If artificial intelligence is the hottest sector of the year, why is self-proclaimed AI software company C3.ai finding it difficult to grow sales? The California company’s share price is up 229 percent this year despite a challenge from short sellers. Wrapping up the ticker symbol “AI” didn’t hurt. Nevertheless, turnover growth in the past financial year was less than 6 percent.
C3’s problem may be that it trades in the wrong kind of AI. Unlike OpenAI’s big language models and generative AI chatbots, C3 sells software that analyzes data. It has launched a generative AI service, but it’s not a core product. Sales growth this year is expected to be around 14 percent at best.
When it was on the list, C3 tried to drill the idea of enterprise AI into potential investors and customers by peppering San Francisco with billboards. However, it is not made for that. Founder Thomas Siebel wanted to provide software services to companies addressing carbon emissions – the “C” in C3 stands for carbon. The company has since gone through a series of rebrands, including a brief stint as C3.IOT. In 2019 it called itself C3.ai.
Pivots are praised in Silicon Valley. But the company is spending a lot to bring in new customers, something that is inconsistent with the increased global interest in AI. In the 12 months to April 30, it spent $183 million on sales and marketing, equivalent to 70 percent of sales. The growth is uneven. A small number of customers account for a large part of the turnover. Three accounted for 44 percent of sales when the company went public in 2020. Last quarter, just one company, Baker Hughes, accounted for 45 percent. The joint venture ends in April 2025.
As it moves to a consumption-based model, revenues may become less predictable. There is no date set for sustainable profitability based on generally accepted accounting principles. C3 illustrates the gap between AI excitement and sustainable, AI-driven income.
If you are a subscriber and would like to be notified when Lex articles are published, click the “Add to myFT” button, which appears above the headline at the top of this page.
