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C3.ai Q3 2025 Earnings Show Revenue Growth Amid Challenges

C3.ai reported Q3 2025 earnings, highlighting 26% revenue growth year over year. Despite challenges, their strategic alliances are enhancing market positioning and sales efficiencies, indicating potential for positive stock momentum.

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AI Rating:   7
Financial Performance Overview
The report shows strong financials for C3.ai despite some concerns. In Q3 fiscal 2025, total revenue rose to $98.8 million, reflecting a 26% increase year-over-year, while subscription revenue grew to $85.7 million, a 22% increase. The gross profit stood at $68.2 million, resulting in a robust gross margin of 69%. Although there was a non-GAAP operating loss of $23.1 million, it was better than previously guided losses, showcasing improved operational efficiency.

Revenue Growth
The notable growth in total revenue signals a promising direction for C3.ai. The company's partnerships with giants like Microsoft and AWS have played a significant role in boosting their sales pipeline, highlighted by the closure of 28 new agreements, marking a 460% increase quarter-over-quarter in joint sales implementations. This not only illustrates operational success but also reflects a growing customer trust in their offerings.

Free Cash Flow
While the report mentions negative free cash flow of $22.4 million, which is an improvement from the previous year's $45.1 million, it is a point of concern for investors regarding liquidity and ongoing investment capability. Their indications of potentially being free cash flow positive in Q4 could alleviate investor worries if achieved.

Strategic Alliances
The report emphasizes the importance of strategic alliances. The collaborations with Microsoft, AWS, and McKinsey QuantumBlack are expected to accelerate growth by expanding market reach and improving operational frameworks. Their sales cycles have shortened, leading to an increase in the qualified sales pipeline.

Overall Outlook
Despite challenges in profitability, the revenue growth and strategic partnerships offer a solid foundation for C3.ai's future. Investors should monitor the upcoming quarters closely, especially the anticipated revenue growth and operational adjustments for further signs of stability and strength.
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