What’s Next For C3.AI Stock?

Following a disappointing preliminary quarterly report, C3.ai stock (NYSE:AI) plunged 25% on Monday, August 11. The enterprise AI software provider, which helps businesses with digital transformation, announced that it expects its first-quarter fiscal 2026 revenues (fiscal year ends in April) to be around $70 million – significantly lower than the street estimates of $99 million. The company’s losses are also expected to widen due to a business reorganization and health issues affecting CEO Thomas Siebel.

The key question now is whether C3.AI stock is a buy after the recent drop. Despite its high current valuation, we believe C3.AI stock is a buy after its recent decline. Our conclusion is based on an analysis of the company’s operating performance and financial health. We evaluated C3.AI’s recent and historical financial condition, including its operating performance over the last few years. Our analysis focuses on key parameters like Growth, Profitability, Financial Stability, and Downturn Resilience, which indicate that the company has a moderate operating performance and financial condition.

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How Does C3.ai’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, AI stock looks expensive compared to the broader market. C3.ai has a price-to-sales (P/S) ratio of 5.9 vs. 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 grown considerably over recent years.

• C3.ai has seen its top line grow at an average rate of 16.5% over the last 3 years (vs. an increase of 5.7% for S&P 500)
• Its revenues have grown 23.8% from $296 Mil to $367 Mil in the last 12 months (vs. growth of 5.0% for S&P 500)
• Also, its quarterly revenues grew 26.0% to $99 Mil in the most recent quarter from $78 Mil a year ago (vs. 5.2% improvement for S&P 500)
• However, based on its preliminary results, Q1 revenue is estimated to decline 19% y-o-y to $70 million.

How Profitable Is C3.ai?

C3.ai’s profit margins are considerably worse than most companies in the Trefis coverage universe.

• C3.ai’s Operating Income over the last four quarters was $-318 Mil, which represents a very poor Operating Margin of -86.6% (vs. 18.6% for S&P 500)
• C3.ai’s Operating Cash Flow (OCF) over this period was $-31 Mil, pointing to a very poor OCF Margin of -8.5% (vs. 20.3% for S&P 500)
• For the last four-quarter period, C3.ai’s Net Income was $-282 Mil — indicating a very poor Net Income Margin of -76.8% (vs. 12.7% for S&P 500)
• Furthermore, the company expects a net loss of around $125 million in Q1, much higher than the net loss of $72.59 million in the year-ago quarter.

Does C3.ai Look Financially Stable?

C3.ai’s balance sheet looks very strong.

• C3.ai’s Debt figure was $4.5 Mil at the end of the most recent quarter, while its market capitalization is $2.2 Bil (as of 8/11/2025). This implies a very strong Debt-to-Equity Ratio of 0.2% (vs. 21.8% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $724 Mil of the $1.1 Bil in Total Assets for C3.ai.  This yields a very strong Cash-to-Assets Ratio of 68.6% (vs. 6.9% for S&P 500)

How Resilient Is AI Stock During A Downturn?

AI stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• AI stock fell 93.9% from a high of $168.92 on 9 February 2021 to $10.26 on 28 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $46.37 on 15 June 2023, and it currently trades at around $16.50

Putting All The Pieces Together: What It Means For AI Stock

In summary, C3.ai’s performance across the parameters detailed above is as follows:

• Growth: Very Strong
• Profitability: Very Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral

The Verdict

Overall, C3.AI’s performance across the key parameters has been neutral. While the stock currently trades at a premium, its strong sales growth helps support these high multiples. In fact, the stock’s average price-to-sales (P/S) ratio over the last four years was over 10x trailing revenues, significantly higher than the current 5.9x. The issues that impacted the company’s Q1 performance seem to be temporary, as the restructuring is now complete, and a replacement for the CEO is being sought due to his health concerns. Therefore, we believe investors could use this dip in C3.AI’s stock as an opportunity for long-term gains. Also, see – C3.AI Dip Buy Analysis

Our assessment, however, may be incorrect. Investors might be unwilling to pay a higher multiple for C3.AI, given its expanding losses and the heavy reliance on the current CEO for sales growth. The stock also has a history of underperforming the broader market during economic downturns. For this reason, investors who are not prepared for potential losses of over 50% should avoid this stock. However, we believe that long-term investors with a 3-5 year horizon will likely benefit from an investment in C3.AI.

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