California (Business Emerge), September 5: Shares of C3.ai experienced a dramatic 20% decline in premarket trading on Thursday, triggered by disappointing quarterly subscription revenue. The downturn stems from sluggish conversions of pilot customers.
The impact of elevated interest rates and economic uncertainty has prompted companies to adopt a more conservative approach to spending, leading to tightened budgets and reduced expenditure.
C3.ai’s subscription revenue for the first quarter reached $73.5 million, falling short of LSEG’s projections of $79.1 million. This revenue primarily includes income from software licenses, Software-as-a-Service offerings, pilot programs, and usage-based pricing models, which generate revenue over time.
“D.A. Davidson analysts noted a decline in subscription revenue by approximately $6.5 million quarter-over-quarter, contrasting with an increase of about $9.5 million in the previous quarter and $5 million in the same period last year,” the firm stated.
C3.ai’s management anticipates continued pressure on gross margins due to the increased proportion of pilots, which involve higher revenue costs during the initial customer lifecycle phase.
Additionally, finance chief Hitesh Lath projected short-term strain on operating margins due to increased investments in sales, research and development, and marketing efforts.