Shares in C3.ai Inc. cratered more than 20% in late trading today after the artificial intelligence software maker fell well short of expectations in its fiscal 2026 third quarter.

It also gave fourth-quarter guidance that was well below expectations amid declining revenue and continued operating losses that raise fresh concerns about the company’s growth trajectory.

For the quarter that ended on Jan. 31, C3 AI reported an adjusted earnings per share loss of 40 cents, up from a 12-cent-per-share loss in the same quarter a year ago, on revenue of $53.3 million, down 46% year-over-year. Analysts had been expecting a loss of 29 cents per share and revenue of $75.91 million.

Subscription revenue in the quarter came in at $48.16 million, down 43.8% year-over-year and professional services revenue was $5.1 million, down 61.1% year-over-year.

Business highlights in the quarter included the closing of 44 agreements, featuring new and expanded deals with the U.S. Department of Agriculture, the U.S. Department of Energy, the NATO Communications and Information Agency, the Royal Navy, Thales S.A., Exxon Mobil Corp., GSK plc, United States Steel Corporation, Plains All American Pipeline LP, Seaspan ULC and McLaren Automotive Ltd.

C3 AI’s federal, defense and aerospace segment gained traction during the quarter, with total bookings in the segment increasing 134% year-over-year and representing 55% of total bookings. Among notable wins, the U.S. Department of Agriculture selected C3 AI to deploy an enterprise-scale AI solution to modernize intergovernmental and public engagement operations by unifying fragmented data ecosystems into a secure, department-wide platform.

The company also continued expanding customer relationships across asset-intensive and supply chain-driven industries while closing eight agreements for C3 Generative AI.

The results came after C3 AI founder and Chief Executive Officer Tom Siebel stepped down from the company because of health issues in July, replaced by Stephen Ehikian.

“I joined C3 AI six months ago and I did so with a clear conviction: this company is uniquely positioned to win in enterprise AI,” Ehikian said in the company’s earnings release. “That conviction has been reinforced through extensive engagement with customers, prospects, partners, and investors”

“However, it was clear to me that we were not organized appropriately,” added Ehikian. “We’ve reduced our cost structure and cash burn. We’ve restructured and flattened the sales organization. We’ve focused efforts on our best-in-class applications. We’ve shifted our go-to-market toward large-scale, enterprise-wide transformations. We’ve accelerated how we build and deliver product. And we are infusing our AI across every function at C3 AI.”

One of the ways the company reduced its cost structure was through the layoff of 26% of its staff, likely about 300 people.

For its fiscal fourth quarter, C3 AI expects revenue of $48 million to $52 million, well below the $77.7 million expected by analysts. For its full fiscal year, the company expects revenue of $246.7 million to $250.7 million.

Image: C3 AI