If artificial intelligence is the hottest sector of the year, why is self-proclaimed AI software company C3.ai struggling to increase sales? The California-based company’s share price is up 229% this year, despite the challenge from short sellers. Bagging the “AI” symbol didn’t hurt. Yet revenue growth over the past fiscal year was less than 6%.
Perhaps C3’s problem is that it’s marketing the wrong type of AI. Unlike OpenAI’s big language models and generative AI chatbots, C3 sells software that analyzes data. It launched a generative AI service, but it’s not a commodity product. Revenue growth this year should be around 14% at best.
During its listing, C3 attempted to introduce the idea of enterprise AI to potential investors and customers, dotting San Francisco with billboards. But that’s not what it was made for. Founder Thomas Siebel wanted to offer software services to companies dealing with carbon emissions – the ‘C’ in C3 stands for carbon. The company has gone through a series of rebranding since then, including a brief stint as C3.IOT. In 2019, it was named C3.ai.
The pivots are rented in Silicon Valley. But the company is spending heavily to attract new customers, which doesn’t match the increased global interest in AI. In the 12 months to April 30, it spent $183 million on sales and marketing, or 70% of its revenue. Growth is uneven. A small number of customers accounts for a large portion of sales. Three accounted for 44% of revenue when the company went public in 2020. Last quarter, just one company, Baker Hughes, accounted for 45%. The joint venture will end in April 2025.
Now that it’s moving to a pay-as-you-go model, revenues may become less predictable. There is no date on the agenda for sustainable profitability based on generally accepted accounting principles. C3 illustrates the gap between AI excitement and sustainable AI-generated revenue.
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