C3.ai Struggles to Reignite Growth Amid New Competitors

C3.ai's stock struggles, trading 40% below IPO prices, but shows signs of renewed top-line growth and extended contracts with key clients. As competitors like Applied Digital and DigitalOcean emerge, the landscape becomes complex for investors.

Date: 08-06-2025

AI Rating: 5

Investor Outlook on C3.ai
C3.ai's trading status, approximately 40% below its IPO price, raises concerns among investors. While it has genuinely experienced top-line growth recently, the company's path to profitability seems uncertain. The ongoing customer concentration issue, primarily with Baker Hughes, which contributes to over 30% of its revenue, adds risk to its dependency on large clients. Furthermore, its growth is offset by a high sales multiple at 7.5 times projected sales.

Considering the forecasts, analysts anticipate revenue growth at a compound annual growth rate (CAGR) of 19% from fiscal 2025 to fiscal 2027. However, this optimistic outlook must be coupled with the reality that C3.ai is not expected to reach profitability soon, as heavy investments in AI services continue. Even if it meets expectations, projections indicate a potential market cap decline in the coming years, accentuating a possible mispricing scenario.

Competitive Landscape: Applied Digital & DigitalOcean
Applied Digital has showcased remarkable revenue growth expectations, potentially eclipsing C3.ai, with a CAGR of 48% from fiscal 2024 to fiscal 2027. It is also transitioning into a REIT structure, providing possible tax benefits, but this comes amidst the challenge of divesting a fast-growing cloud computing segment. If achieved, this divestment could bolster Applied Digital's position against C3.ai.

DigitalOcean, profitably navigating the cloud infrastructure sector, is another competitor benefiting from the growing small-to-medium enterprise market. Analysts expect its revenue and EPS to continue growing by 14% and 12% CAGR respectively. Its current valuation remains low compared to C3.ai, with pricing at just 3.1 times this year's sales, placing it in a favorable position among investors, especially as it seeks larger deal opportunities.

In light of the evolving competitive landscape and mixed indicators from C3.ai's performance metrics, investors may need to carefully weigh their options and reconsider portfolio allocations in AI-related stocks going forward.

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