Here's Why You Should Avoid C3.ai Stock Despite 12% Surge in 6 Months

C3.ai AI shares have gained 12% in the trailing six-month period compared with the Zacks Computer & Technology sector’s return of 6.6%.The outperformance can be attributed to strong traction in its enterprise AI applications, particularly for C3 Generative AI.In the fiscal second quarter of 2025, C3.ai closed 58 agreements, 36 of which involved pilot projects. This represents a notable increase in demand for its Enterprise AI and Generative AI offerings.C3.ai Shares Beat SectorImage Source: Zacks Investment ResearchAI’s Strong Partner Base Boosts ProspectsC3.ai has been one of the prominent AI stocks in recent times thanks to strong demand for C3 Generative AI solutions and an expanding partner base that includes the three big cloud providers Amazon AMZN, Alphabet GOOGL and Microsoft MSFT.Partnerships with hyperscalers like Google Cloud, Amazon Web Services (AWS), and Microsoft Azure have driven 62% of the company’s agreements in the second quarter of fiscal 2025. This indicates that C3.ai’s partner network is critical in driving revenues and adopting its solutions.In the fiscal second quarter of 2025, C3.ai, in collaboration with Alphabet’s cloud business Google Cloud, closed 20 agreements, marking a 180% year-over-year increase. It was featured at Google’s Public Sector Summit in Washington, DC, while jointly hosting six executive roundtable discussions across North America and LATAM.C3.ai is also benefiting from its expanding partnership with Microsoft. It leverages Microsoft’s Azure platform to enhance its AI offerings and reach a broader customer base across sectors.AI Expands U.S. Government Partnerships With AI SolutionsC3.ai continues to build momentum in the public sector, particularly within the U.S. government. Building on this momentum in December 2024, C3.ai, in partnership with ECS, secured a task order from the U.S. Army’s Program Manager for Intelligence Systems & Analytics to modernize information collection management processes. The task order focuses on deploying the AI-driven C3 AI Decision Advantage application to optimize intelligence operations and reduce soldier workload.The company’s federal business also saw strong growth in the second quarter of fiscal 2025, securing new and expanded agreements with the U.S. Department of Defense, the U.S. Air Force, the U.S. Navy, the U.S. Army, the U.S. Marine Corps, the Defense Logistics Agency, the Chief Digital Artificial Intelligence Office, and the National Science Foundation.AI Offers Solid Top-Line Growth GuidanceC3.ai’s strong adoption of C3 Generative AI solutions and increased demand for its Enterprise AI software has been noteworthy.For third-quarter fiscal 2025, C3.ai expects revenues between $95.5 million and $100.5 million. For fiscal 2025, C3.ai expects revenues between $378 million and $398 million.Earnings Estimate Shows Mixed TrendThe Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is currently pegged at $97.97 million, indicating growth of 24.96% from the figure reported in the year-ago quarter.The consensus mark for loss is pegged at 25 cents per share, which remained unchanged over the past 30 days. The figure indicates a year-over-year decline of 92.31%.The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $388.16 million, indicating 29.57% growth year over year. The consensus mark for loss is pegged at 63 cents per share, which has increased by a penny over the past 30 days. The figure indicates a year-over-year decline of 34.04%.C3.ai, Inc. Price and Consensus C3.ai, Inc. price-consensus-chart | C3.ai, Inc. QuoteFind the latest EPS estimates and surprises on Zacks Earnings Calendar.What Should Investors Do With AI Stock?Despite strong demand for C3 Generative AI solutions and an expanding partner base, C3.ai is suffering from stiff competition in the enterprise AI sector. This intense competition clouds C3.ai’s efforts to gain a stronger foothold in the market.As a result, C3.ai has made plans to invest aggressively in its offerings to secure market share. However, this strategy is expected to keep margins under pressure in the near term, making the stock risky for investors.AI is also suffering from macroeconomic uncertainties, which are impacting its development, adoption, and integration across industries.We point out that C3.ai stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Sales, AI is trading at 9.09X, higher than the sector’s 7X.Price/Sales (F12M)Image Source: Zacks Investment ResearchAI currently carries a Zacks Rank #4 (Sell), which implies that investors should stay away from investing in this stock at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report C3.ai, Inc. (AI): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks