale its direct sales force as aggressively.

Another strength is the development of the Strategic Integrator Program, which allows system integrators and partners to build their solutions on C3.ai’s platform. This approach may expand adoption at much lower costs to C3.ai, turning its technology into the backbone for multiple industries.

Even with recent challenges, the company maintains a solid financial cushion, holding more than $700 million in cash and equivalents. That liquidity provides a runway to fix sales execution issues, invest in growth and weather the transition toward larger-scale deployments and subscriptions.

Despite the long-term promise, the near-term picture shows real risks. C3.ai’s revenues fell nearly 19% year over year in the latest quarter, marking its first miss since going public. Management acknowledged the shortfall was mainly due to weak sales execution and organizational disruption, particularly after leadership changes and CEO Tom Siebel’s reduced involvement. While steps are being taken to reset the sales organization, execution risk remains high until the company demonstrates that it can consistently close and convert large deals.

Financial performance also raises concerns. The gross margin dropped to 52% as more deals came from initial production deployments, which are costlier to support. Meanwhile, the company posted a non-GAAP operating loss of nearly $58 million and burned more than $30 million in free cash flow.

Another risk lies in deal conversion. While C3.ai boasts hundreds of production deployments, a notable portion have not transitioned into recurring revenue streams. Finally, leaning heavily on partner-led sales may accelerate exposure but limit direct control, which may slow deal closures and weaken customer relationships if coordination falters.

The Case for MSFT

Microsoft continues to demonstrate unmatched momentum in cloud and AI, cementing its role as one of the most dominant players in tech. Azure alone generated more than $75 billion in annual revenues, up 34% year over year, supported by massive infrastructure investments spanning more than 400 data centers across 70 regions.

The company’s ability to scale faster than competitors, while delivering efficiency gains such as a 90% improvement in token throughput on GPUs, underlines the operational edge it holds in the generative AI era. This backbone gives Microsoft a durable advantage as enterprises and governments migrate critical workloads to its cloud ecosystem.

At the application layer, Microsoft’s Copilot suite is gaining rapid adoption, reshaping productivity and workflows across industries. Microsoft 365 Copilot has reached more than 100 million monthly active users, with Fortune 500 giants like Barclays and UBS rolling it out enterprise-wide. GitHub Copilot, now used by 20 million developers, is expanding into autonomous agent capabilities, making it a central tool for software development.

The company’s data strategy adds a powerful growth engine. Microsoft Fabric, its end-to-end analytics platform, grew 55% year over year and is already its fastest-growing database product ever. By integrating OneLake with services like Power BI, Cosmos DB and PostgreSQL, Microsoft has positioned itself as the essential “context layer” for AI applications. This makes the company not only a platform for building AI but also a critical provider of the data infrastructure underpinning it.

Partnerships with OpenAI and Atom Computing for quantum and hyperscaler-level collaborations strengthen its technological moat, ensuring Microsoft sits at the center of the AI ecosystem.

Financially, Microsoft is equally robust. In fiscal 2025, it delivered $281 billion in revenues and $128 billion in operating income, both rising year over year at double-digit rates. Cloud revenues reached $168 billion, up 23%, while commercial bookings surpassed $100 billion for the first time, showcasing long-term contracted demand.

With a free cash flow of $25.6 billion in just one quarter, the company has ample firepower to reinvest in infrastructure and innovation while still returning capital to shareholders. This blend of scale, profitability and forward visibility makes Microsoft one of the most resilient and attractive AI leaders for investors.

Price Performance

The AI stock has declined 27.1% in the past year against the S&P 500’s growth of 17.8%. Conversely, MSFT shares have jumped 16.3% in the same time frame.

Valuation

C3.ai is trading at a forward 12-month price-to-sales (P/S) ratio of 7.39X, below its three-year median of 8.32X.

MSFT’s forward sales multiple sits at 11.44X, above its three-year median of 10.72X. The C3.ai stock is trading at a discount when compared with the sector average and MSFT.

P/S (F12M)

Comparing EPS Projections: AI & MSFT

The Zacks Consensus Estimate for fiscal 2026 loss per share has widened to $1.33 in the past 30 days. Moreover, the consensus mark for the fiscal 2027 loss per share has widened to $1.02, as shown in the chart.

The Zacks Consensus Estimate for MSFT's fiscal 2026 and 2027 earnings per share has increased in the past 30 days, as shown in the chart.

End Notes

From the comparison, it is clear that Microsoft offers a stronger, more stable investment case than C3.ai. Microsoft has built a comprehensive AI ecosystem that spans cloud infrastructure, productivity tools, data platforms and enterprise solutions, all supported by consistent profitability and strong customer adoption across industries. Its scale, execution and ability to convert innovation into recurring revenue streams give it resilience and long-term growth visibility.

Conversely, C3.ai remains a niche player with promising technology but faces execution hurdles, widening losses and difficulty in turning deployments into sustainable revenues. For now, investors looking for a safer and more reliable way to tap into the AI boom may find Microsoft the better choice, while the AI stock is best approached with caution until it demonstrates greater stability and operational consistency.

MSFT has a Zacks Rank #2 (Buy), whereas AI carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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