Is C3.ai Stock a Buy Before Feb. 26? Here Is What History Suggests.

Over the last few weeks, companies have been reporting earnings for the fourth quarter and full calendar year 2024. For most technology investors, big tech stocks in the “Magnificent Seven,” as well as emerging players such as Palantir Technologies, received most of the attention across Wall Street.

With earnings season coming to a close, there are still a few companies in the artificial intelligence (AI) race worth watching. One company often compared to Palantir is a software business called C3.ai (AI -4.68%).

On Feb. 26, C3.ai is scheduled to announce financial results for its fiscal third quarter (period ending Jan. 31). Is C3.ai stock a buy before it reports earnings next week? Let’s look at some recent developments at the company and analyze historical trends to help us find out.

C3.ai has some good things going for it, but…

The chart illustrates C3.ai’s quarterly revenue trends over the last three years. Not only is the company witnessing impressive growth, but its sales are actually accelerating — indicated by the steepening slope of the line.

AI Revenue (Quarterly) data by YCharts

One way C3.ai has been able to jump-start its revenue is through a partner ecosystem. The company works closely with cloud hyperscalers such as Microsoft, Alphabet, and Amazon, in addition to leading consulting firms Booz Allen Hamilton and McKinsey & Company.

Last quarter, over 60% of C3.ai’s business came through its partner network. Given soaring demand for AI applications and an increasing involvement from consulting firms helping businesses integrate their AI platforms, I think C3.ai is positioned to continue benefiting from these partners.

Image source: Getty Images.

… the company has a long way to go

While C3.ai’s various partnerships have helped the company diversify its revenue base and accelerate sales, the trends depicted in the chart below tell a different side to the company’s story.

AI Net Income (Quarterly) data by YCharts

Despite rapid growth across the top line, C3.ai remains unprofitable. The consistency of the company’s net losses and negative free cash flow aren’t particularly encouraging. While many growth stocks will experience periods of cash burn, eventually accelerating revenue should help widen margins and eventually lead to profitability. Per the chart, that isn’t really the case with C3.ai.

Given the company is materially smaller than its software peers — namely Palantir — and its lack of profitability, it’s hard to justify a compelling reason to buy this stock. Nevertheless, let’s assess some historical trends around C3.ai and its earnings reports before making a final judgment.

Is C3.ai stock a buy right now?

The chart illustrates C3.ai’s stock movement over the last three years. In addition, I’ve annotated the chart to depict the company’s earnings reports — as illustrated by the purple circles with the letter “E” in the middle.

AI data by YCharts

I see a pretty clear trend here. It looks like C3.ai stock generally begins to rise prior to reporting earnings — only to fall immediately afterward. In my opinion, this is a stock that investors want to like, but consistently are let down. What’s more is that given its speculative nature, C3.ai comes across as more of a stock to trade rather than own.

In my eyes, it is not worth getting caught up in a momentum stock like C3.ai — there’s just too much risk. Instead, I’d look for more established players in the AI software realm that feature a combination of robust revenue growth, consistent profitability, and strong forward guidance. Unfortunately, C3.ai does not meet those criteria. For those reasons, I would not buy the stock before the company reports earnings on Feb. 26.