C3 AI (NYSE: AI) has released its second-quarter fiscal year 2024 results, showing a 17% increase in total revenue to $73.2 million compared to the previous year. The company experienced growth in customer engagement and is transitioning to a consumption-based pricing model, which is expected to drive future revenue and customer growth, despite causing a temporary decline in sales revenue. C3 AI maintains a strong cash position and is confident in the market potential of its AI solutions, particularly generative AI, which is projected to significantly expand their market reach.
Key highlights from the report include:
– Total revenue increased by 17% YoY to $73.2 million, with subscription revenue up by 12%.
– North American revenue grew by 28%, while EMEA revenue fell by 11%.
– The shift to consumption-based pricing is expected to lead to higher revenue and customer growth in the long term.
– The company launched self-service C3 Generative AI on the AWS Marketplace.
– Gross margin was 68.8%, with an operating loss of $25 million.
– Q3 revenue is forecasted to be between $74 million and $78 million, with positive cash flow expected in Q4 FY24.
– Full fiscal year ’24 revenue guidance remains at $295 million to $320 million, with an increase in non-GAAP loss from operations guidance.
Company Outlook:
C3 AI is optimistic about its future, especially with the potential of generative AI, which is expected to more than double the company’s addressable market. The company is well-capitalized, with $762.3 million in cash, cash equivalents, and marketable securities, and plans to continue investing in data scientists, large language model engineers, and lead generation. While acknowledging issues with sales execution in Europe, the company is taking steps to address this and improve performance.
Bearish Highlights:
The company faced sales headwinds, including a decrease in Q2 sales revenue due to the transition to a consumption-based pricing model. Additionally, there was an 11% decrease in EMEA revenue. The company also increased its non-GAAP loss from operations guidance for the fiscal year.
Bullish Highlights:
C3 AI reported a significant increase in customer engagements, up 81% from the previous quarter, and highlighted successful collaborations with major partners and customers. The company’s strategic investments in AI, particularly generative AI and multimodal AI technologies, are expected to strengthen its market position.
Misses:
While the transition to consumption-based pricing is expected to be beneficial in the long run, it has had a short-term negative impact on revenue growth. The company also noted an increase in accounts receivable, attributed to the timing of invoicing, and acknowledged the need for improvement in sales execution in Europe.
In the question and answer segment, Tom Siebel discussed the company’s strategic investments in human capital, including performance-related layoffs and the hiring of data scientists and engineers. He also highlighted the federal use cases for generative AI, particularly the predictive maintenance system for the United States Air Force, which is expected to improve operational efficiency.
In conclusion, C3 AI’s second-quarter fiscal year 2024 results indicate a company in transition, adopting a new pricing model that is expected to drive long-term growth. Despite some short-term challenges, the company’s focus on generative AI and strong partnerships position it well for future success. With a solid cash reserve and positive guidance for the coming quarters, C3 AI is poised to capitalize on the expanding AI market.
Source link
