Earnings release
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C3 AI Announces Fiscal Second Quarter 2026 Results December 3, 2025 Revenue increases 7% QoQ as Federal bookings grow 89%YoY REDWOOD CITY, Calif.--(BUSINESS WIRE)--Dec. 3, 2025-- C3.ai, Inc. (“C3 AI,” “C3,” or the “Company”) (NYSE: AI), the Enterprise AI application software company, today announced financial results for its fiscal second quarter ended October 31, 2025. “We delivered a solid quarter driven by excellent performance in our Federal business and increased high-value deal activity across our customer base. The Federal market continues to be a large growth vector for us,” said Stephen Ehikian, CEO, C3 AI. “Both Federal and commercial customers want to move faster, scale sooner, and embed AI as a core operating capability that delivers measurable economic value — and our platform is built for this moment.” Fiscal Second Quarter 2026 Financial Highlights: Total Revenue was $75.1 million. Subscription Revenue was $70.2 million. Subscription revenue constituted 93% of total revenue. Subscription and Prioritized Engineering Services Revenue Combined was $74.2 million, constituting 99% of total revenue. GAAP gross profit was $30.4 million, representing a 40% gross margin. Non-GAAP gross profit was $40.9 million, representing a 54% non-GAAP gross margin. GAAP net loss per share was $(0.75). Non-GAAP net loss per share was $(0.25). Cash, cash equivalents, and marketable securities was $675.0 million. Business Highlights C3 AI’s results were driven by accelerating partner activity and significant growth and expansion across the Federal business. In Q2, the Company closed 46 agreements including new and expanded agreements with AMD, GSK, Air Products, U.S. Steel, Signature Aviation, BAE Systems, La Poste, Holcim, Cargill, and Duke Energy, among others. Total bookings increased by 49% quarter-over-quarter, driven by expansions and increased high-value deal activity, including 17 agreements greater than $1 million and six agreements greater than $5 million. C3 AI’s Federal business experienced significant traction across multiple government agencies as bookings across federal, defense and aerospace grew 89% year-over-year. 89% of total bookings were driven with and through the C3 AI partner ecosystem. Verdantix named C3 AI a Leader in industrial AI, awarding the Company the highest overall scores in its 2025 Green Quadrant: Industrial AI Analytics Software report. Federal Business Federal growth accelerated, despite headwinds from the government shutdown, as agencies and partners navigate the shift from custom government off-the-shelf (GOTS) builds to mandated commercial-off-the-shelf technology (COTS) solutions. In Q2, total bookings across federal, defense and aerospace increased by 89% year-over-year, and represented 45% of total bookings. The Company entered into new and expansion agreements with the U.S. Department of Health and Human Services , BAE Systems, the U.S. Department of War, the U.S. Intelligence Community, the U.S. Army, the Naval Air Warfare Center Aircraft Division, Naval Sea Systems Command, the U.S. Marine Corps, and the Los Alamos National Laboratory, among others. The U.S. Department of Health and Human Services , including the National Institutes of Health and the Centers for Medicare & Medicaid Services , selected C3 AI to establish a unified, secure, and scalable data foundation for Enterprise AI. The Department will use C3 Agentic AI to automate complex, labor-intensive administrative workflows. Booz Allen Hamilton, one of the largest Federal systems integrators, joined the C3 AI Strategic Integrator Program (SIP) licensing the C3 Agentic AI Platform to develop and commercialize COTS solutions in compliance with the new federal government COTS imperative. Partner Network C3 AI’s partner ecosystem, including Microsoft, AWS, McKinsey & Company, Baker Hughes, Booz Allen, and others, continues to be a tremendous source of operating leverage. In Q2, the Company closed 38 agreements with and through its partner network, representing 89% of total bookings. The joint 12-month qualified opportunity pipeline with partners increased by 108% year-over-year.
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C3 AI and Microsoft celebrated the first anniversary of their strategic alliance during which the companies have jointly closed more than 100 customer agreements across 17 industries, generating over $130 million in C3 AI bookings. In Q2, C3 AI and Microsoft jointly closed 24 agreements and expanded deal activity contributed to a 146% year-over-year increase in qualified pipeline. C3 AI and AWS jointly closed nine agreements and hosted multiple C-suite executive events to drive 172% year-over-year increase in joint qualified pipeline. C3 Generative AI In Q2, the Company entered into eight new and expanded agreements for C3 Generative AI with the U.S. Intelligence Community, Cargill, Bristol Myers Squibb, and TRAC Intermodal, among others. In State & Local Government, the Company closed production agreements of C3 Generative AI with government agencies in New Jersey and Tennessee. C3 AI launched C3 AI Agentic Process Automation, a new solution that will change how enterprises operate and expand use of the C3 Agentic AI Platform. This solution enables organizations to encapsulate full business workflows and industrial processes as autonomous AI agents: users describe complex workflows in natural language and the system automatically builds and deploys them in minutes. Additional CEO Commentary “We have crafted a detailed execution plan and put in place precise operational objectives for each business unit,” said Stephen Ehikian, CEO, C3 AI. “This plan prioritizes our execution in areas where we have demonstrable leadership, clear customer success, and the right to win, and concentrates our efforts on our fastest-growing sectors. I believe the execution of this plan will facilitate our return to growth and provide a clear pathway to cash generation and non-GAAP profitability.” Financial Outlook: The Company’s guidance includes GAAP and non-GAAP financial measures. The following table summarizes C3 AI’s guidance for the third quarter of fiscal 2026 and full-year fiscal 2026: (in millions) Third Quarter Fiscal 2026 Guidance Full Year Fiscal 2026 Guidance Total revenue $72.0 - $80.0 $289.5 - $309.5 Non-GAAP loss from operations $(44.0) - $(52.0) $(180.5) - $(210.5) A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. Stock-based compensation expense-related charges, including employer payroll tax-related items on employee stock transactions, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP results included in this press release. Our fiscal year ends April 30, and numbers are rounded for presentation purposes. Conference Call Details What: C3 AI Second Quarter Fiscal Year 2026 Financial Results Conference Call When: Wednesday, December 3, 2025 Time: 2:00 p.m. PT / 5:00 p.m. ET Participant Registration: https://register-conf.media-server.com/register/BId6f3aa380c954e2a8abe44d0ee66f9b2 (live) Webcast: https://edge.media-server.com/mmc/p/cku8tg7s (live and replay) Investor Presentation Details An investor presentation providing additional information and analysis can be found at our investor relations page at ir.c3.ai. Statement Regarding Use of Non-GAAP Financial Measures The Company reports the following non-GAAP financial measures, which have not been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP gross profit, non-GAAP gross margin, non-GAAP loss from operations, and non-GAAP net loss per share. Our non-GAAP gross profit, non-GAAP gross margin, non-GAAP loss from operations, and non-GAAP net loss per share exclude the effect of stock-based compensation expense-related charges and employer payroll tax expense related to employee stock-based compensation. We believe the presentation of operating results that exclude these non-cash items provides useful supplemental information to investors and facilitates the analysis of our operating results and comparison of operating results across reporting periods. Free cash flow. We believe free cash flow, a non-GAAP financial measure, is useful in evaluating liquidity and provides information to management and investors about our ability to fund future operating needs and strategic initiatives. We
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calculate free cash flow as net cash used in operating activities less purchases of property and equipment and capitalized software development costs. This non-GAAP financial measure may be different than similarly titled measures used by other companies. Additionally, the utility of free cash flow is further limited as it does not represent the total increase or decrease in our cash balances for a given period. We use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period- to-period comparisons. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP to non-GAAP financial measures. Other Information Professional Services Revenue Our professional services revenue includes service fees and prioritized engineering services. Service fees include revenue from services such as consulting, training, and paid implementation services. Prioritized engineering services are undertaken when a customer requests that we accelerate the design, development, and delivery of software features and functions that are planned in our future product roadmap. When we agree to this, we negotiate an agreed upon fee to accelerate the development of the software. When the software feature is delivered, it becomes integrated to our core product offering, is available to all subscribers of the underlying software product, and enhances the operation of that product going forward. Such prioritized engineering services result in production-level computer software – compiled code that enhances the functionality of our production products – which is available for our customers to use over the life of their software licenses. Per Accounting Standards Codification (ASC) 606, Prioritized engineering services revenue is recognized as professional services over the period in which the software development is completed. Total professional services revenue consists of: Three Months Ended October 31, Six Months Ended October 31, 2025 2024 2025 2024 (in thousands) (in thousands) Prioritized engineering services $ 3,941 $ 9,661 $ 12,604 $ 20,310 Service fees 964 3,515 2,261 6,623 Total professional services revenue. $ 4,905 $ 13,176 $ 14,865 $ 26,933 Use of Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements in this press release include, but are not limited to, statements regarding our market leadership position, anticipated benefits from our partnerships, our financial outlook for the third quarter of fiscal 2026 and full 2026 fiscal year, our ability to accelerate going forward, our ability to return to growth and to achieve cash generation and non-GAAP profitability, our sales and customer opportunity pipeline, including continued growth in the Federal market, the expected benefits of our offerings (including the potential benefits of our C3 Generative AI offerings), the expectations for our C3 AI Agentic Process Automation, and our business strategies, plans, and objectives for future operations. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including our history of losses and ability to achieve and maintain profitability in the future, our historic dependence on a limited number of existing customers that account for a substantial portion of our revenue, our ability to attract new customers and retain existing customers, the ability of our restructured global sales and services organization to achieve desired productivity levels in a reasonable period of time, the impact of the transition of our Chief Executive Officer role, the continued involvement of our Executive Chairman and our ability to retain key members of our senior management, market awareness and acceptance of enterprise AI solutions in general and our products in particular, the length and unpredictability of our sales cycles and the time and expense required for our sales efforts. Some of these risks are described in greater detail in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2025, our Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2025, and other filings and reports we make with the Securities and Exchange Commission from time to time, including, when available, our Quarterly Report on Form 10-Q that will be filed for the fiscal quarter ended October 31, 2025, although new and unanticipated risks may arise. The future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Although we believe that the expectations reflected in the forward- looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or events and circumstances reflected in the forward-looking statements will occur. Except to the extent required by law, we do not undertake to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations. About C3.ai, Inc. C3.ai, Inc. (NYSE:AI) is the Enterprise AI application software company. C3 AI delivers a family of fully integrated products including the C3 Agentic AI Platform, an end-to-end platform for developing, deploying, and operating enterprise AI applications, C3 AI applications, a portfolio of industry-specific SaaS enterprise AI applications that enable the digital transformation of organizations globally, and C3 Generative AI, a suite of domain-specific generative AI offerings for the enterprise. Source: C3.ai, Inc.
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C3.AI, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended October 31, Six Months Ended October 31, 2025 2024 2025 2024 Revenue Subscription $ 70,242 $ 81,162 $ 130,543 $ 154,618 Professional services 4,905 13,176 14,865 26,933 Total revenue 75,147 94,338 145,408 181,551 Cost of revenue Subscription 42,945 35,038 84,426 68,330 Professional services 1,822 1,460 4,158 3,215 Total cost of revenue 44,767 36,498 88,584 71,545 Gross profit 30,380 57,840 56,824 110,006 Operating expenses Sales and marketing 58,337 55,643 120,850 107,768 Research and development 58,352 55,715 123,003 108,642 General and administrative 25,804 21,770 49,903 41,470 Total operating expenses 142,493 133,128 293,756 257,880 Loss from operations (112,113) (75,288) (236,932) (147,874) Interest income 7,539 9,560 15,757 19,563 Other income (expense), net 143 13 275 41 Loss before provision for income taxes (104,431) (65,715) (220,900) (128,270) Provision for income taxes 237 257 537 529 Net loss $ (104,668) $ (65,972) $ (221,437) $ (128,799) Net loss per share attributable to Class A and Class B common stockholders, basic and diluted $ (0.75) $ (0.52) $ (1.62) $ (1.02) Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted 138,670 127,870 137,022 126,434 C3.AI, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) (Unaudited) October 31, 2025 April 30, 2025 Assets Current assets Cash and cash equivalents $ 103,205 $ 164,358 Marketable securities 571,829 578,330 Accounts receivable, net of allowance of $897 and $877 as of October 31, 2025 and April 30, 2025, respectively 136,064 137,226 Prepaid expenses and other current assets 34,800 24,338 Total current assets 845,898 904,252 Property and equipment, net 73,681 79,298 Goodwill 625 625 Other assets, non-current 41,094 41,707 Total assets $ 961,298 $ 1,025,882 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 35,936 $ 15,160 Accrued compensation and employee benefits 48,930 53,868 Deferred revenue, current 32,398 36,561 Accrued and other current liabilities 13,561 26,295 Total current liabilities 130,825 131,884 Deferred revenue, non-current 2,283 —
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Other long-term liabilities 56,305 55,695 Total liabilities 189,413 187,579 Commitments and contingencies Stockholders’ equity Class A common stock 137 130 Class B common stock 3 3 Additional paid-in capital 2,371,034 2,216,284 Accumulated other comprehensive income 783 521 Accumulated deficit (1,600,072) (1,378,635) Total stockholders’ equity 771,885 838,303 Total liabilities and stockholders’ equity $ 961,298 $ 1,025,882 C3.AI, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended October 31, 2025 2024 Cash flows from operating activities: Net loss $ (221,437) $ (128,799) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 6,815 6,092 Non-cash operating lease cost 155 203 Stock-based compensation expense 133,628 111,721 Accretion of discounts on marketable securities (5,300) (7,618) Other 277 418 Changes in operating assets and liabilities Accounts receivable 1,142 (30,051) Prepaid expenses, other current assets and other assets (3,412) (1,993) Accounts payable 20,987 9,294 Accrued compensation and employee benefits 1,070 (4,815) Operating lease liabilities 1,074 (1,215) Other liabilities (13,150) 19,284 Deferred revenue (1,880) (3,172) Net cash used in operating activities (80,031) (30,651) Cash flows from investing activities: Purchases of property and equipment (1,146) (1,739) Purchases of marketable securities (331,188) (365,926) Maturities and sales of marketable securities 343,251 348,750 Net cash provided by (used in) investing activities 10,917 (18,915) Cash flows from financing activities: Taxes paid related to net share settlement of equity awards — (5,787) Proceeds from exercise of Class A common stock options 2,983 4,472 Proceeds from issuance of Class A common stock under employee stock purchase plan 4,978 5,009 Net cash provided by financing activities 7,961 3,694 Net decrease in cash, cash equivalents and restricted cash (61,153) (45,872) Cash, cash equivalents and restricted cash at beginning of period 176,924 179,712 Cash, cash equivalents and restricted cash at end of period $ 115,771 $ 133,840 Cash and cash equivalents $ 103,205 $ 121,274 Restricted cash included in other assets, non-current 12,566 12,566 Total cash, cash equivalents and restricted cash $ 115,771 $ 133,840 Supplemental disclosure of cash flow information—cash paid for income taxes $ 649 $ 534 Supplemental disclosures of non-cash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued liabilities $ 227 $ 117 Right-of-use assets obtained in exchange for lease obligations (including remeasurement of right-of-use assets and lease liabilities due to changes in the timing of receipt of lease incentives) $ (166) $ 1,345 Vesting of early exercised stock options $ 7 $ 216
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C3.AI, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except percentages) (Unaudited) Three Months Ended October 31, Six Months Ended October 31, 2025 2024 2025 2024 Reconciliation of GAAP gross profit to non-GAAP gross profit: Gross profit on a GAAP basis $ 30,380 $ 57,840 $ 56,824 $ 110,006 Stock-based compensation expense (1) 10,399 8,311 19,689 16,719 Employer payroll tax expense related to employee stock-based compensation (2) 168 171 754 527 Gross profit on a non-GAAP basis $ 40,947 $ 66,322 $ 77,267 $ 127,252 Gross margin on a GAAP basis 40% 61% 39% 61% Gross margin on a non-GAAP basis 54% 70% 53% 70% Reconciliation of GAAP loss from operations to non-GAAP loss from operations: Loss from operations on a GAAP basis $ (112,113) $ (75,288) $ (236,932) $ (147,874) Stock-based compensation expense (1) 68,853 57,038 133,628 111,721 Employer payroll tax expense related to employee stock-based compensation (2) 1,036 1,090 3,256 2,362 Loss from operations on a non-GAAP basis $ (42,224) $ (17,160) $ (100,048) $ (33,791) Reconciliation of GAAP net loss per share to non-GAAP net loss per share: Net loss on a GAAP basis $ (104,668) $ (65,972) $ (221,437) $ (128,799) Stock-based compensation expense (1) 68,853 57,038 133,628 111,721 Employer payroll tax expense related to employee stock-based compensation (2) 1,036 1,090 3,256 2,362 Net loss on a non-GAAP basis $ (34,779) $ (7,844) $ (84,553) $ (14,716) GAAP net loss per share attributable to Class A and Class B common shareholders, basic and diluted $ (0.75) $ (0.52) $ (1.62) $ (1.02) Non-GAAP net loss per share attributable to Class A and Class B common shareholders, basic and diluted $ (0.25) $ (0.06) $ (0.62) $ (0.12) Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders, basic and diluted 138,670 127,870 137,022 126,434 (1) Stock-based compensation expense for gross profit and gross margin includes costs of subscription and cost of professional services as follows. Stock-based compensation expense for loss from operations includes total stock-based compensation expense as follows: Three Months Ended October 31, Six Months Ended October 31, 2025 2024 2025 2024 Cost of subscription $ 9,960 $ 7,827 $ 18,582 $ 15,521 Cost of professional services 439 484 1,107 1,198 Sales and marketing 25,687 20,802 49,868 39,635 Research and development 20,084 17,999 39,407 36,430 General and administrative 12,683 9,926 24,664 18,937 Total stock-based compensation expense $ 68,853 $ 57,038 $ 133,628 $ 111,721 (2) Employer payroll tax expense related to employee stock-based compensation for gross profit and gross margin includes costs of subscription and cost of professional services as follows. Employer payroll tax expense related to employee stock-based compensation for loss from operations includes total employer payroll tax expense related to employee stock-based compensation as follows: Three Months Ended October 31, Six Months Ended October 31, 2025 2024 2025 2024
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Cost of subscription $ 164 $ 163 $ 714 $ 489 Cost of professional services 4 8 40 38 Sales and marketing 467 450 1,141 922 Research and development 208 231 1,001 595 General and administrative 193 238 360 318 Total employer payroll tax expense $ 1,036 $ 1,090 $ 3,256 $ 2,362 Reconciliation of free cash flow to the GAAP measure of net cash used in operating activities: The following table below provides a reconciliation of free cash flow to the GAAP measure of net cash used in operating activities for the periods presented: Three Months Ended October 31, Six Months Ended October 31, 2025 2024 2025 2024 Net cash used in operating activities $ (46,496) $ (38,693) $ (80,031) $ (30,651) Less: Purchases of property and equipment (386) (815) (1,146) (1,739) Free cash flow $ (46,882) $ (39,508) $ (81,177) $ (32,390) Net cash provided by (used in) investing activities $ 62,088 $ 22,635 $ 10,917 $ (18,915) Net cash provided by financing activities $ 6,672 $ 3,512 $ 7,961 $ 3,694 View source version on businesswire.com: https://www.businesswire.com/news/home/20251203414665/en/ Investor Contact ir@c3.ai C3 AI Public Relations Axicom Mindy Nelson 830-214-4823 pr@c3.ai Source: C3.ai