C3.ai's Chief Executive, Thomas Siebel, reported a solid start to the fiscal year, driven by rising demand for enterprise AI, marking six consecutive quarters of revenue growth.

In the fiscal first quarter of 2025, C3.ai reported revenue of $87.2 million, a 21% increase from the previous year, slightly exceeding estimates of $86.9 million.

However, subscription revenue fell short of expectations at $73.5 million, raising concerns about the company's path to profitability.

This decline in subscription revenue, which dropped by approximately $6.5 million quarter-on-quarter, contrasts sharply with a $9.5 million increase in the previous quarter.

Looking ahead, C3.ai projected its fiscal second-quarter sales to be between $88.6 million and $93.6 million, which is lower than the $91.3 million estimate.

Following these results, several Wall Street analysts downgraded their price targets for C3.ai, citing disappointing subscription revenue growth and higher-than-expected losses.

C3.ai's stock fell approximately 20% in premarket trading after the disappointing results, reflecting broader investor concerns in the tech sector.

If these stock losses continue, C3.ai could see a market valuation drop of over $600 million from its current $2.97 billion.

Despite the challenges, JMP maintained an Outperform rating, highlighting a 20.5% revenue growth in Q1 and strong total contract value bookings.

The company reported positive free cash flow of $7.1 million and holds a strong cash position of $762.5 million, which may provide some stability amid current challenges.

C3.ai's subscription revenue includes software licenses, SaaS offerings, pilots, trials, and consumption-based pricing, indicating a shift to a subscription-based model that has not yet yielded expected growth.

Management plans to invest in sales, research, and marketing, which may impact short-term operating margins but is aimed at driving future growth.