C3.ai (NYSE:AI) held its fourth-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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Summary

C3.ai reported total revenue of $51.6 million for Q4, with subscription revenue making up 94% of that total.

The company has undergone significant restructuring, reducing headcount by about 35% and saving approximately $135 million annually in operating costs.

CEO Tom Siebel highlighted poor sales execution as a key issue and emphasized strategies to improve sales, including expanding the target market from 100-150 accounts to over 1000.

There is a strong focus on leveraging AI tools across all departments to increase productivity and improve financial outcomes.

Future guidance for fiscal year 2027 includes revenue expectations between $210 million and $240 million, with a focus on achieving non-GAAP profitability.

Despite recent challenges, management is optimistic about the turnaround potential, given the large market opportunity in enterprise AI and the company's robust product offering.

Full Transcript

Amit Berry (Investor Relations)

Good afternoon and welcome to C3.ai's earnings call for the fourth quarter and full fiscal year 2026 which ended on April 30, 2026. My name is Amit Berry and I lead Investor Relations at C3.ai. With me on the call today are Tom Siebel, Chairman and Chief Executive Officer, Stephen Ehikian, President and Hitesh Lott, Chief Financial Officer. After the market closed today, we issued a press release with details regarding our fourth quarter results which can be accessed through the Investor Relations SECtion on our website at IR C3.ai.

This call is being webcast and a replay will be available on our IR website following the conclusion of the call. During today's call, we will make statements related to our business that may be considered forward looking under federal SECurities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward looking statements or outlook.

These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to our filings with the SEC. All figures will be discussed on a non Generally Accepted Accounting Principles (GAAP) basis unless otherwise noted. Also, during today's call we will refer to certain non Generally Accepted Accounting Principles (GAAP) financial measures.

A reconciliation of Generally Accepted Accounting Principles (GAAP) to non Generally Accepted Accounting Principles (GAAP) financial measures to the extent reasonably available is included in our press release. Finally, at times in our prepared remarks in response to your questions, we may discuss metrics that are incremental to our usual presentation to give greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future.

And with that, let me turn the call over to Tom.

Thomas M. Siebel

Good afternoon everybody. This is Tom. And just when he thought it was safe, I'm back. We have an enormous opportunity before us and the opportunity is to create enormous value for our shareholders. The performance of this company has been staggeringly Disappointing. We're looking at a turnaround opportunity. And the fundamental nature of this turnaround opportunity is to change everything about the way we manage this business. In the process, we're going to create enormous financial returns for our shareholders.

Along these lines, I've been working with the senior executive leadership and the board for the last couple of months. We have restructured the company. We have restructured sales, we have restructured products, we have restructured services. We have put together a strategic plan, we have put together the objectives and we have a clear plan in place to turn this company around and create value for our shareholders. The restructuring of the company, first introduced by Stephen Ehikian in February has been expanded and accelerated by my return.

Headcount has been reduced from 1075 to roughly 700. We have taken almost $135 million in annual operating cost. The business structure, C3.ai Federal has been entirely reorganized for a new and highly experienced leader. The sales organization has been completely restructured globally under again a very highly experienced seasoned chief revenue officer. In the past weeks we have reorganized the company top to bottom. We have new leadership throughout the organization.

We have restructured the company. We have restructured C3 federal under new leadership. We have restructured C3 sales under new leadership. We have restructured products under new leadership. We have brought together end products, the platform group, the applications group, the product marketing group. Okay. And the customer services group all in one organization. Under senior seasoned leadership, we have restructured the service team. The objectives in place, the strategy is written and we are now going to talent just like the company.

Just like sales, the products group has been completely redesigned and re engineered. We've brought together under one senior leader who's been with the company for 14 years. Four functions including the platform team, the applications team, the product marketing team and the services team in one place. So we have one organization basically responsible for designing the product, coding the product quality, assuring the product and delivering the product to make sure that customers are successful.

The services organization has also been completely re engineered and completely designed under a new senior leader who's been with the company for more than seven years. We've taken four layers out of that org structure from seven to three. The organization has been redesigned so that for every one of our customers where we're working on pilots or production deployments, we have a dedicated team assigned to the customer. They move in with the customer and they stay with the customer until the project is done and the customer is successful.

I am absolutely satisfied that the new structure is going to result in Higher levels of customer satisfaction, more successful customer deployments and more rapid expansion of our customer deployments into large enterprise. Expanding contract relationships As I look at the performance of the company in recent quarters and particularly the sales performance, it is just unspeakably horrible and it's surreal. This is resulting in market multiples for the company that are candidly well earned and scathing analysis from analysts and sell side analysts that are candidly well deserved.

I am here to fix that as it relates to enterprise sales. This is not an area which I'm entirely unfamiliar with. I think just to return to fundamental hygiene and fundamental sales protocol, just the basics will take this company a long long way for its increasing their holder value and the company is sufficiently well capitalized to basically obviate any question of any need for financing, as we have enough capital there to meet the mission that is before us.

I want to give you an update on the restructuring that Stephen introduced last quarter. We have expanded those objectives and we have accelerated those objectives. We have reduced headcount by approximately 35% across all organizations. The workforce actions are in place, they are done. The cost controls are in place, the budget is in place, the plans are in place, the cost have been reduced by order of $135 million a year and we are well on our way to becoming a fully agentic enterprise.

Adopting these agent tools to fundamentally change the way we do business across the enterprise and to dramatically increase productivity in every aspect of our business. The products organizations today are largely leveraging AI tools for all programming activities. These agency tools have been adopted across the organization legal, finance, sales, marketing wherever it may be, to increase productivity really dramatically across the enterprise. Sales in particular are leveraging the agentic tool to focus on market development, business development and strategies to increase their penetration of existing customers and large global new customers

across every function. Our people in the organization are operating with an agentic AI first mindset increasing productivity across all business functions. This is now all about execution and we're going to have our heads down every hour, every day, every month, every quarter and the early indications are that this is moving in the right direction. Our priorities are clear, they are well understood, they are articulated, the objectives are distributed and they're understood.

If we look at sales for example, our go to market activities have changed significantly. We're focusing on using technologies and agentic technologies focused on penetrating territories, penetrating large accounts with campaigns that will develop over multiple quarters and multiple years rather than the narrow focus that was in place before, focused on relatively small opportunities that might be in place for any given quarter. The executive team, all of the employees at C3.ai are laser focused on doing whatever it takes with the objectives in place.

To turn the company through significant quarter to quarter top line revenue growth, to establish the company as one that generates free cash flow every quarter, and to establish the company as a company that generates non GAAP profitability quarter after quarter after quarter. The opportunity to increase shareholder value at C3.ai is enormous and that is exactly what we're going to do. Talk is cheap and rather than rain forth with idle promises that everybody will largely ignore, we're going to accept the challenge to deliver acceptable financial results, to deliver growth, to deliver cash generation, non GAAP profitability generation, and let

the results speak for themselves. Game on. With that. Let me turn this over to my colleagues. Our CFO is going to talk about the results of the quarter. Okay. And Nitesh and Stephen Akikian will be available to answer questions they may have. Thank you very much for your interest and I look forward to updating you as this develops at the end of Q1 and the end of Q2. Thank you. Thank you. Thank you.

Nitesh

Thank you, Tom. Total revenue for the quarter was $51.6 million. Subscription revenue was $48.4 million, representing 94% of total revenue. Professional services revenue was $3.2 million, of which $2.1 million was revenue from prioritized engineering services, or PEs. Professional services represented 6% of total revenue during the quarter. Our subscription and PES revenue combined was $50.5 million and accounted for 98% of total revenue. Non Generally Accepted Accounting Principles (GAAP) gross profit for the quarter was $19.3 million and non Generally Accepted Accounting Principles (GAAP) gross margin was 37%.

Non Generally Accepted Accounting Principles (GAAP) gross margin for professional services was 78%. Non Generally Accepted Accounting Principles (GAAP) operating loss for the quarter was $54.4 million. Non Generally Accepted Accounting Principles (GAAP) net loss for the quarter was $48.8 million $0.33 per share. Our non Generally Accepted Accounting Principles (GAAP) operating expenses for the quarter were $106 million. This reflects a reduction of $33.9 million as compared to the actual non Generally Accepted Accounting Principles (GAAP) operating expenses of $139.9 million same quarter last year.

Free cash flow for the quarter was negative $54.8 million. We continue to be well capitalized and close the quarter with $575.4 million in cash, cash equivalents and marketable securities. During the quarter, we signed nine initial production deployments for IPDs. At the end of the quarter, we had cumulatively signed 417 IPDs of which 251 are still active. This means they are either in their original three to six month terms or extended for some duration or converted to ongoing subscription or consumption contracts or are currently being negotiated for conversion to ongoing subscription or consumption contract.

Last quarter we launched a restructuring plan which included expense reductions across our business to produce full year cost savings of approximately $135 million. As Tom said, our headcount has been reduced from roughly 1075 in January of 2026 to about 700 today and we have already completed actions to realize almost 130 million of total planned savings. We are on track to meet or exceed our original cost savings target. As we said on the last quarter's earnings call, some of the cost savings associated with the non employee expenses will be fully realized starting with the second half of fiscal year 2027.

With these actions, we are well positioned to materially improve our operating efficiency, free cash flow and position the company for long term success. Our founder and CEO Tom Siebel purchased 6.17 million shares of C3.ai stock at a price of $11.16 per share for net cash proceeds of approximately $69 million. The company has received the cash and as of today, our total cash, cash equivalents and marketable securities balance is $673 million. Now I'll move on to our guidance for Q1 and fiscal year 27.

Our revenue guidance for Q1 of fiscal year 27 is $50 million to $54 million. Our guidance for non Generally Accepted Accounting Principles (GAAP) loss from operations for Q1 is $40.5 million to $48.5 million. Please note that the midpoint of this guidance is based on non Generally Accepted Accounting Principles (GAAP) operating expenses of $96.5 million, which is $31.6 million lower than the actual non Generally Accepted Accounting Principles (GAAP) operating expenses of $128.1 million same quarter last year.

Our revenue guidance for fiscal year 27 is $210 million to $240 million. Our guidance for non Generally Accepted Accounting Principles (GAAP) loss from operations for fiscal year 27 is $128 million to $160 million. Now I'd like to turn the call over to the operator to begin the Q and A session. Operator,

OPERATOR

thank you. As a reminder, if you would like to ask a question, please press STAR 11 on your telephone One moment While we compile the Q and A roster, our first question for the day will be coming from the line of Patrick Walbrz of Citizens. Please go ahead.

Patrick Walbrz (Equity Analyst)

Oh great. Thank you. And Tom, it's good to see you back. And it's good to see the insider buying. Can you just start very big picture and help us? You know, you can't fix something until you understand what went wrong. And you've spent a lot of time figuring out what went wrong. So in fiscal 25, this company was doing, you know, 389 million in revenue. And this year you're guiding to, around 235, 230 at the midpoint. So just fundamentally what happened?

Where did the revenue go? Well, you know, thanks, Pat, for the question. And, you know, if you look at this scenario, I mean, the company used to do, you know, 90, 100 million in a quarter. It used to do 43 deals. It used to do, you know, bookings were very large numbers. You look in the last five quarters. I mean, sales just fell off the cliff. And the product is great, the customers are happy. There's no question of market size. I mean, come on.

I've been Talking about Enterprise AI since 2010, and I was the only person in the world talking about it until probably 2022, when. Till November 2022. And we had a little inflection point there. And now Tom's not the only person in the world who thinks there's a market in enterprise AI. So we have a great product, we have a huge market, we have satisfied customers. And, and the sales discipline has just been surreal, Pat. I mean, this is in. That's, you know, that's where the revenue numbers come from.

That's where the RPO comes from. That's where the profitability or the lack thereof comes from. It's basically sales execution. It's been miserable. It's reflected in all the operating results. It is completely unacceptable. And it's not that hard to fix. It is a. You know, I accept all the criticism the company has received. I think it's well deserved. Okay. I really do. I think the revenue multiple is well earned. It is. But the good news, not that hard to turn around.

And so I think we fixed the sales problem. It fixes revenue growth, it fixes rpo, it fixes, you know, cash generation. It fixes everything. And so, you know, for those, Pat, you know me a little bit and, you know, I'm not entirely unfamiliar with enterprise sales. Maybe I have a little experience in that. So, you know, I think this is definitely a turnaround situation. We know how to fix it. The plan's in place and standby. Great, thank you. And as a follow up, so totally hear you on the sales side, but you know, for the company, Churn must have been bigger than you wanted too.

And non renewals must have been bigger than you wanted. What, what did you learn about that? Like what was causing, what was causing the existing customers to spend so much less with you than they did before? There's a number of issues there. I'm not actually sure that this Churn issue is really true. Could somebody help me with that? I'm not sure that's true, Pat. I think it really is sales execution.

Thomas M. Siebel

But yeah, we have not experienced significant loss of production customers. I'm not sure that's true, but I think it really is sales execution. Market's huge, product's great, customers are happy. This, I think this is pretty fundamental. No question we see this as a turnaround situation and that's what we're focused on. We're coming off of coming off of performance that is just completely unacceptable, laughably unacceptable. And we're going to take a bat in the teeth for that.

We deserve it. And now we're focused on turning this business around and focused on return to shareholders. And I think we can do that in a pretty big way. Okay, thank you. I'll pass it on. Thank you.

OPERATOR

Thank you. One moment for the next question. And our next question will be coming from the line of Rati Sultan of ubs. Please go ahead.

Rati Sultan (Equity Analyst)

Samia, thanks for taking the question. And Tom, good to see you back in the saddle. I want to start on the federal side. So you know your comments on C3AI Federal. You know, how is the ramp of the $450 million contract ceiling with the US Air Force tracking relative to your expectations and how is sort of the restructuring of C3I Federal impacted that?

Thomas M. Siebel

Wasn't the RSO a hundred million dollar contract? Celie, you know, the honest answer is I am not. You know, I have not been that in touch with the operating details of the business in the last four quarters and you know, I haven't looked into that. I think the RSO (Rapid Sustainment Office) contract was $100 million. But honestly, I'm sorry it got increased after. Oh, did it? Okay. I'm sorry. It's a legitimate question and I don't know and I'll find out and we'll get back to you.

Rati Sultan (Equity Analyst)

No problem. No problem. Yeah, no problem at all. Just attached maybe on the fiscal 27 guide as we calibrate our models, could you just help us understand the moving parts around license and PEs embedded in

the guide this year? And maybe just post restructuring, how should we be thinking about the role demonstration licenses in the growth strategy post restructuring. Thank you.

Nitesh

Yeah. Hi, Radi. As you know, we guide to total revenue and as it relates to PEs, or prioritized engineering services, we expect DES to continue to contribute a vast share of our total professional services revenue. And in terms of professional services mix, expected to be between 10 to 15% of total revenue.

Thomas M. Siebel

Including PEs. Including PEs. And as it relates to revenue from demo licenses, let me try this. It's a very legitimate question, ladies and gentlemen. I think it's a. Don't know. I mean we have changed everything about the sales organization. We have changed everything about go to market. And I think that while it's a very legitimate question, how much is going to be professional services, how much was demo license, how much is going to be pes? I don't think we really know.

Okay. We have a plan to grow revenue, but we really. And I'm sorry that this doesn't work in helping you fill out your spreadsheet. But we don't know. All we can assure you is that it's going to be the revenue will be properly accounted for. And we can't really tell you what that mix. He is a. Make no mistake. We are focused on software revenue, guys, not services, ladies and gentlemen, software revenue. We understand the difference and that's what we're focused on.

But it's hard to tell how this is going to shake out. And I know that's not the answer you want to hear, but it's true.

Rati Sultan (Equity Analyst)

Got it. Thanks.

OPERATOR

Thank you. One moment for the next question, please. And our next question is coming from the line of Matthew Calturi of Needham and Company. Please go ahead.

Matt Cliche

Hey guys, this is Matt Cliche. I'm from Mike Sikos over at Needham. Thanks for taking our questions. Tom, welcome back and great to hear that your health issues have been largely resolved. You mentioned in your prepared remarks that you're going to look at penetrating territories and large accounts rather than the more narrow focus on relatively small opportunities that was put in place in the past.

You guys had sort of run like a small amount of deals that were large in size. And then we pivoted over to the pilot model. What exactly do you have in mind going forward? Is there sort of a sweet spot in the middle there or how are you thinking about that balance?

Thomas M. Siebel

How do I describe this? There was kind of a funny issue. I'm sorry, your first name one more time. Matt. Matt. This is kind of a funny issue, Matt. Okay. When we looked into it in the way that territory assignments have worked okay. In the last year, and the truth of the matter is they had a focus on a limited number of major accounts rather than looking at the entire market opportunity. So I would say if you look at Europe or North America, they might have been only focused on really, I know this is hard to believe, but the sales organization might have been focused on total of 100 to 150 accounts in each of those organizations.

And so I know it's hard to believe, but it really is true. And so now you will see those North American and federal and European sales organizations focused on order of 1000 account opportunities rather than maybe even more than that, rather than order of 100. So it's hard to believe that's the way it was set up. But it really was set up that way and we fixed it. Now, within that, they'll be focused on large deals. What's a large deal? I would say, you know, 50 million to a couple of billion.

They'll be focused on medium sized deals, which might be 5 million to 50, and they'll be focused on smaller deals, which might be, you know, half million to 2 million. I know there's a big gap there, but you get the idea. Got it.

Matt Cliche

Yeah, that's very helpful. And then just broadly, like, where are you seeing customers find budget for AI initiatives? And are you seeing any change in sales cycles or just the pace of adoption as organizations race to capture ROI and push AI initiatives?

Thomas M. Siebel

Well, as you do your market analysis, as I'm sure you've done, Matt, on the pure kind of enterprise AI market, which would include Palantir C3 and others, it was about a $6 billion market in 2025, it's about a $10 billion market in 2026, and it's projected to be about a $15 billion market in 2027. So it doesn't look like these people are being too starved for opportunities.

It's a $10 billion market growing at a 50% compound annual growth rate, which people are finding the budgets, that's for sure.

Matt Cliche

Great. Thanks so much.

OPERATOR

Thank you. One moment for the next question. And our next question is coming from the line of Koji Akeda of Bank of America. Please go ahead.

George McGrean

Hi, this is George McGrean for Koji Aceda. Thanks for taking our question. And you know, I kind of wanted to ask maybe kind of a two in one. And when we think about ipds and kind of over time how the quantity of ipds has kind of trended downwards, where would you say are there use cases or customer profiles that have been Kind of harder to get recently. And then conversely, which type of customers or use cases are you most excited about?

About kind of driving and capturing over

the next few quarters? Thank you.

Thomas M. Siebel

Well, it's, you know, as evidence from Palantir and others, and Palantir has a go to market motion that is very much analogous to an ipd. I mean, the idea that the market opportunity isn't big is, I think, inconsistent with the performance you've seen out of Palantir. The market is clearly there and the execution is pretty damn good. I mean, pretty impressive. So I don't think there's the question of the market being there.

Where do we see market being there? Do I think the execution on behalf of C3 has been acceptable? It has been completely unacceptable, George. And if you want us to fall on our sword or eviscerate ourselves in a public audience, put me on stage, give me the stake, give me a sword, and I'll do it.

But the opportunity going forward looks the pure enterprise AI market, which enterprise AI application market, which we are most certainly in, looks like a $10 billion market growing at a 50% compound growth rate. We're not even growing. We're not growing off a small base number, and we're growing at a level, you know, smaller than the market at large. I mean, that's just unacceptable. Do we think we know how to fix it? Yeah. Where's the market opportunity?

It's in financial services. Okay. Is it a consumer packaged goods? It is. Is it in defense and intelligence? It is. Is it in agribusiness? It is. Is it in aerospace? Yes, sir, it is. So I don't think as we get into 28, 29, 30, I don't think there's anybody who believes that all of those markets don't address enterprise AI. You know, they do, and you believe. And even bank of America probably believes that today. Okay.

And you didn't in 20, 16, 17, 18, 19, 20 or 21? I think even bank of America believes that today. And we just intend to play our full role in.

OPERATOR

Thank you. And that ends the Q and A session for today. I would like to turn the call back over to Mrs. Hebel for closing remarks. Please go ahead.

Hebel

Ladies and gentlemen, thank you for the courtesy of your time. We really appreciate it. We hope we used it effectively. I hope you have a feel for the plan, and we look very much forward to reporting on you, to you in the progress in the next three months and six months. Thank you very much.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.