C3 Ai's Q1 2026: Contradictions in Sales Leadership, Revenue Guidance, and Tom Siebel's Role

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $70.3M, down 19% YOY
• EPS: -$0.37 non-GAAP net loss per share
• Gross Margin: 52%, declined due to higher IPD mix and lower demonstration license/PES mix
• Operating Margin: Approximately -82% non-GAAP operating margin (operating loss of $57.8M on $70.3M revenue)

Guidance:

• Q2 FY26 revenue expected at $72M–$80M.
• Q2 FY26 non-GAAP operating loss expected at $49.5M–$57.5M.
• Withdrew previous guidance due to leadership changes and restructuring.
• Plan to provide updated outlook for the remainder of FY26 and full-year at the next earnings release.

Business Commentary:

• Revenue Decline:
• C3 AI reported total revenue of $70.3 million for Q1, a 19% decrease year-over-year.

• The decline was due to a 19% reduction in subscription revenue to $60.3 million, representing 86% of total revenue, and a 49% decrease in software licenses revenue to $17.9 million.

• Sales and Leadership Challenges:

• The company attributed the poor performance to poor sales execution and poor resource coordination.

• Tom Siebel's reduced involvement in the sales process due to health issues exacerbated the issues.

• Restructuring and New Leadership:

• C3 AI has restructured its sales and service organizations globally and appointed a new CEO, Steven Ahikian.

• The restructuring aims to improve growth and customer satisfaction by combining sales and service teams and establishing clear leadership.

• Strategic Customer Wins:

• Despite the revenue decline, the company secured strategic customer wins, including partnerships with Nucor, Chimerica, and HII.
• These wins are expected to contribute to future growth through expanded AI programs across multiple industries.

Sentiment Analysis:

• Management called results “completely unacceptable…in virtually every respect.” Revenue fell 19% YOY and the company missed guidance for the first time as a public company. They withdrew prior guidance and cited “poor sales execution and poor resource coordination,” while restructuring sales and services leadership.

Q&A:

• Question from Roddy Sultan (UBS): How involved will you be in sales going forward, and how will you ensure a smooth handoff to Steven and new sales leadership?
  Response: Siebel will stay involved as needed while new leadership (CEO and CCO) leads; focus is on a smooth transition and rapid ramp of global sales and services capacity.

• Question from Roddy Sultan (UBS): What gives confidence in the Q2 guide, and how should we think about the back half?
  Response: Q2 guide reflects August activity and current pipeline under new leadership; no back-half guide, but management won’t argue with FY26 revenue forecasts of $290M–$300M and remains committed to profitability over time.

• Question from Nick (Citizens): How will the mix of partner-led versus direct sales evolve given 40 partner-led deals this quarter?
  Response: About 90% of deals were partner-led (Azure, AWS, GCP, McKinsey); C3 AI will significantly increase investments with hyperscalers to scale from hundreds to thousands of joint engagements.

• Question from Nick (Citizens): Why did Steven choose to join C3 AI?
  Response: Massive enterprise AI opportunity; C3 AI has the platform/apps customers need and proven deployments; ability to work with Siebel and the team made joining an easy decision.

• Question from Matt Colitri (Needham): How do you weight sales disruption vs. your reduced involvement in causing the miss?
  Response: Approximately 70% sales disruption and 30% reduced Siebel involvement; quarter was poor, and the team is refocused on execution.

• Question from Matt Colitri (Needham): Where were the execution issues—signing pilots or converting to contracts?
  Response: Issues across both pilots and conversions; new leadership caused confusion and crossed channels, now being corrected with clearer roles and plans.