Was Jim Cramer Right About C3.ai, Inc. (AI)?
6min read Jim Cramer’s skepticism toward C3.ai (AI) has long centered on its failure to achieve profitability despite rapid revenue growth. In late 2024, the Mad Money host famously declared, “I just don’t know how to value this stock because they lose a lot of money. I’m taking a hard pass on AI.” But does his bearish stance hold up against the company’s recent performance, strategic wins, and investor sentiment? Let’s dive into the data.
Cramer’s Case Against C3.ai
Cramer’s criticism has consistently focused on two pillars:
1. Persistent losses: Despite a 21% year-over-year revenue increase in Q1 2025 (to $94.3 million), C3.ai reported an adjusted loss of $0.05 per share. The company even projected a wider operating loss for Q2 2025, signaling no near-term path to profitability.
2. Valuation uncertainty: Cramer argued that without profits, investors lacked a reliable metric to justify the stock’s price. This skepticism was underscored by his “Hard Pass on C3.ai” segment in December 2024, where he called the stock “overvalued” given its financials.
Ask Aime: "Should I stay away from C3.ai stock?"
The Microsoft Partnership: A Catalyst for Growth?
In late 2024, C3.ai announced a five-and-a-half-year strategic alliance with Microsoft, positioning its AI platform as a “preferred solution” on Azure. The partnership sparked an 12% stock surge in immediate trading, with shares hitting a high of $39.88 on November 25, 2024.
Ask Aime: "Is C3.ai's AI technology worth investing in after Microsoft's partnership?"
The deal’s impact was swift:
- Revenue growth accelerated to 29% YoY in Q2 2025, driven by 71% of customer agreements sourced through partnerships like microsoft.
- Sales cycles shortened by 20%, as Microsoft’s global salesforce and Azure’s infrastructure reduced customer onboarding friction.
- By Q3 2025, the two companies had 600 active enterprise opportunities globally, spanning energy, healthcare, and defense sectors.
The Profitability Paradox
While revenue surged, Cramer’s core critique—losses—remains valid. In Q2 2025, the company reported a GAAP net loss of $0.52 per share, though non-GAAP losses narrowed to $0.06, signaling progress. Analysts at Zacks Investment Research argue that operational efficiency improvements and higher-margin consumption-based revenue (now 30% of total) could tip the company toward profitability by 2026.
Yet risks linger:
- Key contract renewal uncertainty: A $23 million Baker Hughes contract (19% of 2025 revenue) faces expiration in mid-2025, with renewal uncertain due to leadership changes at the client.
- Margin pressures: Scaling global partnerships and R&D investments continue to weigh on cash flows.
Institutional Sentiment: A Split Verdict
Hedge funds are divided. As of late 2024, 27 funds held C3.ai stock, up from 25 in Q3, suggesting cautious optimism. Zacks assigns a “Buy” rating, citing narrowing losses and $1.3 trillion AI market potential by 2032. Conversely, D.A. Davidson remains neutral, warning that the stock’s 5.71x forward P/S ratio (above sector averages) may outpace fundamentals.
The Bottom Line: Cramer Was Partially Right—But Missing the Big Picture
Cramer’s focus on profitability is undeniably valid; C3.ai’s losses remain a red flag. However, his dismissal overlooks two critical factors:
1. Strategic moats: The Microsoft partnership has doubled sales velocity and unlocked access to Azure’s Fortune 500 client base. Federal contracts (e.g., $23 million with the U.S. Army) now account for 40% of new deals, signaling resilience in high-margin sectors.
2. Long-term trends: C3.ai’s generative AI platform, with 130 scalable applications, positions it to capitalize on a $1.3 trillion market. While short-term volatility persists, the stock’s Zacks Rank #2 (Buy) and narrowing loss estimates suggest a rebound is plausible.
Final Analysis
Jim Cramer’s skepticism about C3.ai’s profitability is justified today. However, the stock’s 12% surge post-Microsoft and 29% revenue growth highlight why some investors are doubling down. For now, Cramer’s “hard pass” may be prudent for conservative investors, but the company’s strategic wins and AI leadership make it a high-risk, high-reward bet for those willing to ride out the losses. The question remains: Can C3.ai convert its partnerships into profits before macroeconomic headwinds or contract expirations derail its momentum? The answer could redefine its valuation—and Cramer’s stance—in 2025.
