Why C3.ai Stock Fell After Today’s Earnings

C3.ai (AI -3.15%) The stock, which makes artificial intelligence (AI) applications, reported its fiscal second quarter 2025 results last night, beating expectations, prompting a series of price target hikes from analysts. Despite the good news and positive reaction on Wall Street, investors are selling C3 shares, which are down 4.2% as of 10:15 a.m. ET.

C3 in Q2

C3.ai beat expectations on both revenue and profit in the quarter ended Oct. 31, reporting second-quarter revenue of $94.3 million (Wall Street forecast $91 million) and losing $0.06 per share instead of the expected loss of $0.16 per share.

So far, so good. But this is where the news gets bad. It appears that C3’s loss of $0.06, which exceeded profit, was just a non-GAAP (adjusted) number, meaning it is not calculated according to generally accepted accounting principles (GAAP). became. C3’s GAAP loss for the quarter was a massive $0.52 per share. That was almost as bad as the company’s loss of $0.59 per share a year ago and worse than the company’s loss of $0.50 per share last quarter.

The fact that C3 grew its revenue by 29% year over year, but saw little to no improvement in profits, suggests that the company’s strong revenue growth isn’t necessarily on the path to profitability.

Is C3 stock a sell?

Worse, C3 growth may already be slowing.

As for guidance, management predicted revenue growth of approximately 25% for both the third quarter of 2025 ($98 million) and the full fiscal year ($388 million). Management did not provide GAAP guidance for earnings, but said it expects non-GAAP losses to continue: losses of $42 million in the third quarter and a loss of about $120 million for the year .

That’s not a good prediction in the short term, and in the longer term, analysts who follow C3 expect this company to continue losing money through 2027 and beyond. (Forecasts only extend through 2027, and losses that year are expected to be $1.68 per share.) Given this dire outlook, investors are probably right to sell C3.ai shares.