Here's What Investors Must Expect Ahead of C3.ai's Q3 Earnings

C3.ai, Inc. AI is scheduled to report its third-quarter fiscal 2026 (ended Jan. 31, 2026) results on Feb. 25, after the closing bell.

In the last reported quarter, the company’s adjusted loss per share of 25 cents contracted from the Zacks Consensus Estimate of a loss per share of 32 cents but widened year over year from an adjusted loss per share of six cents. Revenues of $75.1 million remained almost flat with the consensus mark but declined year over year by 20.4%.

AI’s earnings surpassed estimates in each of the trailing four quarters, with an average surprise of 24.1%.

How are Estimates Placed for AI Stock?

The Zacks Consensus Estimate for the fiscal third quarter indicates a loss per share of 29 cents, which has remained unchanged over the past 60 days. The estimate is 141.7% wider than the loss per share of 12 cents reported in the year-ago quarter.

The consensus estimate for revenues is pegged at $75.8 million, indicating a 23.2% year-over-year decline from $98.8 million.

C3.ai, Inc. Price and EPS Surprise

C3.ai, Inc. price-eps-surprise | C3.ai, Inc. Quote

Factors Likely to Have Shaped C3.ai’s Q3 Performance

Revenues

During the fiscal third quarter, the company’s top-line performance is expected to have declined year over year because of lower contributions from Subscription (contributed 93% to the second quarter fiscal 2026 total revenues) and Professional services (contributed 7% to the second quarter fiscal 2026 total revenues) operations.

The downturn is likely to have been caused by weaker recognized revenues despite ongoing deal activity, because of a higher mix of Initial Production Deployments (IPDs), as many deals were still in early implementation phases. Also, a decline in prioritized engineering services and the number of service, consulting and training projects for C3 AI Platform and C3 AI Application customers is expected to have hit the performance growth.

For the fiscal third quarter, C3.ai expects total revenues to be between $72 million and $80 million.

The Zacks Consensus Estimate for revenues from the Subscription and Professional services operations is pegged at $68 million and $7.5 million, reflecting year-over-year declines of 20.9% and 42.7%, respectively.

Margins

AI’s bottom line is expected to have plunged in the fiscal third quarter, mainly due to a decline in prioritized engineering service projects, along with higher payroll and contractor costs.

Besides, the company expects to witness moderated gross margins in the near term because of a high mix of IPDs, which carry a greater cost of revenues during the initial production deployment phase, and due to the investments in expanding its support capacity and lower economies of scale.

The Zacks model expects gross margins for the Subscription and Professional services operations to be 49.9% and 74%, respectively. The estimates indicate year-over-year contractions of 610 basis points (bps) and 600 bps, respectively.

What the Zacks Model Says for C3.ai

Our proven model does not conclusively predict an earnings beat for C3.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, as you will see below.

AI’s Earnings ESP: The company has an Earnings ESP of -9.40%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

AI’s Zacks Rank: It currently carries a Zacks Rank #4 (Sell).

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

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Computer and Technology sector, which according to our model, have the right combination of elements to post an earnings beat.

Credo Technology Group Holding Ltd CRDO has an Earnings ESP of +3.54% and a Zacks Rank of 1 at present. 

Credo Technology’s earnings beat estimates in each of the last four quarters, the average surprise being 38.5%. The company’s earnings for the third quarter of fiscal 2026 are expected to surge 284% year over year.

Sportradar Group AG SRAD currently has an Earnings ESP of +6.06% and a Zacks Rank of 3.

Sportradar’s earnings topped estimates in two of the last four quarters and missed on the remaining two occasions, the average surprise being 61.3%.  The company’s earnings for the fourth quarter of 2025 are expected to be nine cents per share compared with break-even earnings in the year-ago period.

StoneCo Ltd. STNE has an Earnings ESP of +5.52% and a Zacks Rank of 3.

StoneCo’s earnings beat estimates in three of the last four quarters and met on the remaining occasion, the average surprise being 9.1%. The company’s earnings for the fourth quarter of fiscal 2025 are expected to rise 23.1% year over year.

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

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