DeepSeek's New AI Model Could Disrupt Nasdaq AI-Related Stocks Amid C3.ai Earnings Focus

C3.ai (NYSE:AI) is set to report third-quarter 2026 earnings on February 25, as the market braces for a projected revenue decline and wider adjusted loss per share. Analysts forecast a 23.2% year-over-year drop in revenue to $75.8 million and a loss per share of 29 cents. These expectations are driven by reduced contributions from subscription and professional services amid a high proportion of early-stage deployments.

The company has historically exceeded estimates, but current challenges in the data and analytics software sector have dampened expectations. C3.ai’s broader industry has seen an average 22% decline in stock prices over the past month, with C3.ai down 24.3%. This underperformance reflects broader market caution ahead of earnings reports.

C3.ai’s Q2 results showed resilience, with revenue of $75.1 million and 16.5% quarter-over-quarter growth in subscription revenue. The company emphasized strategic partnerships with Microsoft and AWS as a key growth driver. However, Q3 projections indicate a continued slowdown in deployment activities and higher operational costs.

Why Did This Happen?

C3.ai’s earnings trajectory is being shaped by a mix of early-stage deployments and higher costs related to Initial Production Deployments (IPDs). These IPDs are known for their high implementation costs during the early phases. Additionally, a reduction in prioritized engineering services has contributed to weaker performance in professional services.

Subscription revenue is expected to decline, with gross margins forecast to fall by 610 basis points to 49.9%, and professional services to see a 600 basis point decline to 74%. These margin contractions are attributed to increased payroll and support capacity investments.

How Did Markets React?

Market participants are closely watching C3.ai’s ability to adapt to external pressures, including economic uncertainties and trade policy changes. The company’s strong cash position of $675 million provides some cushion despite a non-GAAP operating loss of $42.2 million in Q2. However, analysts remain cautious, with a Zacks Rank #4 (Sell) and a negative Earnings ESP of -9.40%.

Beyond C3.ai, broader market sentiment is influenced by developments in the AI sector. DeepSeek’s new AI model is anticipated to launch in weeks and could challenge the dominance of U.S. tech firms like Nvidia. If DeepSeek achieves comparable performance at lower costs, it could expose a growing 'capex bubble' in the U.S. and lead to short-term volatility in the Nasdaq.

What Are Analysts Watching Next?

The market is evaluating whether C3.ai can maintain its growth momentum despite these headwinds. Management’s guidance for fiscal 2026 revenue of $289.5-309.5 million reflects a cautious outlook amid economic uncertainties and competitive pressures. The company’s strategic emphasis on partnerships and deployment scale is expected to play a key role in its ability to meet these targets.

For DeepSeek, the introduction of a high-efficiency architecture with lower costs could reshape AI supply chains and reduce reliance on U.S. hardware over time. The use of Nvidia’s Blackwell chips in the model has already triggered a federal investigation into potential export control violations.

Investors are also monitoring how geopolitical tensions and AI infrastructure investments affect semiconductor and cloud computing stocks. If DeepSeek demonstrates cost efficiency, it could compress profit margins for companies currently enjoying premium pricing.

C3.ai’s earnings report will offer further insights into its financial health and strategy. The company’s ability to navigate these challenges will be critical for both its near-term performance and longer-term positioning in the enterprise AI market.