Shares of the artificial intelligence software provider C3.ai Inc. trended down in late trading today after the company fell short of expectations in its top-line financial results.

Investors’ disappointment over the mixed results was further exacerbated when the company issued guidance for the current quarter that fell shy of the Street’s forecasts.

C3.ai reported a fiscal second-quarter net loss of $69.8 million, exactly the same bottom line as it delivered in the same period one year earlier. It also reported a loss before certain costs such as stock compensation of 13 cents per share, which came in above the Street’s call for a loss of 18 cents.

However, revenue came up short, with the company generating $73.2 million, up 17% from a year earlier but at the lower end of its own guidance range and below the analysts’ consensus estimate of $74.3 million.

Looking to the third quarter, which ends in January, C3.ai said it’s expecting revenue of between $74 million and $78 million, the midpoint of which is below the $77.7 million analyst forecast. The company also revised its full-year forecast, saying it now sees a non-GAAP operating loss of between $115 million and $135 million, widening from a previous range of $70 million to $100 million.

C3.ai’s stock, which had fallen almost 3% during the regular trading session, dropped by a further 7% in the extended trading period after the results were posted.

The company is a leading provider of enterprise AI development software. With the C3.ai Application Platform, companies get access to a comprehensive suite of tools for building AI applications aimed at accelerating business transformation. The company says its platform enables developers to build AI apps more rapidly and efficiently, at lower costs than alternatives.

C3.ai Chief Executive Thomas Siebel (pictured) said the company is seeing “unprecedented interest and traction” in its new generative AI development tools. “Importantly, we are seeing a return to accelerating revenue growth as we continue our transition to a consumption-based pricing model,” he added.

The company said it had closed 62 agreements, including 36 pilots, during the quarter just gone, up from 24 pilots closed during the first quarter.

C3.ai announced its switch from a traditional subscription-based model to a consumption pricing model in August 2022, saying the move is in line with other software-as-a-service providers. At the time, the company justified the transition, saying that companies such as Amazon Web Services Inc. and Snowflake Inc. use a consumption-based model to great effect.

It works similarly to how a company might pay its utility bills, with higher charges the more they use C3.ai’s platform. For customers, the main benefits are unlimited use, developer licensing and runtime licensing, together with access to concierge technical support and training programs.

Siebel told analysts on the call that the switch to the new model has been “met with great reception among C3.ai’s prospects, customers and partners.” He added that the company has now closed on more than 100 pilots since introducing the new pricing plan.

Constellation Research Inc. analyst Holger Mueller said C3.ai grew well in terms of revenue, but not by enough to return to profitability, disappointing investors. “The advent of generative AI should provide an opportunity for Siebel and team to grow even more and become profitable in the not too distant future, as the company has a strong set of development capabilities,” he stated. “But investors will be hoping for the company to execute this turnaround quickly, within the next two to three quarters.”

Despite today’s after-hours drop, C3.ai’s stock remains one of the hottest stock market properties in the year to date, up 161% prior to today’s movement.

Photo: SiliconANGLE