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C3.ai Inc (AI) reported fiscal Q2 2026 earnings that exceeded expectations. The company posted revenue of $75.1 million, driven by a 16.5% sequential increase in subscription revenue. Despite a non-GAAP operating loss of $42.2 million, the company's cash balance remains strong at $675 million. CEO Stephen Ehikian highlighted increasing demand for enterprise AI and strategic partnerships with Microsoft and AWS contributing to 89% of bookings.

The stock rose 4.42% to $14.37 after the report, reflecting renewed investor confidence. Subscription revenue growth and the expanding AI ecosystem signaled positive momentum.

C3.ai's Q3 revenue guidance is projected at $72–80 million, while full-year revenue for fiscal 2026 is expected to reach $289.5–309.5 million. The company acknowledged challenges from economic uncertainty and competition but expressed optimism about long-term growth potential.

Why Did This Happen?

C3.ai's performance in Q2 2026 reflects its growing presence in enterprise AI adoption. The 16.5% sequential growth in subscription revenue suggests increasing customer retention and expansion within existing accounts. Strategic partnerships with Microsoft and AWS have also played a critical role in driving bookings and customer adoption.

Despite persistent losses and a non-GAAP gross margin of 54%, the company's cash balance of $675 million provides operational flexibility and supports future growth initiatives.

How Markets Reacted

The stock price rose to $14.37 following the earnings report, reflecting improved investor sentiment. Subscription revenue growth and the strategic partnership ecosystem were key drivers of the market's positive reaction.

Analysts have a mixed outlook for C3.ai stock. While some firms like Citizens and Wedbush have issued "Buy" ratings with price targets above $23, others like DA Davidson and Morgan Stanley have maintained "Sell" positions. The price targets range from $10 to $50, indicating significant uncertainty about the company's near-term valuation.

What Analysts Are Watching

Analysts are closely monitoring whether C3.ai can achieve its projected revenue targets and improve profitability. While the company has historically struggled to scale profits, its focus on platform-based AI solutions and recurring revenue could attract long-term investors.

Technical indicators suggest mixed signals for investors. The RSI is at 47.96, indicating a neutral stance, while moving averages show divergence. Shorter-term MAs like MA5 and MA10 are bullish, but longer-term MAs like MA50 and MA200 are bearish.

Candlestick patterns such as the Engulfing Bearish and Inverted Hammer suggest both bearish and bullish setups, reflecting ongoing volatility in the stock. These patterns could influence short-term trading decisions and add to the uncertainty surrounding the stock's direction.

BigBear.ai (BBAI) has seen similar enthusiasm, with a forward P/S ratio of 16.2X. While the company has shifted its focus to a platform-centric AI business, its valuation remains high relative to historical averages. The acquisition of Ask Sage is expected to generate $25 million in annual recurring revenue, but whether this justifies the premium remains to be seen.

C3.ai's founder, Thomas Siebel, sold 532,832 shares for approximately $7.6 million in December 2025, primarily through indirect entities like The Siebel Living Trust. These sales followed a broader pattern of declining holdings and a challenging year for the company. Siebel's direct holdings remain unchanged at 722,362 shares, while indirect holdings have declined by over 90% since March 2025.

The stock's price has fallen by more than 58% over the past year, reflecting broader challenges in the AI sector and execution issues at C3.ai. Siebel's transition to executive chairman and the appointment of Stephen Ehikian as CEO were also highlighted as structural changes that could impact investor perception.

C3.ai's market position is further complicated by its high P/S ratio of around 9 and lack of profitability. While enterprise AI adoption is accelerating, the company faces stiff competition from both established tech firms and emerging startups.

Investors are advised to closely monitor revenue growth, cash flow trends, and the success of C3's generative AI offerings. While the company has made progress in stabilizing its operations, consistent profitability and execution remain key hurdles.

The company's ability to maintain its market share in enterprise AI and expand into new sectors will be critical in determining whether the current valuation is justified or overextended.