Warning: Two Popular AI Stocks to Sell as Revenue Falls and Profit Margins Deteriorate

C3.ai and Super Micro Computer are two popular AI stocks facing challenges. C3.ai's revenue fell 19% YoY to $70.3 million, and its profitability is deteriorating. Super Micro Computer's profit margins remain weak despite impressive revenue growth. Certain analysts have set price targets implying significant downsides, with C3.ai at a 43% and Super Micro at a 67% decline.

C3.ai, Inc. (AI) and Super Micro Computer (SMCI) are two prominent AI stocks currently facing significant challenges. C3.ai reported a 19% year-over-year (YoY) decline in revenue for the first quarter of fiscal 2026, totaling $70.3 million. The company attributed this downturn to softer demand for demonstration licenses and organizational changes. Subscription revenues, which accounted for 86% of overall sales, remained robust at $60.3 million. However, demonstration licenses, a key revenue driver, declined by $15.9 million, significantly impacting the top line C3.ai's Q1 Top Line Takes a Hit: Can Growth Reaccelerate in FY26?^[1].

Despite the revenue setback, C3.ai maintains a strong customer momentum and partner activity. The company signed 28 new initial production deployments (IPDs) in the quarter, bringing the total to 374, with 266 still active. Approximately 90% of deals were partner-led, highlighting the growing influence of alliances with major cloud providers. Management guided fiscal second-quarter revenues to be in the range of $72 million to $80 million, indicating a modest sequential improvement C3.ai's Q1 Top Line Takes a Hit: Can Growth Reaccelerate in FY26?^[1].

Super Micro Computer, on the other hand, has seen impressive revenue growth but continues to struggle with weak profit margins. The company reported an EPS of $0.41 for Q4 2025, missing the consensus estimate of $0.44 by $0.03. Quarterly revenue rose 8.5% YoY to $5.76 billion, below the consensus estimate of $5.88 billion. Despite the revenue growth, the company's earnings are expected to grow by only 19.35% next year, from $1.86 to $2.22 per share Super Micro Computer (SMCI) Earnings Date, Estimates & Call Transcripts^[2].

Certain analysts have set price targets implying significant downsides for both stocks. C3.ai faces a 43% decline, while Super Micro Computer is expected to fall by 67%. C3.ai shares have declined 27.6% in the past three months compared to the industry’s fall of 7.4%. The company is currently trading at a forward 12-month price-to-sales (P/S) multiple of 7.50, well below the industry average of 17.10 C3.ai's Q1 Top Line Takes a Hit: Can Growth Reaccelerate in FY26?^[1].

In conclusion, both C3.ai and Super Micro Computer are facing distinct challenges. C3.ai’s revenue decline and Super Micro Computer’s weak profit margins present significant hurdles. However, the companies' strong customer and partner momentum, along with their growing pipeline of IPDs, offer potential paths to revenue stabilization and growth.