Should You Buy C3.ai Stock Right Now?

The hottest ticket in the technology industry right now, by far, is anything related to artificial intelligence (AI).

Much of the chatter surrounding AI has been reserved for megacap tech behemoths. However, smaller players have emerged as intriguing opportunities for growth investors too.

C3.ai (NYSE: AI) is an enterprise software platform specializing in AI-powered applications for both the public and private sectors. Yet despite the company’s impressive growth, shares of C3.ai have declined 28% over the last year.

Is this an opportunity to buy a hidden gem in the AI space on sale, or are investors best off sitting on the sidelines?

Demand is high for C3.ai products, but …

The chart below illustrates the revenue trend for C3.ai over the last five years. It’s pretty clear the company has enjoyed steady momentum since AI became a focal point for the business world around the beginning of last year.

AI Revenue (Quarterly) Chart

One thing that I find particularly impressive about C3.ai is that despite its relatively small size, the company has managed to forge some impressive partnerships with cloud infrastructure platforms, including Microsoft, Alphabet, and Amazon, among others.

This partner network has proven to be a good source of lead generation, as evidenced by the company’s rising deal flow. For the company’s fiscal year 2024 (ended April 30), C3.ai closed 115 deals through its partner ecosystem, an increase of 62% year over year.

Another positive sign for C3.ai is how the company’s generative AI products are sold across a multitude of end markets. Nearly 40% of its deals are in manufacturing and defense, but the remainder are sold across industries like life sciences, chemicals, energy, agriculture, and government contracting.

The company’s expanding target market has likely contributed to its revenue acceleration. However, a closer analysis of its income statement sheds some light on where C3.ai is having issues.

Image source: Getty Images.