C3.ai Fiscal Q4 2026 Earnings Call - Founder Returns to Fix

Conference Call Operator: day, and thank you for standing by. Welcome to the C3.ai fiscal fourth quarter and fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there’ll be a question and answer session. To ask a question during the session, you’ll need to press star one on one on your telephone. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker for today, Amit Berry. Please go ahead.

Amit Berry, Head of Investor Relations, C3.ai: Good afternoon and welcome to C3.ai’s earnings call for the fourth quarter and full fiscal year 2026, which ended on April 30th, 2026. My name is Amit Berry, and I lead investor relations at C3.ai. With me on the call today are Tom Siebel, Chairman and Chief Executive Officer, Stephen Ehikian, President, and Hitesh Lath, Chief Financial Officer. After the market closed today, we issued a press release with details regarding our fourth quarter results, which can be accessed through the investor relations section on our website at ir.c3.ai. This call is being webcast, and a replay will be available on our IR website following the conclusion of the call. During today’s call, we will make statements related to our business that may be considered forward-looking under federal securities laws.

These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC. All figures will be discussed on a non-GAAP basis unless otherwise noted. Also, during today’s call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures, to the extent reasonably available, is included in our press release.

Finally, at times in our prepared remarks, in response to your questions, we may discuss metrics that are incremental to our usual presentation to give greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to Tom.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Good afternoon, everybody. This is Tom. Just when you thought it was safe, I’m back. We have an enormous opportunity before us. The opportunity is to create enormous value for our shareholders. The performance of this company has been staggeringly disappointing. We’re looking at a turnaround opportunity. The fundamental nature of this turnaround opportunity is to change everything about the way we manage this business. In the process, we’re going to create enormous financial returns for our shareholders. Along these lines, I’ve been working with the senior executive leadership and the board for the last couple of months. We have restructured the company, we have restructured sales, we have restructured products, we have restructured services. We have put together a strategic plan, we have put together the objectives. We have a clear plan in place to turn this company around and create value for our shareholders.

The restructuring of the company, first introduced by Stephen Ehikian in February, has been expanded and accelerated by my return. Headcount has been reduced from 1,075 to roughly 700. We have taken almost $135 million in annual operating cost out of the business structure. C3.ai Federal has been entirely reorganized under a new and highly experienced leader. The sales organization has been completely restructured globally under, again, a very highly experienced, seasoned chief revenue officer. In the past weeks, we have reorganized the company top to bottom. We have new leadership throughout the organization. We have restructured the company, we have restructured C3 Federal under new leadership, we have restructured C3 sales under new leadership. We have restructured products under new leadership.

We have brought together end products, the platform group, the applications group, the product marketing group, okay, and the customer services group all in one organization under senior seasoned leadership. We have restructured the service team, the objective’s in place, the strategy is written, and we are now going to town. Just like the company, just like sales, the products group has been completely redesigned and re-engineered. We’ve brought together under one senior leader who’s been with the company for 14 years, four functions, including the platform team, the applications team, the product marketing team, and the services team in one place. We have one organization basically responsible for designing the product, coding the product, quality assuring the product, and delivering the product to make sure that customers are successful.

The services organization has also been completely re-engineered and completely redesigned under a new senior leader who’s been with the company for more than seven years. We’ve taken four layers out of that org structure from seven to three. The organization has been redesigned so that for every one of our customers where we’re working on pilots or production deployments, we have a dedicated team assigned to the customer. They move in with the customer, and they stay with the customer until the project is done and the customer is successful. I am absolutely satisfied that the new structure is going to result in higher levels of customer satisfaction, more successful customer deployments, and more rapid expansion of our customer deployments into large enterprise expanding contract relationships.

As I look at the performance of the company in recent quarters, and particularly the sales performance, it is just unspeakably horrible and it’s surreal. Okay? This is resulting in market multiples for the company that are candidly well-earned, okay, and scathing analysis from analysts and sell-side analysts that are candidly well-deserved. I am here to fix that. Okay, as it relates to enterprise sales, this is not an area which I’m entirely unfamiliar with. I think just the return to fundamental hygiene and fundamental sales protocol, just the basics, will take this company a long way towards increasing shareholder value. The company is sufficiently well-capitalized to basically obviate any question of the need for a financing event. We have enough capital there to meet the mission that is before us. I want to give you an update on the restructuring that Stephen introduced last quarter.

We have expanded those objectives, and we have accelerated those objectives. We have reduced headcount by approximately 35% across all organizations. The workforce actions are in place. They are done. The cost controls are in place. The budget is in place. The plans are in place. The cost have been reduced by order of $135 million a year, and we are well on our way to becoming a fully agentic enterprise, adopting these agentic tools to fundamentally change the way we do business across the enterprise and to dramatically increase productivity in every aspect of our business. The products organizations today are largely leveraging AI tools for all programming activities. These agentic tools have been adopted across the organization, legal, finance, sales, marketing, wherever it may be, to increase productivity really dramatically across the enterprise.

Sales, in particular, are leveraging these agentic tools to focus on market development, business development, and strategies to increase their penetration of existing customers and large global new customers. Across every function, our people in the organization are operating with an agentic AI-first mindset, increasing productivity across all business functions. This is now all about execution. We’re going to have our heads down every hour, every day, every month, every quarter. The early indications are that this is moving in the right direction. Our priorities are clear. They are well understood. They are articulated. The objectives are distributed, and they’re understood. If we look at sales, for example, our go-to-market activities have changed significantly.

We’re focusing on using technologies and agentic technologies focused on penetrating territories, penetrating large accounts with campaigns that will develop over multiple quarters and multiple years, rather than the narrow focus that was in place before, focused on relatively small opportunities that might be in place for any given quarter. The executive team, all the employees at C3.ai, are laser-focused on doing whatever it takes with the objectives in place to turn the company to significant quarter-to-quarter top-line revenue growth, to establish the company as one that generates free cash flow every quarter, and to establish the company as a company that generates non-GAAP profitability quarter after quarter after quarter. The opportunity to increase shareholder value at C3.ai is enormous, and that is exactly what we’re going to do.

Talk is cheap. Rather than rain forth with idle promises that everybody will largely ignore, we’re going to accept the challenge to deliver acceptable financial results, to deliver growth, to deliver cash generation, non-GAAP profitability generation, and let the results speak for themselves. Game on. Let me turn this over to my colleagues. Our CFO, Hitesh Lath, is going to talk about the results of the quarter. Hitesh and Stephen Ehikian will be available to answer questions that you may have. Thank you very much for your interest. I look forward to updating you as this develops at the end of Q1 and the end of Q2. Thank you.

Hitesh Lath, Chief Financial Officer, C3.ai: Thank you, Tom. Total revenue for the quarter was $51.6 million. Subscription revenue was $48.4 million, representing 94% of total revenue. Professional services revenue was $3.2 million, of which $2.1 million was revenue from prioritized engineering services or PES. Professional services represented 6% of total revenue during the quarter. Our subscription and PES revenue combined was $50.5 million and accounted for 98% of total revenue. Non-GAAP gross profit for the quarter was $19.3 million, and non-GAAP gross margin was 37%. Non-GAAP gross margin for professional services was 78%. Non-GAAP operating loss for the quarter was $54.4 million. Non-GAAP net loss for the quarter was $48.8 million and $0.33 per share. Our non-GAAP operating expenses for the quarter were $106 million. This reflects a reduction of $33.9 million as compared to the actual non-GAAP operating expenses of $139.9 million same quarter last year.

Free cash flow for the quarter was negative $54.8 million. We continue to be well capitalized and closed the quarter with $575.4 million in cash equivalents and marketable securities. During the quarter, we signed nine Initial Production Deployments or IPDs. At the end of the quarter, we had cumulatively signed 417 IPDs, of which 251 are still active. This means they are either in their original three to six-month terms or extended for some duration, or converted to ongoing subscription or consumption contracts, or are currently being negotiated for conversion to ongoing subscription or consumption contract. Last quarter, we launched a restructuring plan which included expense reductions across our business to produce full year cost savings of approximately $135 million.

As Tom said, our head count has been reduced from roughly 1,075 in January of 2026 to about 700 today, and we have already completed actions to realize almost $130 million of total planned savings. We are on track to meet or exceed our original cost savings target. As we said on the last quarter’s earnings call, some of the cost savings associated with the non-employee expenses will be fully realized starting with the second half of fiscal year 2027. With these actions, we are well-positioned to materially improve our operating efficiency, free cash flow and position the company for long-term success. Our founder and CEO, Tom Siebel, purchased 6.17 million shares of C3.ai stock at a price of $11.16 per share for net cash proceeds of approximately $69 million.

The company has received the cash, and as of today, our total cash equivalents and marketable securities balance is $673 million. I’ll move on to our guidance for Q1 and fiscal year 2027. Our revenue guidance for Q1 of fiscal year 2027 is $50 million-$54 million. Our guidance for non-GAAP loss from operations for Q1 is $40.5 million-$48.5 million. Please note that the midpoint of this guidance is based on non-GAAP operating expenses of $96.5 million, which is $31.6 million lower than the actual non-GAAP operating expenses of $128.1 million same quarter last year. Our revenue guidance for fiscal year 2027 is $210 million-$240 million. Our guidance for non-GAAP loss from operations for fiscal year 2027 is $128 million-$160 million. I’d like to turn the call over to the operator to begin the Q&A session. Operator?

Conference Call Operator: Thank you. As a reminder, if you would like to ask a question, please press star on one of your telephone. One moment while we compile the Q&A roster. Our first question for the day will be coming from the line of Patrick Walravens of Citizens. Please go ahead.

Patrick Walravens, Analyst, Citizens: Oh, great. Thank you. Tom, it’s good to see you back, and it’s good to see the insider buying. Can you just start very big picture and help us? You can’t fix something until you understand what went wrong, and you’ve spent a lot of time figuring out what went wrong. In fiscal 2025, this company was doing $389 million in revenue, and this year you’re guiding to $235-ish, 230 at the midpoint. Just fundamentally, what happened? Where did the revenue go?

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Well, thanks, Pat, for the question. If you look at this scenario, I mean, the company used to do $90 million, $100 million in a quarter. It used to do 43 deals. It used to do bookings for very large numbers. You’re looking at the last five quarters, I mean, sales just fell off the cliff. The product is great. The customers are happy. There’s no question of market size. I mean, come on, I’ve been talking about enterprise AI since 2010, and I was the only person in the world talking about it until probably 2022, till November 2022, when we had a little inflection point there. Now Tom’s not the only person in the world who thinks there’s a market in enterprise AI. We have a great product. We have a huge market.

Hitesh Lath, Chief Financial Officer, C3.ai: We have satisfied customers, and the sales discipline has just been surreal, Pat.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: That’s where the revenue numbers come from. That’s where the RPO comes from. That’s where the profitability or the lack thereof comes from. It’s basically sales execution. It’s been miserable. It’s reflected in all the operating results. It is completely unacceptable, and it’s not that hard to fix. I accept all the criticism the company has received. I think it’s well-deserved. Okay. I really do. I think the revenue multiple is well-earned. It is. The good news is, it’s not that hard to turn around. I think we fix the sales problem, it fixes revenue growth, it fixes RPO, it fixes cash generation. It fixes everything. For those who, Pat, you know me a little bit, and I’m not entirely unfamiliar with enterprise sales. Maybe I have a little experience in that. I think this is definitely a turnaround situation.

We know how to fix it, the plan’s in place, and stand by.

Patrick Walravens, Analyst, Citizens: Great. Thank you. Then as a follow-up, Totally hear you on the sales side, For the company, churn must have been bigger than you wanted too, and non-renewals must have been bigger than you wanted. What did you learn about that? What was causing the existing customers to spend so much less with you than they did before?

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: There’s a number of issues there. I’m not actually sure that this churn issue is really true. Could somebody help me with that? I’m not sure that’s true, Pat. I think it really is sales execution.

Hitesh Lath, Chief Financial Officer, C3.ai: Yeah, we have not experienced a significant loss of production customers.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: I’m not sure that’s true, Pat. I think it really is sales execution. Market’s huge, product’s great, customers are happy. I think this is pretty fundamental. No question, we see this as a turnaround situation, and that’s what we’re focused on. We’re coming off of performance that is just completely unacceptable, laughably unacceptable. We’re going to take a bat in the teeth for that. We deserve it, and now we’re focused on turning this business around and focused on return to shareholders, and I think we can do that in a pretty big way.

Patrick Walravens, Analyst, Citizens: Okay. Thank you. I’ll pass it on.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Thank you.

Conference Call Operator: Thank you. One moment for the next question. Our next question will be coming from the line of Radi Sultan of UBS. Please go ahead.

Radi Sultan, Analyst, UBS: Yeah, thanks for taking the question, and Tom, good to see you back in the saddle. I wanted to start on the federal side. Saw your comments on C3.ai Federal. How is the ramp of the $450 million contract ceiling with the U.S. Air Force tracking relative to your expectations, and how has the restructuring of C3.ai Federal impacted that?

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Wasn’t the RSO a $100 million contract ceiling? The honest answer is I have not been that in touch with the operating details of the business in the last four quarters, and I haven’t looked into that. I think the RSO contract was $100 million. Honestly, I’m sorry?

Hitesh Lath, Chief Financial Officer, C3.ai: It got increased after.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Oh, did it?

Hitesh Lath, Chief Financial Officer, C3.ai: Yeah.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Okay. I’m sorry. It’s a legitimate question, and I don’t know, and I’ll find out, and we’ll get back to you. Next question.

Radi Sultan, Analyst, UBS: No problem. Yeah, no problem at all. Just to attach maybe on the fiscal 2027 guide as we calibrate our models, could you just help us understand the moving parts around license and PES embedded in the guide this year? Maybe just post-restructuring, how should we be thinking about the role of demonstration licenses in the growth strategy post-restructuring? Thank you.

Hitesh Lath, Chief Financial Officer, C3.ai: Yeah. Hi, Radi. As you know, we guide to total revenue, and as it relates to PES or prioritized engineering services, we expect PES to continue to contribute a large share of our total professional services revenue. In terms of professional services mix, expect it to be between 10%-15% of total rev.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Including PES.

Hitesh Lath, Chief Financial Officer, C3.ai: Including PES. As it relates to revenue from demo licenses.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Let me try this, okay? It’s a very legitimate question, ladies and gentlemen. I think it’s a "don’t know." We have changed everything about the sales organization. We have changed everything about go-to-market. I think that while it’s a very legitimate question, how much is going to be professional services, how much of it was demo licenses, how much is going to be PES? I don’t think we really know, okay? We have a plan to grow revenue, but we really don’t, and I’m sorry that this doesn’t work in helping you fill out your spreadsheet, but we don’t know. All we can assure you is that the revenue will be properly accounted for. We can’t really tell you what that mix is. Make no mistake, we are focused on software revenue, guys, not services, ladies and gentlemen. Software revenue.

We understand the difference, and that’s what we’re focused on. It’s hard to tell how this is going to shake out, and I know that’s not the answer you want to hear, but it’s true.

Radi Sultan, Analyst, UBS: Got it. Thanks.

Conference Call Operator: Thank you. One moment for the next question, please. Our next question is coming from the line of Matthew Cerruti of Needham & Company. Please go ahead.

Matt Cerruti, Analyst, Needham & Company: Hey, guys, this is Matt Cerruti. I’m for Mike Cikos over at Needham. Thanks for taking our questions. Tom, welcome back, and great to hear that your health issues have been largely resolved. You mentioned in your prepared remarks that you’re going to look at penetrating territories and large accounts rather than the more narrow focus on relatively small opportunities that was put in place. In the past, you guys had sort of run a small amount of deals that were large in size, and then we pivoted over to the pilot model. What exactly do you have in mind going forward? Is there sort of a sweet spot in the middle there, or how are you thinking about that balance?

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: How do I describe this? There was kind of a funny issue. I’m sorry, your first name one more time?

Matt Cerruti, Analyst, Needham & Company: Matt.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Matt, this is kind of a funny issue, Matt. Okay, when we looked into it, in the way the territory assignments have worked, okay, in the last year, and the truth of the matter is, they had a focus on a limited number of major accounts rather than looking at the entire market opportunity. I would say if you look at Europe or North America, they might have been only focused on really, I know this is hard to believe, but the sales organization might have been focused on total of 100 to 150 accounts in each of those organizations. I know it’s hard to believe, but it really is true. Now you will see those North American and federal and European sales organizations focused on order of 1,000 account opportunities rather than maybe even more than that, rather than order of 100.

It’s hard to believe that’s the way it was set up, but it really was set up that way and we fixed it. Now within that, they’ll be focused on large deals. What’s a large deal? I would say, $50 million-$a couple of billion. They’ll be focused on medium-sized deals, which might be $5 million-$50, and they’ll be focused on smaller deals, which might be $half million-$2 million. I know there’s a big gap there, but you get the idea.

Matt Cerruti, Analyst, Needham & Company: Got it. Yeah, that’s very helpful. Then just broadly, where are you seeing customers find budget for AI initiatives, and are you seeing any change in sales cycles or just the pace of adoption as organizations race to capture ROI and push AI initiatives?

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: As you do your market analysis, as I’m sure you’ve done, Matt, on the pure kind of enterprise AI market, which would include Palantir, C3 and others, it was about a $6 billion market in 2025. It is about a $10 billion market in 2026, it is projected to be about a $15 billion market in 2027. It does not look like these people are being too starved for opportunities. It is a $10 billion market growing at a 50% compound annual growth rate, which people are finding the budgets, that is for sure.

Matt Cerruti, Analyst, Needham & Company: Great. Thanks so much.

Conference Call Operator: Thank you. One moment for the next question. Our next question is coming from the line of Koji Ikeda of Bank of America. Please go ahead.

George McGrian, Analyst, Bank of America: Hi, this is George McGrian on for Koji Ikeda. Thanks for taking our question. I kind of wanted to ask maybe kind of a two in one, when we think about IPDs, and kind of over time how the quantity of IPDs has kind of trended downwards, where would you say are there use cases or customer profiles that have been kind of harder to get recently? Conversely, which type of customers or use cases are you most excited about kind of driving and capturing over the next few quarters? Thank you.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Well, as evidenced from Palantir, okay, and others, Palantir has a go-to-market motion that is very much analogous to an IPD. I mean, the idea that the market opportunity isn’t big is, I think, inconsistent with the performance you’ve seen out of Palantir. The market is clearly there, and the execution is pretty damn good. I mean, pretty impressive. I don’t think there’s the question of the market being there. Where do we see market being there? Do I think the execution on the behalf of C3 has been acceptable? It has been completely unacceptable, George. If you want us to fall on our sword or eviscerate ourselves in a public audience, put me on stage, give me the stage, give me a sword, and I’ll do it, okay?

The opportunity going forward, look at the pure enterprise AI market, enterprise AI application market, which we are most certainly in, looks like a $10 billion market growing at a 50% compound annual growth rate. We’re not even growing, okay? We’re not growing off a small base number, and we’re growing at a level smaller than the market at large. I mean, that’s just unacceptable. Do we think we know how to fix it? Yeah. Where’s the market opportunity? It’s in financial services. Okay. Is it in consumer packaged goods? It is. Is it in defense and intelligence? It is. Is it in agribusiness? It is. Is it in aerospace? Yes, sir, it is. I don’t think as we get into 2028, 2029, 2030, I don’t think there’s anybody who believes that all of those markets don’t address enterprise AI. You know they do.

Even Bank of America probably believes that today. You didn’t in 2016, 2017, 2018, 2019, 2020, or 2021. I think even Bank of America believes that today. We just intend to play our full role in.

Conference Call Operator: Thank you. That ends the Q&A session for today. I would like to turn the call back over to Mr. Siebel for closing remarks. Please go ahead.

Tom Siebel, Chairman and Chief Executive Officer, C3.ai: Ladies and gentlemen, thank you for the courtesy of your time. We really appreciate it. We hope we used it effectively. I hope you have a feel for the plan, and we look very much forward to reporting to you in the progress in the next three months and six months. Thank you very much.

Conference Call Operator: Thank you for your participation today. You may now disconnect.