C3.ai Gears Up to Post Q4 Earnings: Buy, Sell or Hold the Stock?

C3.ai, Inc. AI is scheduled to report its fourth-quarter of fiscal 2025 results on May 28, after the closing bell.

In the last reported quarter, C3.ai’s top and bottom line surpassed the Zacks Consensus Estimate by 0.8% and 52%, respectively. The company delivered strong top-line growth and operational improvements. Revenue rose 26% year over year to $98.8 million, with subscription revenue up 22% to $85.7 million, driven by expanding pilot programs and strengthened partnerships. The company signed 50 new pilots, bringing the total active pilots to 245, reinforcing a robust pipeline for future conversions.

Strategic alliances with Microsoft MSFT Azure, Amazon’s AMZN AWS, and McKinsey QuantumBlack played a pivotal role in accelerating deal flow, with Microsoft-related agreements jumping 460% quarter over quarter. Gross margin remained healthy at 69%, while operating loss narrowed to $23.1 million—well below guidance—thanks to disciplined expense control and a shift in spending toward salesforce and partner enablement.

This enterprise artificial intelligence (AI) software company surpassed earnings estimates in all the trailing four quarters, with an average surprise of 60.1%. You can see the historical figures in the chart below. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

How Are Estimates Placed for C3.ai Stock?

The Zacks Consensus Estimate for fiscal fourth-quarter bottom line has remained unchanged at a loss of 20 cents per share over the past 60 days. The estimated figure indicates a wider loss compared to the year-ago loss of 11 cents per share. The consensus mark for revenues is pinned at $108.3 million, suggesting 25% year-over-year growth.

For fiscal 2025, AI is expected to witness 29.6% revenue growth from the 2024 level. The company is expected to register a 4.3% year-over-year improvement in the bottom line for this year.

What the Zacks Model Unveils for C3.ai

Our proven model does not conclusively predict an earnings beat for C3.ai this reporting cycle. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen. This is not the case here, as you will see below.

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

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

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

Factors Influencing C3.ai’s Fiscal Q4 Performance

Increasing partner-led deal closures and broader enterprise AI adoption across industries are expected to have contributed to the company’s revenues. C3.ai has guided for fiscal fourth-quarter revenues in the range of $103.6 million to $113.6 million. The company anticipates that its growing sales pipeline, strengthened by its strategic alliances, will support sequential top-line expansion.

Despite stronger revenue projections, C3.ai expects a non-GAAP operating loss of $30 million to $40 million for the quarter, which is wider than the prior quarter’s reported loss of $23.1 million and a year-ago figure of $23.4 million. This anticipated margin compression is primarily due to increased investments in direct sales expansion, partner enablement, customer support, and product development. Management emphasized that these are strategic, front-loaded investments aimed at capturing long-term enterprise AI market share, even if they suppress near-term profitability.

Although the company expects to remain free cash flow negative for the full fiscal year 2025, it has guided toward achieving positive free cash flow in the fiscal fourth quarter. This inflection is expected to result from disciplined cost management, operational efficiency improvements, and growing contributions from higher-margin subscription and demonstration license revenues. The shift would mark a meaningful step toward sustainable financial health and investor confidence in its path to profitability.

C3.ai Share Price Performance

In terms of C3.ai’s share price performance, its shares have lost 4.8% in the past three months. However, it has underperformed the Zacks Computer & Technology sector and the Zacks Computers - IT Services industry, as shown below.

At its current price, the AI stock represents a 49.6% discount from its 52-week high of $45.08. It also indicates a 33.4% premium to its 52-week low of $17.03.

C3.ai Share Price Performance

A Look at AI Stock Valuation

C3.ai is currently trading at a slight premium relative to its Zacks Computer & Technology sector but at a discount to historical metrics. In terms of the forward 12-month Price/Sales, AI is trading at 6.24X, higher than the sector’s 6.07X. Its forward 12-month P/S ratio sits below its three-year average, as shown below.

C3.ai Valuation

Why Should You Sell C3.ai Stock Now?

While C3.ai continues to pursue an ambitious growth trajectory in the enterprise AI space, the investment case is clouded by ongoing operational losses, limited earnings visibility, and inconsistent monetization of strategic partnerships. Despite solid top-line growth and impressive expansion in pilot programs, the conversion of these initiatives into recurring revenue remains elusive. The company’s dependence on demonstration licenses to drive near-term results adds further ambiguity to the sustainability of its revenue base.

Moreover, the widening operating loss projected for the fiscal fourth quarter, due to elevated spending in sales and development, signals prolonged margin pressure, even as management promises eventual efficiency gains. Although C3.ai expects a positive free cash flow inflection in the upcoming quarter, its full-year outlook remains cash flow negative, tempering investor confidence in the near-term financial trajectory.

With the stock trading at a premium to sector peers despite underperformance relative to broader tech indices and AI benchmarks, the risk-reward balance appears skewed. Until C3.ai can demonstrate scalable, recurring revenue growth and improved margin discipline, investors may find better risk-adjusted opportunities elsewhere within the AI ecosystem.

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

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