Latest Developments:
C3.ai reported $87 million in 1Q25 revenue, showing 20.83% YoY growth and beating estimates. Gross margin improved to 59.77%, and the company posted positive free cash flow for the second consecutive quarter. For FY2025, C3.ai expects revenue between $370 million and $395 million, implying 19% to 27% growth. However, its focus on achieving profitability might limit future growth.

Investment Case:
C3.ai is positioned to benefit from AI adoption, but its capital-intensive business model and high customer acquisition costs could hinder growth. The company’s reliance on government contracts and Baker Hughes poses additional risks. C3.ai must diversify its revenue sources to maintain long-term growth.

Valuation:
Despite strong demand, C3.ai’s current valuation appears overstretched, with a market capitalization of $4.7 billion. Applying a Nasdaq-like price-to-sales ratio suggests a potential downside of more than 30%. The stock lacks a margin of safety, and investors should remain cautious.

Disclaimer: The above is an excerpt on a report written by our close associate, Selendis Research. Interested parties may check out the full report here on Seeking Alpha. All information provided is intended solely for general informational purposes. Seven Insights does not take into account individual financial goals or situations and does not provide personalized investment advice. Seven Insights is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank.