Should Investors Buy C3.ai Stock Before Its Q2 Earnings Release?

C3.ai, Inc. AI is scheduled to report its second-quarter of fiscal 2026 results on Dec. 3, after the closing bell.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 2.6%. AI’s earnings surpassed estimates in each of the trailing four quarters, with the average being 34.3%, as shown in the chart below.

AI’s Q2 Estimate Revisions

The Zacks Consensus Estimate for fiscal second-quarter loss per share has remained unchanged at 32 cents in the past 60 days. In the last reported quarter, the company reported adjusted loss per share of 6 cents. 

The consensus mark for revenues is pegged at $75.1 million, implying a 20.4% year-over-year decline.

What the Zacks Model Unveils for AI

Our proven model does not conclusively predict an earnings beat for AI this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

AI’s Earnings ESP: C3.ai currently has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank of AI: The company carries a Zacks Rank #3 (Hold) at present.

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

Factors Influencing AI’s Q2 Performance

C3.ai’s top line in second-quarter fiscal 2026 is expected to have shown sequential improvement, supported by stronger sales activity as the new commercial leadership settles in. Management noted that the company’s revenue outlook of $72 million to $80 million for the fiscal second quarter reflects healthier deal progression observed in August and better execution under recently installed sales leadership. The company also continues to benefit from growing subscription and engineering services revenues, which accounted for 98% of first-quarter fiscal 2026 total sales, providing a more predictable, recurring foundation for revenue expansion. 

Growth initiatives within its strategic customer base should serve as another tailwind. Major enterprise clients such as Nucor, Qemetica, HII and the U.S. Army are expanding AI deployments across additional facilities and mission-critical use cases, positioning the company for broader consumption of its applications over time. In addition, the partner ecosystem has been playing a larger role in revenue generation, with roughly 90% of first-quarter fiscal 2026 business sourced through major distributors like Microsoft Azure, AWS, GCP and McKinsey, a scale advantage that might have helped accelerate contract wins in second-quarter fiscal 2026 and beyond.

On the other hand, year-over-year revenue trends remain pressured following a difficult fiscal first quarter, where total revenues declined 19% from the prior year due to significant sales disruption. Leadership changes caused confusion in deal execution and delayed contract closures, and reduced involvement from former CEO Tom Siebel in the sales process contributed further to the slowdown. A sharp sequential drop in revenues from demonstration licenses, down $15.9 million, is also likely to weigh on results, reducing a previously meaningful revenue contributor. As a result, the company entered second-quarter fiscal 2026 against a high year-over-year comparison, making it challenging to show immediate recovery despite operational improvements.

C3.ai’s bottom line in second-quarter fiscal 2026 is likely to have remained under pressure due to elevated operating costs and continued margin headwinds tied to its shift toward a higher mix of initial production deployments (IPDs). Management noted that non-GAAP gross margin fell to 52% in first-quarter fiscal 2026, primarily because IPDs carry significantly higher delivery costs in the early phases and were accompanied by reduced scale efficiencies. 

With guidance calling for another substantial operating loss of $49.5 million to $57.5 million in second-quarter fiscal 2026, profitability is likely to have remained challenged as the company absorbed the financial impact of execution issues, leadership transition and the cost of ramping resources to stabilize growth.

Price Performance & Valuation of AI

AI stock has declined 61.1% over the past year, underperforming its industry peers and the broader market. Meanwhile, shares of Palantir Technologies Inc. PLTR and SoundHound AI, Inc. SOUN have surged 152.4% and 28.7%, respectively.

Price Performance

Analysts have expressed concerns that AI stock is overvalued. The company is currently valued at a discount compared with its industry on a forward 12-month P/S basis. Its forward 12-month price-to-sales ratio stands at 6.05, lower than the industry average.

P/S (F12M)

Investment Thoughts for AI Stock

C3.ai enters its fiscal second-quarter earnings with a mix of encouraging operational progress and lingering uncertainty, creating a cautious setup for investors. While management has highlighted improving sales execution, expanding partnerships and deeper adoption among major enterprise and government clients, the company is still contending with the aftereffects of leadership transitions and prior disruptions that continue to pressure year-over-year revenue trends and profitability.

With margins under strain and sentiment subdued following a sharp slide in the share price, the stock may offer recovery potential over the long run as execution stabilizes and strategic deployments scale. However, near-term volatility around results and the absence of clear visibility into a sustained rebound make it sensible for existing investors to maintain positions but for new investors to wait for post-earnings clarity before considering fresh entry.

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

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