📝 usncan Note: Buy C3.ai Stock Now?
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DAVOS, SWITZERLAND – JANUARY 21: C3.ai store is seen at Promenade Street in Davos, Switzerland on January 21, 2025. (Photo by Ömer Sercan Karku/Anadolu via Getty Images)
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After a disappointing preliminary quarterly report, C3.ai stock (NYSE:AI) dropped 25% on Monday, August 11. The enterprise AI software company, which assists businesses with digital transformation, projected that it anticipates its first-quarter fiscal 2026 revenues (fiscal year ends in April) to be approximately $70 million – considerably below the street’s projections of $99 million. The firm’s losses are also predicted to increase due to a business restructuring and health complications affecting CEO Thomas Siebel.
The key question now is whether C3.ai stock is worth buying after the recent fall. Despite its high current valuation, we believe C3.ai stock is a buy following its recent downturn. Our assessment is based on an evaluation of the company’s operational performance and financial health. We analyzed C3.ai’s recent and historical financial state, including its operational performance over recent years. Our assessment emphasizes key metrics such as Growth, Profitability, Financial Stability, and Downturn Resilience, which suggest that the company maintains a moderate operational performance and financial condition.
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How Does C3.ai’s Valuation Look vs. The S&P 500?
Based on what you pay per dollar of sales or profit, AI stock appears expensive compared to the wider market. C3.ai has a price-to-sales (P/S) ratio of 5.9 compared to a figure of 3.2 for the S&P 500.
How Have C3.ai’s Revenues Grown Over Recent Years?
C3.ai’s Revenues have increased significantly in recent years.
- C3.ai has experienced an average annual growth rate of 16.5% over the past 3 years (compared to a rise of 5.7% for the S&P 500)
- Its revenues have increased by 23.8% from $296 million to $367 million in the last 12 months (compared to a growth of 5.0% for the S&P 500)
- Additionally, its quarterly revenues rose by 26.0% to $99 million in the latest quarter from $78 million a year prior (compared to a 5.2% increase for the S&P 500)
- However, based on preliminary results, Q1 revenue is projected to drop by 19% year-over-year to $70 million.
How Profitable Is C3.ai?
C3.ai’s profit margins are considerably worse than those of most companies within the Trefis coverage universe.
- C3.ai’s Operating Income over the past four quarters was $-318 million, showcasing a very poor Operating Margin of -86.6% (compared to 18.6% for the S&P 500)
- C3.ai’s Operating Cash Flow (OCF) during this timeframe was $-31 million, indicating a very poor OCF Margin of -8.5% (compared to 20.3% for the S&P 500)
- For the last four-quarter period, C3.ai’s Net Income was $-282 million — representing a very poor Net Income Margin of -76.8% (compared to 12.7% for the S&P 500)
- Moreover, the company anticipates a net loss of around $125 million in Q1, substantially higher than the net loss of $72.59 million from the same quarter last year.
Does C3.ai Look Financially Stable?
C3.ai’s balance sheet appears very strong.
- C3.ai’s debt level was $4.5 million at the conclusion of the most recent quarter, while its market capitalization stands at $2.2 billion (as of 8/11/2025). This results in a very strong Debt-to-Equity Ratio of 0.2% (compared to 21.8% for the S&P 500). [Note: A low Debt-to-Equity Ratio is considered favorable]
- Cash (including cash equivalents) constitutes $724 million of the $1.1 billion in Total Assets for C3.ai. This amounts to a very strong Cash-to-Assets Ratio of 68.6% (compared to 6.9% for the S&P 500)
How Resilient Is AI Stock During A Downturn?
AI stock has underperformed significantly relative to the benchmark S&P 500 index during several recent downturns. As investors hope for a soft landing in the U.S. economy, how severe could the situation get if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
Inflation Shock (2022)
- AI stock declined 93.9% from a peak of $168.92 on February 9, 2021, to $10.26 on December 28, 2022, while the S&P 500 saw a peak-to-trough drop of 25.4%
- The stock is still yet to regain its pre-Crisis high
- The highest price the stock has achieved since then is $46.37 on June 15, 2023, and it now trades around $16
Putting All The Pieces Together: What It Means For AI Stock
In summary, C3.ai’s performance across the outlined metrics is as follows:
- Growth: Very Strong
- Profitability: Very Weak
- Financial Stability: Very Strong
- Downturn Resilience: Very Weak
- Overall: Neutral
The Verdict
In conclusion, C3.ai’s performance across critical metrics has been neutral. While the stock currently trades at a premium, its robust sales growth supports these elevated multiples. In fact, the stock’s average price-to-sales (P/S) ratio over the past four years was over 10x trailing revenues, much higher than the current 5.9x. The challenges affecting the company’s Q1 performance appear to be temporary, as the restructuring is complete, and a replacement for the CEO is being pursued due to health issues. Thus, we believe that investors may seize this decline in C3.ai’s stock as an opportunity for long-term gains. Furthermore, see – C3.ai Dip Buy Analysis
However, we could be incorrect in our assessment. Investors may hesitate to pay a higher multiple for C3.ai, considering its increased losses and the significant dependence on the current CEO for sales growth. Also, the stock has a history of underperforming relative to the broader market during economic downturns. For this reason, investors who aren’t prepared for potential losses exceeding 50% should steer clear of this stock. Nevertheless, we believe that long-term investors with a horizon of 3-5 years will likely reap benefits from an investment in C3.ai.
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