C3.ai, Inc. is scheduled to release its new quarterly earnings on December 3, 2025 (after U.S. market close). The market is focusing on whether the resilience of subscription income and expense control can narrow the losses, as well as any changes in management's guidance on revenue and profit margins.

Market Forecast

The market consensus for this quarter's total revenue is approximately $74,860,690, a year-over-year decrease of about 17.76%. Adjusted EPS is expected to be -$0.327, down approximately 101.57% YoY. EBIT is expected to be -$50,445,000, a decline of about 66.64% YoY. The explicit forecast data for this quarter was not further disclosed in last quarter's financial statements. The company's main business highlights currently focus on a high percentage of software income driven by subscription fees. The most promising current business development prospects remain in the combination of subscription fees and professional services. Last quarter, subscription income was approximately $60,301,000, and professional services income was about $9,960,000, with no YoY changes disclosed, together forming a stable revenue structure.

Review of Last Quarter

Last quarter, the company achieved revenue of $70,261,000, a year-over-year decrease of about 19.44%. Gross margin was 37.64%, with no YoY data disclosed. Net loss attributable to shareholders was $117 million, a sequential growth rate of -46.51% (indicating wider losses); net margin was -166.19%. Adjusted EPS was -$0.37, down about 6.40% YoY. Management focused on advancing the delivery of subscriptions and professional services, yet profitability was pressured by expenses and cost structure. Regarding business segments, subscription income was about $60,301,000, and professional services income was approximately $9,960,000, with no YoY data disclosed, the subscription business remains the main revenue stream.

Outlook for This Quarter

Impact of Product and Delivery Pace Changes on Revenue Recognition Pace

Recently, the combination of subscriptions and professional services remains the main revenue stream. The timing and renewal of subscription contracts will directly affect quarterly revenue recognition. If large customer deployment cycles lengthen or project acceptance is delayed, this could lead to short-term YoY declines. Given that last quarter's revenue fell by about 19.44% YoY, maintaining the market forecast level of $74,860,690 this quarter could alleviate some sequential and YoY pressure, but more visible new contract and renewal data is needed.

For gross margin, which was 37.64% last quarter, it was significantly impacted by the proportion of professional services and implementation costs. This quarter, whether a higher proportion of standardized subscription delivery can boost the gross margin remains a key point of observation. An improvement in gross margin could be possible if subscription delivery share increases while reducing the customization level of professional services.

On the expense side, if sales and R&D spending remain high, the expected EBIT loss level of -$50,445,000 will continue. Expense control and improvement in project delivery efficiency are key variables for narrowing losses this quarter.

The Role of Customer Demand and AI Application Rollout on Order Conversion

External agency viewpoints indicate uncertainty remains regarding the specific benefit path for application software companies amid the AI wave, with the market favoring "infrastructure" type stocks and maintaining caution on application layers. This funding preference might affect customer budgeting and procurement decisions, thereby suppressing the short-term order conversion rate.

For C3.ai, if it can demonstrate clearer ROI and shorter implementation cycles in vertical industry solutions, subscription renewals and new orders will be more certain. Focusing on reusable models and templated scenarios can reduce delivery costs, improve gross margins, and shorten the cycle from signing to revenue recognition.

This quarter, it is necessary to pay attention to whether the company discloses more large corporate client renewals and expansion case studies, and whether it provides clearer subscription revenue growth paths in earnings guidance. If contract amounts for new/renewed deals and subscription delivery ratios increase, it is likely to drive structural improvement in income and gross margins.

Verification of Profit Structure and Cash Flow Quality

Last quarter's net margin was -166.19%, indicating a significant loss that shows mismatch between expense structure and revenue scale. If the current quarter can maintain the income forecast level while achieving a slowdown in expense growth, the possibility of narrowing EBIT losses is higher.

Cash recovery from subscription income is generally more stable than professional services. Improvement in billing and collection pace will enhance cash flow quality. If management emphasizes stricter expense discipline and prioritization (such as focusing more on reusable product R&D investments) in the guidance, it will help to boost market confidence.

Investors will also be watching closely for significant improvements in gross margin. If the company reports an increase in standardized delivery proportion and a decrease in the cost percentage of professional services, gross margins for this or subsequent quarters are likely to move toward a healthier range.

Analyst Opinions

In the past six months, the sell-side research environment has been cautious overall toward the application software sector, with a high proportion of bearish or conservative voices. In November, Barclays commented, "The market still holds dual concerns about 'AI threat looming' and 'excessive hyperscale cloud capital expenditure' for application software companies, with short-term funds preferring infrastructure software stocks and remaining cautious about application software." In this context, expectations around C3.ai are more conservatively oriented: revenue is projected to decrease by approximately 17.76% YoY, adjusted EPS is expected to be -$0.327, and EBIT is predicted to be -$50,445,000, all pointing to ongoing losses. The main arguments for the conservative side include: revenue structure still affected by professional services and implementation cycles, making it difficult to achieve rapid substitution with high-margin subscriptions in the short term; limited room for gross margin improvement; under the macro-funding preference for infrastructure, the order confirmation speed and client budget release for application layer software may be slow, suppressing new subscription growth; expenditure levels remain high, and without significant revenue scale expansion support, the pace of loss narrowing may be slower than market expectations.

Overall, the focus this quarter is on whether management provides clearer guidance on revenue and profit margins, and empirical data on increased subscription delivery shares. Progress in renewals, templated delivery, expense discipline, and improvement in gross margins will help alleviate market conservative expectations and lay the foundation for valuation and stock price performance in subsequent quarters.