Everyone's Watching Stocks. The Real Bubble Is AI Debt.

AI Debt and Earnings Challenges in the Tech Sector

C3.ai (AI) reported a modest beat for its Q2 2026 earnings, posting a loss of $0.25 per share compared with the $0.33 forecast. However, the company's quarterly revenue declined 20.3% year-over-year to $75.15 million, signaling ongoing challenges in scaling its AI solutions. The performance underscores growing concerns about the sustainability of AI-driven business models and the mounting debt burden for firms in the sector according to market analysis.

SoundHound AI (SOUN) faces similar hurdles as it balances near-term automotive sector headwinds with expanding enterprise AI demand. The company's Q3 2025 revenue grew 68% year-over-year to $42 million, driven by enterprise adoption of voice and agentic AI. However, the automotive segment remains volatile due to macroeconomic pressures and long development cycles according to analysts.

Rigetti Computing (RGTI) is another example of the sector's struggles. The company reported a 39% decline in revenue for the first nine months of 2025 compared to 2024, citing fierce competition from larger players like IBM and Alphabet in the quantum computing field.

Why Is AI Debt Becoming a Concern?

AI companies are facing rising debt and declining revenue as they invest heavily in research, partnerships, and infrastructure. For instance, C3.ai has reduced its fiscal 2026 revenue guidance from $448–$485 million to $290–$310 million, reflecting a 20% year-over-year decline in the first half of the fiscal year.

The shift in revenue guidance and the widening operating losses raise questions about the sector's ability to generate sustainable cash flows. C3.ai's operating expenses outpaced revenue in the first two quarters of 2026, contributing to a $221 million loss, compared to $129 million in the same period in 2025.

Meanwhile, enterprise AI adoption is growing, but it remains unclear whether these gains can fully offset the automotive sector's struggles for companies like SoundHound. The company's Q3 2025 revenue was driven by subscription-based models in financial services and healthcare, but the sector's volatility persists.

How Are Markets Reacting to AI Earnings Reports?

C3.ai's stock price has declined over 60% in the past year, with a forward price-to-sales ratio of 5, a two-year low. The stock's performance reflects investor concerns about the company's profitability and management transition, as Stephen Ehikian took over as CEO after the departure of founder Thomas Siebel according to market reports.

Rigetti Computing has seen similar declines, with its stock down nearly 60% from its October 2025 high. The company's falling sales and high valuation metrics, including a price-to-book ratio of 22, suggest it may continue to face headwinds in the near term.

Investors are also scrutinizing Palantir Technologies (PLTR), which has seen its valuation reach levels that appear unsustainable. The company's trailing P/E ratio is over 450, and its forward P/E is around 270, raising concerns about whether the stock is priced for perfection.

What Are Analysts Watching for the Rest of 2026?

Analysts are closely monitoring whether enterprise AI demand can sustain growth for companies like SoundHound and C3.ai. While enterprise AI offers more predictable revenue models through subscription services, the automotive sector remains a significant headwind.

C3.ai has set Q3 2026 revenue guidance at $72–$80 million, but the company will need to demonstrate improved gross margins and cost controls to regain investor confidence. The company's non-GAAP operating loss of $42.2 million in Q2 and a 54% stock price drop in 2025 raise doubts about its ability to scale profitably.

Rigetti Computing's falling revenue and reliance on share issuance to fund operations suggest it may struggle to compete with larger tech firms in quantum computing. The company's 39% year-over-year revenue decline and $198 million net loss for the first nine months of 2025 highlight the need for a more sustainable business model.