C3.ai CEO Tom Siebel is unfazed by Wall Street’s concerns over the company’s recent earnings report. While the results for C3.ai’s October quarter fell short of expectations, Siebel remains confident in the company’s direction.
The company’s shares saw a 10.7% decline to $26.05 after the earnings announcement, but they are still up 133% for the year. Despite the volatility in the stock price, Siebel sees it as a minor blip on the radar.
So, what’s the situation? C3.ai’s growth has not met the levels of two years ago, which Siebel attributes to a transition in their business model. The company has shifted to a consumption model, similar to many cloud vendors, as opposed to a subscription-based model.
In their fiscal second quarter, which ended on October 31, C3.ai reported revenue of $73.2 million—a 17% increase from the previous year. While this is at the lower end of their guidance range ($72.5 million to $76.5 million), it is slightly below the Street consensus forecast of $74.3 million, according to FactSet.
Looking ahead to the January quarter, C3.ai projects revenue between $74 million and $78 million, with a non-GAAP operating loss between $40 million and $46 million. This is lower than the Street consensus estimate of $77.7 million in revenue and a non-GAAP operating loss of $21.1 million.
The real concern lies in the guidance for the full fiscal year ending in April 2024. C3.ai maintains its revenue guidance of $295 million to $320 million. However, the company now anticipates a wider non-GAAP loss from operations between $115 million and $135 million, compared to the previous forecast of $70 million to $100 million.
C3.ai had previously cautioned investors during their July quarter results that they would be ramping up spending to take advantage of the growing demand for generative artificial intelligence software. This increased investment is expected to delay the timeline for reaching non-GAAP profitability.
Despite these challenges, Siebel remains optimistic about C3.ai’s future. He believes that the company’s business model transition and investment in AI technology will position them favorably in the long run. With a focused strategy and commitment to innovation, C3.ai aims to regain momentum and deliver strong results in the coming quarters.
The Potential of Generative AI: C3.ai’s Ambitious Plans
Siebel Systems, a leading customer relationship management software company founded by Tom Siebel and later acquired by Oracle, is making bold moves in the field of generative AI. With a substantial $800 million cash reserve at their disposal, the company has decided to allocate significant resources to sales, marketing, advertising, and data scientists in order to seize a larger market share in this burgeoning field.
Siebel describes the strategy as a “land grab,” emphasizing that it would be unwise to ignore the immense opportunities presented by generative AI. In an interview, he expressed his belief that the potential of this technology surpasses anything he has witnessed throughout his professional career.
With $800 million in the bank, Siebel is determined to invest in the growth of the business. He highlights the economic imperative to do so, stating that failing to capitalize on this opportunity would be irrational. The company plans to launch a comprehensive brand campaign, expand its workforce, develop new applications, and refine their models. This expansion is fueled by the exponential growth of generative AI, which has effectively doubled the company’s market potential over the past year.
C3.ai’s recent transformation from subscription-based pricing to consumption-based pricing has been a significant part of their journey. Although their top-line growth rate dipped to -4% in the January 2023 quarter after a period of high growth, the company has experienced a rebound since then. Subsequent quarters have shown steady progress, with a stagnant growth rate in April, followed by an 11% increase in July and a remarkable 17% increase this quarter.
Siebel remains optimistic about the future trajectory of C3.ai’s growth. He likens the previous slow growth period to a passing low-pressure system and predicts a further acceleration of growth in the coming years. This ambition reflects his confidence that C3.ai can ultimately return to the heady days of 40%-plus growth.
While C3.ai’s endeavors in generative AI continue to shape its future, the company’s commitment to innovation and market dominance remains resolute.