Is C3.ai's Q2 Earnings a Turning Point for Long-Term Value?

C3.ai (NYSE: AI), the enterprise AI software company, has long been a study in contrasts: a visionary founder with a track record of innovation, yet plagued by operational volatility and leadership turbulence. Its Q2 2026 earnings report, however, may signal a pivotal moment in its journey. With revenue growth, strategic repositioning, and a stabilized leadership team, the question now is whether these developments represent a sustainable turning point or a temporary reprieve.

A Glimmer of Operational Stability

C3.ai's Q2 2026 results showed a 7% sequential increase in total revenue to $75.1 million, driven by a 16.5% rise in subscription revenue to $70.2 million. This performance, while modest, marks a departure from the turbulence of Q1 2025, when CEO Thomas Siebel attributed poor sales execution to a reorganization and personal health issues. The non-GAAP gross margin of 54% further underscored improved cost management, a critical metric for a company that has historically struggled with profitability.

The federal sector emerged as a standout, with bookings growing 89% year-over-year and accounting for 45% of total bookings. This resilience, even during a 43-day government shutdown, highlights the company's ability to capitalize on its federal, defense, and aerospace expertise-a sector where demand for AI-driven analytics remains robust according to C3.ai's earnings announcement.

Strategic Reorganization and Leadership Overhaul

The operational improvements coincided with a significant leadership shakeup. In Q1 2025, C3.ai restructured its global sales and services teams, appointing Rob Schilling as Chief Commercial Officer and John Kitchingman as General Manager of EMEA. Additional hires, including Jeff Cosseboom and Lars Färnström in North America and the Nordics, signaled a shift toward a partner-led sales model according to financial analysis. Alex Amato's promotion to oversee professional services and customer operations further emphasized a focus on execution and client retention.

These changes were not without pain. Siebel acknowledged that the reorganization disrupted Q1 sales, but by Q2, the company began to see "operational improvements, including an increase in the number of closed deals" according to market analysis. The leadership overhaul appears to have stabilized the sales pipeline, with 89% of total bookings now facilitated through strategic partnerships, particularly with Microsoft and AWS according to earnings commentary.

A New Product and a Revised Strategy

C3.ai's launch of C3 AI Agentic Process Automation in Q2 added another layer to its value proposition. This solution, which enables organizations to automate complex workflows using autonomous AI agents, aligns with broader industry trends toward generative AI and workflow optimization. While the product's long-term impact remains to be seen, it demonstrates the company's commitment to innovation-a hallmark of Siebel's career.

The revised strategy also includes a clearer focus on high-growth verticals. Federal business growth, in particular, suggests that C3.ai is leveraging its expertise in regulated industries to differentiate itself from competitors. This focus may prove critical as enterprise AI adoption accelerates, but it also exposes the company to the risks of government procurement cycles and budget constraints.

Is This a Turning Point?

The Q2 results and leadership changes present a compelling case for cautious optimism. The sequential revenue growth, improved gross margins, and federal sector momentum indicate that C3.ai is beginning to execute on its strategic priorities. The stabilized leadership team and partner-driven model also reduce the risk of operational disruptions that have historically derailed the company.

However, skepticism remains warranted. The company's Q3 revenue guidance of $72–80 million, while achievable, still falls short of pre-reorganization levels. Moreover, the reliance on federal contracts introduces volatility, and the competitive landscape for enterprise AI is intensifying.

For long-term value creation, C3.ai must now prove that these improvements are not just tactical fixes but part of a durable transformation. The success of its new product suite, the sustainability of federal growth, and the ability to maintain profitability in a maturing market will be key indicators.

Conclusion

C3.ai's Q2 earnings may not yet represent a definitive turning point, but they are a necessary step in the right direction. The company has addressed immediate operational and leadership challenges, positioning itself to capitalize on AI's growing role in enterprise software. Investors should monitor Q3 results and the rollout of Agentic Process Automation for further signals. For now, the balance sheet and strategic clarity suggest that C3.ai is emerging from a period of self-inflicted turbulence-and that its long-term value may finally be on the horizon.