Exploring the Prospects of AI Stock Before Q1 Earnings
C3.ai AI is positioned to disclose its first-quarter fiscal 2025 results on Sep 4.
Projections for AI’s revenues stand between $84 million to $89 million for the fiscal first quarter. Analysts estimate revenue at $87.12 billion, signaling an impressive 42% growth compared to the previous year.
Expectations for the quarterly loss remain steady at 13 cents per share, unmoving over the past month. Last year, AI recorded a loss of 9 cents per share.
AI has consistently surpassed the Zacks Consensus Estimate in the last four quarters, boasting an average earnings surprise of 49.18%.
Let’s delve into the state of AI shares leading up to this much-anticipated announcement.
The Performance of C3.ai, Inc.
C3.ai’s first-quarter performance is likely bolstered by C3 Generative AI solutions and the rising demand for its Enterprise AI software.
The move by C3.ai to diversify its clientele across various industries such as manufacturing, federal, defense, aerospace, and pharmaceuticals is anticipated to drive substantial revenue growth. Particularly, the company’s expanding footprint in the federal domain has been a significant catalyst.
Nonetheless, the ongoing shift to a pay-as-you-go model has led to shorter-term, smaller transactions that might have negatively impacted revenue performance obligations despite revenue growth.
The expectation of a higher gross margin pressure due to a greater mix of expensive pilots might have impacted profitability in the upcoming quarter.
Furthermore, increased investments in sales force, research and development, and marketing expenditure are likely to have weighed on the operating margin.
AI Shares Performance Compared to the Sector
Year-to-date, AI shares have dipped by 18.7%, falling behind the broader Zacks Computer & Technology sector’s 20.9% return and the Zacks IT Services industry’s rise of 5.3%.
Assessment of AI Stock
Presently, AI stock is deemed overvalued, indicated by a Value Score of F.
The stock trades at a premium with a forward 12-month Price/Sales (P/S) ratio of 7.04X, surpassing the sector’s 6.27X.
Current Trend in AI Shares
AI stock is currently trading below its 50-day and 200-day moving averages, signaling a bearish trend.
Long-Term Prospects of C3.ai
The expanding clientele and increased adoption of C3.ai’s Enterprise AI software mark promising developments for investors.
C3 Generative AI is proving beneficial across manufacturing, industrial, and military sectors, enhancing safety standards, analyzing technical data, and financial information.
The firm’s robust portfolio, exemplified by AI-powered predictive maintenance solutions, has been chosen by renowned entities such as Dow, Holcim, and Con Edison in the fourth quarter of fiscal 2024.
Riding on a diverse portfolio and technological prowess, C3.ai has fostered strong partnerships with industry giants like Booz Allen Hamilton, Microsoft, Amazon, and Alphabet.
Noteworthy advancements include attaining AWS Generative AI competency and deploying C3 Generative AI for Government Programs on Alphabet’s Google Cloud to efficiently dispense government program information.
In fiscal 2024, Federal revenues soared by double digits, reflecting AI’s fortified position in the federal landscape.
Concluding Thoughts
Despite strong demand for C3 Generative AI solutions and a burgeoning partner network, aggressive investment strategies may exert downward pressure on margins in the immediate future. Considering this, C3.ai currently holds a Zacks Rank #3 (Hold), implying potential advantages in waiting for a more favorable entry point in the stock.
For the latest earnings updates, keep an eye on the Zacks Earnings Calendar.
