One of the most popular artificial intelligence (AI) stocks during the past couple of years has been the one with AI as its ticker symbol: C3.ai (AI -4.26%).
The company provides businesses with turnkey AI solutions that can help make it easy for its customers to integrate AI into their operations. And the rising popularity of chatbots and AI as a whole has proved to be a solid growth opportunity for the business.
Now that the company has reported another strong quarterly performance and unveiled a key partnership with Microsoft, has this AI stock finally proved its doubters wrong?
Its growth is accelerating, and that trend may continue
Last week, C3.ai announced results for its 2025 fiscal second-quarter. The top-line numbers were strong: Sales for the period ended Oct. 31 rose by 29% to more than $94 million. Even more impressive, it was the company's seventh straight quarter of accelerating revenue growth rate -- a year ago, it was 17%.
In the previous month, investors also learned that management is partnering with tech giant Microsoft in a deal that could help C3.ai expand its Enterprise AI platform on Microsoft Azure.
Since announcing that partnership on Nov. 19, the stock has risen by roughly 65%. This suggests that investors are likely more bullish on the company's opportunities with Microsoft than perhaps they are on C3.ai's own results thus far.
There hasn't been much progress on the bottom line
Although there has been a lot of positive news surrounding the top line and C3.ai's growth prospects, one significant issue remains: a lack of profitability. In the most recent quarter, the company reported a net loss of $66 million.
That was less than the $70 million loss it reported in the prior-year period, but it's just a very modest improvement, which may leave investors wanting more, especially given the strong demand the company is experiencing right now.
In the past, Chief Executive Officer Thomas M. Siebel referred to profitability as a "mathematical certainty" that would come with scale. But even as the business is growing, the bottom line isn't improving nearly fast enough to suggest profitability will be reached anytime soon.
Without drastically bringing down its operating expenses, which totaled $133 million this past quarter and were more than double the company's gross profit, it could be a long time before C3.ai achieves profitability, assuming it does at all.
Is C3.ai stock due for a correction?
The company has proved that it has some promising growth opportunities, especially with its deal with Microsoft potentially opening up some new doors. But there are still many question marks surrounding its ability to turn a profit because simply scaling up its operations may not lead its bottom line into the black anytime soon. And until that changes, there's plenty of reason to remain skeptical about the stock in the long run.
Such a large spike in the company's share price over the past month suggests that investors are pricing in a lot more revenue growth to come, and that the bar may be set even higher for C3.ai in the future. The stock is already extremely volatile, with a beta value of around 1.8 (meaning it rise and fall much more than the market as a whole), which can make it a particularly risky investment to hold. Any hint that things are slowing down with respect to AI-related spending could quickly send the stock into a tailspin.
Right now, investors are buying the hype and optimism surrounding the company, but if it can't get out of the red anytime soon, this rally may prove to be short-lived. Investors are still likely better off avoiding this AI stock and its wild swings.
