C3.ai Doubles Down on Federal AI: Can Execution Catch Up?

C3.ai, Inc. AI is entering a more consequential phase of its operating reset, with federal bookings emerging as an increasingly important pillar of the company’s near-term narrative. During second-quarter fiscal 2026, bookings across federal, defense and aerospace rose 89% year over year and represented approximately 45% of total bookings, despite a prolonged 43-day U.S. government shutdown that management described as a meaningful headwind to procurement activity.

Management attributed this performance to sustained demand across government agencies that are reevaluating their technology stacks and prioritizing the adoption of commercial off-the-shelf AI solutions. During the quarter, C3.ai signed new and expanded agreements with a range of federal customers, including the Department of Health and Human Services, the intelligence community and multiple military organizations. These deployments focus on consolidating fragmented data environments, improving data governance and enabling AI-driven analytics and automation within secure operating frameworks, consistent with agency requirements.

The company also highlighted the growing role of its partner ecosystem in supporting federal momentum. Nearly 89% of total bookings in the quarter were closed with or through partners, reflecting deeper engagement with system integrators that are aligned with government COTS mandates. Management pointed to the addition of Booz Allen to its Strategic Integrator Program as an example of how partners are able to sublicense applications built on the C3 Agentic AI platform, helping agencies meet procurement standards while accelerating deployment timelines.

Looking ahead, management identified bookings as a key indicator to monitor, particularly as execution processes are reset. While near-term financial metrics remain constrained, the scale of federal demand, increasing partner participation and continued engagement across government agencies suggest that the federal segment remains a meaningful area of traction as the company works to improve consistency in execution.

AI’s Price Performance, Valuation & Estimates

Shares of C3.ai have declined 20.3% in the past three months compared with the industry’s fall of 15.6%. In the same time frame, other industry players like TaskUs, Inc. TASK, Leidos Holdings, Inc. LDOS and ServiceNow, Inc. NOW have declined 35.2%, 1.3% and 16.3%, respectively.

AI Three-Month Price Performance

From a valuation standpoint, AI trades at a forward price-to-sales ratio of 6.32, significantly below the industry’s average of 13.73X. Then again, other industry players, such as TaskUs, ServiceNow and Leidos Holdings, have P/S ratios of 0.81, 10.35 and 1.33, respectively.

The Zacks Consensus Estimate for C3.ai’s fiscal 2026 loss per share has narrowed in the past 30 days.

The company is likely to report dismal earnings, with projections indicating a plunge of 195.1% year over year in fiscal 2026. Conversely, industry players like TaskUs, ServiceNow and Leidos Holdings are likely to witness growth of 9.2%, 16.5% and 4.7%, respectively, in 2026 earnings.

AI stock currently carries a Zacks Rank #3 (Hold). 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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