Shares of C3 AI Inc. initially dropped more than 10% in extended trading today despite fiscal first-quarter revenues and profits that exceeded analysts’ estimates.

Executive statements that the maker of market-specific artificial intelligence software would invest more aggressively in generative AI in coming quarters to take advantage of what it called a “massive opportunity” did little to help the share price, which was down about 7% at 6 p.m. EDT.

Revenue of $72.4 million was up from $65.3 million a year ago and beat Wall Street estimates of $71.6 million. The net loss of $64.4 million, or 56 cents a share, narrowed from $71.7 million and year earlier. Adjusted earnings of a loss of nine cents per share beat analysts’ consensus estimate of a loss of 17 cents.

Subscription revenue for the quarter was $61.4 million, constituting 85% of total revenue. Gross profit of $49.6 million translated into a gross margin of 69%.

Eyes on the prize

Chief Executive Tom Siebel (pictured) spent little time on the conference call with analysts dwelling on the past quarter’s numbers and focused instead on the opportunities he sees in the market’s current feeding frenzy over generative AI. He said today’s release of 28 domain-specific generative models priced at $250,000 each is perfectly timed to take advantage of the surging customer interest and that C3 AI expects to throw everything it has at the opportunity.

“We believe that the advent of Generative AI may more than double the addressable market immediately available to C3 AI, and now with our new C3 Generative AI Suite of products out the door, you can expect that we will be investing in the coming quarters to promote, market and support these initiatives,” he said.

“The market opportunity is immediate and we expect to seize it,” Siebel he told analysts. He said the company closed eight generative AI deals in the most recent quarter and has a qualified pipeline of 140 sales opportunities. “That exceeds all of the products we’ve introduced in the last 14 years,” he said. “The opportunity is so massive that we have elected to invest for success.”

The result is that management expects the company to be cash-flow positive in the fourth quarter of fiscal 2024 and all of FY 25, but “we will be investing in our generative AI solutions and at this time do not expect to be non-GAAP profitable in Q4 FY 24,” Siebel said, referring to generally accepted accounting principles.

“C3 AI has spent the past 14 years preparing for this opportunity,” he said. “There is no way we are not going to be successful on these projects. If we have to overinvest to be successful, we will do that.”

Chief Financial Officer Juho Parkkinen said the company is maintaining its previous guidance of between $72 million and $76.5 million for the second fiscal quarter and between $295 million and $320 million for the full year. He increased the estimate of expected losses to a range of $27 million to $40 million in the quarter and between $70 million and $100 million for the year.

Siebel said investors should look at the lowered expectations as the byproduct of a decision to focus on bigger opportunities. “We are a well-capitalized company with almost 1,000 sales professionals,” he said. “This is the 11^th consecutive quarter in which we have met or exceeded guidance. We have demonstrated in recent quarters that we have solid cost management controls in place. We are making this decision because we are confident in the value for our shareholders.”

Photo: SiliconANGLE