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C3.ai Stock Tumbles. He sees a decline in revenue and changes business models.

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Software provider C3.ai is moving to a consumption-based business model like Amazon Web Services.

The time of dreams

Artificial intelligence software publisher

C3.ai

cut its revenue outlook and said it would revise its business model while acknowledging an economic downturn.

C3.ai shares (ticker: AI) fell 20% on Thursday to $14.39. Heading into Thursday’s trading session, C3.ai shares were down 42% this year.

C3.ai reported fiscal first quarter revenue of $65.3 million, up 25% from a year ago and down from the company’s target range of 65 at $67 million. On an adjusted basis, the company lost 12 cents per share in the quarter; Wall Street analysts expected a loss of 24 cents. According to generally accepted accounting principles, the company lost 67 cents per share, compared to a loss of 37 cents in the year-ago quarter.

The company has reduced its revenue prospects in the future. For the second quarter, the company is forecasting revenue of $60-62 million, below consensus of $71.7 million, with a non-GAAP loss of $15-20 million. C3.ai now sees revenue for the full fiscal year ending April 2023 of $255 million to $275 million, down from a previous range of $308 million to $316 million. The company reports a non-GAAP operating loss for the full year of $90 million to $98 million.

“No doubt we’re in a recession,” founder and CEO Tom Siebel said in an interview with Barrons. “Have we noticed a slowdown in our activity? Absolutely, and it accelerated in July.

Siebel said the company sees an opportunity to grow its addressable market over time by overhauling how it operates. C3.ai will shift its business to a consumption-based pricing model and away from a subscription model. Consumption-based pricing is used by cloud computing companies like Amazon Web Services, Microsoft Azure, Google Cloud and

Snowflake
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It is a utility model, like water or electricity. The more computing power you use, the more you pay.

The head of C3.ai said that over time the company should have more customers, more revenue and more profit. But he noted that the company is expected to see revenue stagnate for a few quarters as the transition progresses.

Siebel said the new model is aimed at accelerating sales, accelerating product acceptance, increasing market share and improving revenue and profitability in the medium to long term. He said the company now expects to be non-GAAP profitable in fiscal 2024.

“The economic downturn is real,” Siebel said. “Our customers are looking at big transactions like never before, which also makes it a great time to launch consumer pricing.”

Write to Eric J. Savitz at [email protected]