C3 AI delivers strong Q2 revenue growth with 29% increase, expands Microsoft partnership

C3.ai, Inc. (C3 AI) posted impressive results for its fiscal second quarter ending October 31, 2024, with a 29% year-over-year revenue increase, reaching $94.3 million. CEO Thomas M. Siebel attributed the growth to the company’s strategic focus on enterprise AI solutions, bolstered by a significant partnership expansion with Microsoft Azure. The collaboration aims to accelerate AI adoption among enterprises through streamlined sales processes and advanced technology integration.

Subscription revenue dominated the earnings, constituting 86% of total revenue at $81.2 million—a 22% increase from the same period last year. Additionally, the combined revenue from subscriptions and prioritized engineering services hit $90.8 million, a 27% rise year-over-year.

Financial performance underscores momentum

Despite a reported GAAP net loss of $0.52 per share, the adjusted non-GAAP loss stood at $0.06 per share, surpassing market expectations of $0.16 per share. Gross profit improved significantly, with a GAAP margin of 61% and a non-GAAP margin of 70%, reflecting efficient cost management.

Key collaboration with Microsoft

C3 AI signed a transformative five-and-a-half-year global alliance with Microsoft in late September. This agreement integrates C3 AI’s solutions into Microsoft’s Azure Marketplace and incentivizes Azure’s global sales teams to promote C3 AI products. Microsoft will also subsidize pilot programs, shortening sales cycles and making enterprise AI solutions accessible to Fortune 500 companies.

Siebel described the partnership as pivotal, asserting that it positions C3 AI to become a cornerstone of enterprise AI transformation by leveraging Microsoft’s expansive market reach.

Federal and commercial advancements

The company strengthened its presence across federal agencies and commercial entities, securing key agreements with ExxonMobil, Shell, and Dow. Federal initiatives included collaboration with the U.S. Department of Defense to enhance intelligence operations through AI-powered applications, driving predictive capabilities in defense logistics.

Additionally, C3 AI’s Generative AI solutions made strides, with 15 pilot projects launched across sectors, including healthcare and energy. These projects transitioned into production for clients like Dow and Florida Crystals, reinforcing C3 AI’s position in the generative AI landscape.

Outlook for FY 2025

Looking ahead, C3 AI has raised its full-year revenue guidance to $378–$398 million, reflecting confidence in its growth trajectory. The company anticipates continued expansion fueled by its alliances, particularly with Microsoft and Google Cloud, alongside an emphasis on innovative AI applications.