Navigating the AI Stock Correction: Is C3.ai a Bargain Buy Amid Management and Revenue Challenges?

The artificial intelligence sector has long been a magnet for speculative fervor, but recent volatility has forced investors to recalibrate their strategies. For value investors, the question now is whether C3.ai (AI), a once-high-flying AI software company, has become a compelling opportunity amid its leadership turmoil and revenue struggles. This analysis evaluates C3.ai's current valuation, management stability, and business model resilience against the backdrop of its recent challenges-and contrasts it with BigBear.ai (BBAI), a peer with a government-dependent revenue structure.

Leadership Turmoil and Legal Risks: A Double-Edged Sword

C3.ai's 2025 leadership shakeup has been a focal point of investor concern. In August 2025, founder and CEO Thomas Siebel stepped down due to health issues, including hospitalizations and vision impairment, which reportedly hindered his ability to support sales efforts, according to a Morningstar report. The subsequent reorganization, while aimed at accelerating growth, disrupted operations and contributed to a 23% year-over-year revenue decline in the first quarter of fiscal 2026, with revenue dropping to $70.3 million from $87.2 million, per a C3.ai press release. The stock price plummeted 25% following the August 8 announcement, as investors alleged the company had downplayed the CEO's health challenges, as reported by Complete A.I. Training.

Legal risks further complicate the picture. A class-action lawsuit, with a lead plaintiff deadline of October 21, 2025, accuses C3.ai of misstating the CEO's health and its impact on deal execution, according to a Motley Fool article. New CEO Stephen Ehikian now faces the daunting task of stabilizing operations while navigating litigation and restoring investor confidence.

Financial Metrics: A Tale of Two Models

C3.ai's financials reveal a mixed bag. For the fiscal third quarter of 2025, the company reported revenue of $98.8 million, a 26% year-over-year increase, but a net loss of $80.2 million ($0.62 per share) persisted, according to a C3.ai press release. Despite this, its gross margins remain robust, with a 59% GAAP gross margin and 69% non-GAAP margin, per a Yahoo Finance report. The company's diversified revenue streams-spanning manufacturing, energy, healthcare, and 28% federal government contracts-offer some insulation against sector-specific downturns, according to a Yahoo Finance article. Partnerships with Microsoft and other firms have also expanded its sales reach, with 40 of 46 Q1 2025 contracts secured through such alliances, as noted in that Yahoo Finance article.

In contrast, BigBear.ai's financials highlight the perils of government dependency. Its Q2 2025 revenue fell 18% to $32.5 million, driven by disruptions in Army programs and efficiency efforts, according to a BigBear.ai press release. While the company boasts a $380 million contract backlog, its gross margin of 28% lags behind industry peers like Palantir (70%), per a CityBiz article. BigBear's Q2 net loss of $228.6 million-largely from non-cash charges-underscores its precarious financial position, according to a CoinCentral report. Analysts project a full-year 2025 revenue range of $125–$140 million, far below its 2024 performance, according to a Motley Fool article.

Risk-Adjusted Returns: Diversification vs. Government Dependency

The key distinction between C3.ai and BigBear.ai lies in their revenue models. C3.ai's diversified approach-serving multiple industries and leveraging enterprise partnerships-reduces exposure to single-sector shocks. For instance, its 28% federal government revenue share is balanced by growth in energy and healthcare, sectors less prone to abrupt policy shifts, as noted in that Yahoo Finance article. Meanwhile, BigBear.ai's 18% revenue decline in Q2 2025 was directly tied to Army program disruptions, illustrating the volatility inherent in government contracts, according to the BigBear.ai press release.

Valuation metrics also favor C3.ai. With a forward P/E ratio of negative infinity (due to losses) and a price-to-sales ratio of 1.2x, the stock appears undervalued compared to BigBear.ai's 3.5x P/S ratio, per the Yahoo Finance article. However, C3.ai's path to profitability remains uncertain, with analysts forecasting a 2025 net loss of $1.33 per share, as that Yahoo Finance article notes.

Is C3.ai a Bargain Buy?

For value investors, C3.ai's current valuation offers a potential entry point, but only if the company can stabilize under new leadership and execute its growth strategy. The diversified revenue model and strong gross margins provide a foundation for recovery, but legal risks and operational disruptions remain headwinds. Conversely, BigBear.ai's government-dependent model, while offering high-margin contracts, exposes it to political and budgetary uncertainties.

The decision ultimately hinges on risk tolerance. C3.ai's challenges are significant, but its lower valuation and broader market exposure may justify a cautious bet for long-term investors. As Ehikian takes the helm, the market will be watching for signs of operational stability and a return to growth.