C3.ai Misses Revenue Growth Hopes as BigBear.ai Banks on AI Turnaround

The Struggle for Growth

C3.ai is facing a challenging period as it struggles to regain its footing in the enterprise AI software market. The company recently reported lower-than-expected revenue for FQ2'26, a 20% drop to $75 million. Despite this, the results slightly exceeded analyst expectations, offering a glimmer of hope for investors. The decline is attributed to several unresolved issues, including a drop in subscription and license revenue, and a slowdown in initial production development contracts.

The company's cash position remains strong at $675 million, providing a buffer against the ongoing financial strain. However, the operating loss for FY26 is projected to be nearly $200 million, raising concerns about the company's long-term viability. The recent revenue guidance for FQ3 is relatively modest, suggesting caution from management amid these uncertainties according to reports.

In contrast, BigBear.ai is emerging as a potential turnaround story in the AI sector. The company has bolstered its balance sheet and signed a significant deal to acquire Ask Sage, a generative AI platform. With a robust backlog and a focus on mission-critical applications, BigBear.ai is positioning itself for growth. The acquisition is expected to add around $25 million in annual recurring revenue and enhance its offerings in defense and intelligence markets.

The Struggle for Growth

C3.ai's challenges extend beyond revenue declines. The company has experienced a significant drop in IPD contracts, which are critical for its business model. In FQ2'26, C3.ai signed only 20 IPDs, with just 6 related to generative AI. This represents a sharp decline compared to previous quarters, where the number of IPDs was higher. The reduction in IPD contracts indicates a slowdown in adoption of the company's AI solutions, which could hinder its ability to scale.

Professional services revenue, another key area for C3.ai, has also seen a significant drop. In FQ2'26, professional services revenue was reported at $4.9 million, accounting for just 6.5% of total sales. This is well below the company's historical performance in this segment. C3.ai has forecasted a rebound in professional services to the 10% to 20% range, but achieving this will require a significant increase in demand for its services according to financial analysis.

Market Position and Investor Sentiment

C3.ai's stock currently trades at a valuation of $2 billion, with a FY26 revenue forecast of around $300 million. This results in an enterprise value of $1.3 billion, or just over 4x sales. While this valuation appears to be at a floor, the company still faces significant risks. The ongoing annual loss of $200 million and the need for immediate improvements to reduce the margin of error pose substantial challenges for management as reported.

In contrast, BigBear.ai has shown resilience in its financial performance. The company ended the third quarter of 2025 with a record cash balance of $456.6 million, significantly improving its financial flexibility. This strong balance sheet provides a solid foundation for its strategic initiatives, including the acquisition of Ask Sage. The move is expected to accelerate AI platform adoption and expand the company's presence in regulated defense and intelligence environments.

Risks and Opportunities

C3.ai faces several risks that could impact its future performance. The company's reliance on subscription and license revenue, coupled with the high costs of R&D and professional services, increases its vulnerability to market fluctuations. Additionally, the recent insider trading activity by C3.ai's chairman, Thomas Siebel, who sold $7.6 million worth of shares, could signal further uncertainty according to financial reports. Such actions may erode investor confidence and highlight potential challenges in the company's strategic direction.

BigBear.ai, on the other hand, is navigating a more favorable landscape. The company's focus on defense and intelligence applications positions it in a niche but high-growth market. The acquisition of Ask Sage is expected to drive margin expansion and enhance cross-selling opportunities. However, the success of this strategy will depend on the effective integration of Ask Sage's platform and the ability to scale operations in new markets as analysts expect.

What This Means for Investors

For investors, the current landscape presents both challenges and opportunities. C3.ai's stock remains a high-risk play, with unresolved issues and significant financial losses. However, the company's recent rebound in revenue and strong cash position could offer a potential upside if management can stabilize operations and address the issues affecting IPD contracts. Investors may view the current valuation as a floor, but they must remain cautious of the risks involved according to market analysis.

BigBear.ai offers a more optimistic outlook for investors seeking a turnaround story. The company's strategic moves, including the acquisition of Ask Sage and expansion into international markets, position it for growth. The strong cash balance and solid backlog provide a buffer against near-term challenges. Investors may find value in the company's potential to scale its AI offerings and capture market share in the defense and intelligence sectors as market reports suggest.

As the AI sector continues to evolve, companies like C3.ai and BigBear.ai will need to adapt to changing market dynamics. The ability to innovate, secure contracts, and maintain financial stability will be crucial for their long-term success. Investors should closely monitor these developments and assess the risks and opportunities associated with each company's strategy.