Shares of C3.ai Inc fell nearly 10 per cent in premarket trading on Thursday, after the software company scrapped its quarterly forecast that it would be profitable by end of the fiscal year as it looks to invest further in its generative AI offerings.
The $3.71 billion stock, among the small-cap AI firms that have benefited from excitement around Generative AI sparked by the success of ChatGPT, has surged about 180 per cent so far this year.
C3.ai reported a 10.1 per cent rise in first-quarter revenue from a year earlier to $72.4 million, while net loss per share narrowed to 9 cents from 12 cents on the back of strong performance of its subscription-based model.
However, the Redwood City, California-based company scrapped its target to achieve quarterly profit by April 30, 2024 as it looks to invest in its Generative AI solutions.
“After careful consideration… we have made the decision to invest in lead generation, branding, market awareness and customer success related to our Generative AI solutions,” said CEO Thomas Siebel.
The company, which is in the middle of a turnaround to a consumption-based pricing model from a subscription business, kept its full-year revenue outlook unchanged between $295 million and $320 million.
J.P.Morgan analyst Pinjalim Bora said while “Gen AI presents a material opportunity, we don’t see top-line metrics materially inflecting higher at this point to justify the increased investment posture”.
Bora maintains a “neutral” rating and views the stock’s current multiple of nearly 11 times enterprise value-to-2024 sales as “stretched” given the hype around artificial intelligence.
Average rating of 14 brokerages covering stock is “hold” and shares are currently trading near the median target price of $28, which implies a 10 per cent downside over the next 12 months.
Shares are down 21 per cent since early June when the company’s disappointing quarterly revenue forecast dented some of the recent euphoria around artificial intelligence-linked stocks.