Financial Performance Overview

C3 AI, a leading provider of Enterprise AI software, has reported its financial results for the three and six months ended October 31, 2025. The company’s revenue is primarily generated from subscription-based offerings, which accounted for 93% and 90% of total revenue in the respective periods. However, the company has seen a decline in both subscription and professional services revenue compared to the same periods last year.

Subscription revenue decreased by 13% and 16% for the three and six months ended October 31, 2025, respectively, compared to the same periods in the prior year. This was primarily due to a lower percentage of revenue coming from new customers, which accounted for 37% and 29% of total subscription revenue in the respective periods, down from 24% and 19% in the prior year. Professional services revenue also declined by 63% and 45% for the three and six months ended October 31, 2025, respectively, mainly due to a decrease in prioritized engineering services and other professional services projects.

Profitability and Margins

The decline in revenue, coupled with increased operating expenses, has led to a significant drop in profitability. Gross margin decreased from 61% in the prior year to 40% and 39% for the three and six months ended October 31, 2025, respectively. The subscription gross margin declined from 57% to 39%, while the professional services gross margin decreased from 89% to 63% over the same period.

The company’s operating expenses increased by 7% and 14% for the three and six months ended October 31, 2025, respectively, compared to the same periods last year. This was primarily driven by higher sales and marketing expenses, as well as increased research and development and general and administrative costs. As a result, the company reported a net loss of $104.7 million and $221.4 million for the three and six months ended October 31, 2025, respectively, compared to net losses of $66.0 million and $128.8 million in the prior year periods.

Strengths and Weaknesses

One of C3 AI’s key strengths is its focus on large, enterprise-level customers, often referred to as “lighthouse customers.” These customers, which include companies and public agencies in industries such as oil and gas, power and utilities, and aerospace and defense, serve as proof points for the company’s technology and help drive adoption among other potential customers. However, this has also resulted in a relatively small number of customers generating a large portion of the company’s revenue, which can lead to volatility in financial performance.

To address this, C3 AI has introduced a new consumption-based pricing model for new customers, which is designed to make it easier and less costly for organizations to adopt the company’s solutions. This model includes an “Initial Production Deployment” phase, where customers can access the C3 Agentic AI Platform, C3 AI Applications, or C3 Generative AI, as well as support services, before transitioning to a monthly fee and consumption-based pricing structure. This shift in go-to-market strategy is intended to increase the company’s customer base and accelerate growth.

Another strength of C3 AI is its focus on technology innovation, particularly in the area of generative AI. The company has introduced a range of domain-specific generative AI offerings, as well as new capabilities such as C3 AI Agentic Process Automation, which combines rules-based automation with AI-powered reasoning. These innovations have helped the company differentiate its offerings and address a broader range of enterprise use cases.

However, the company has also faced some challenges, including the disruptive impact of a recent restructuring of its sales and services organization, as well as the transition in the CEO role. The company has noted that these changes, along with the reduced involvement of the Executive Chairman due to health issues, may have had a negative effect on sales results in the short term.

Outlook and Future Prospects

Looking ahead, C3 AI is focused on several key priorities to drive future growth and profitability. These include:

1. Customer Acquisition, Retention, and Expansion: The company is aiming to continue growing its customer base, particularly by attracting new customers through its consumption-based pricing model, while also retaining and expanding its relationships with existing customers.

2. Restructuring of Sales and Services Organization: The company is working to achieve the desired productivity levels from its restructured sales and services organization, which it believes will be critical to its future success.

3. Generative AI Investments: C3 AI plans to continue investing heavily in generative AI technologies, leveraging these advanced capabilities to enhance its existing offerings and create new, innovative applications that expand its impact in the Enterprise AI market.

4. Brand Awareness and Partnerships: The company intends to make significant investments in marketing and brand-building activities, as well as expanding its ecosystem of strategic partners, to increase awareness and adoption of its solutions.

5. International Expansion: C3 AI sees significant opportunities for growth in international markets and plans to invest in expanding its presence in these regions.

While the company has faced some near-term challenges, its focus on innovation, customer success, and strategic partnerships positions it well to capitalize on the growing demand for Enterprise AI solutions. However, the company will need to successfully navigate the transition in leadership, as well as the broader macroeconomic conditions, in order to achieve its long-term growth and profitability goals.

Key Takeaways:

• C3 AI’s revenue is primarily generated from subscription-based offerings, which have declined in the recent periods due to lower new customer acquisition and reduced professional services revenue.
• Profitability has been impacted by the revenue decline and increased operating expenses, leading to significant net losses.
• The company’s strengths include its focus on large enterprise customers and technology innovation, particularly in generative AI. However, it faces challenges related to its go-to-market strategy and leadership transition.
• C3 AI is focused on driving customer growth and expansion, investing in generative AI, building brand awareness, and expanding its international presence to drive future growth and profitability.