Executive Summary
C3.ai, Inc. posted QQ1 2026 revenue of $70.3 million, down 19% year over year and 35% quarter over quarter, with a heavy emphasis on subscription revenue ($60.3 million, 86% of total) and a material contribution from non-recurring IPD-related activities. Non-GAAP gross margin was 52%, reflecting a higher mix of IPD costs and a reduced share of demonstration licenses, while non-GAAP operating loss widened to $57.8 million and non-GAAP net loss to $49.8 million (EPS -$0.37). The quarter also featured operational leadership changes and a comprehensive restructuring of the sales and services organizations, culminating in the appointment of Stephen Ehigian as CEO and a new Chief Commercial Officer to streamline execution. Management framed these actions as a necessary reset to unlock a substantial long-term opportunity in enterprise AI, supported by a broad IPD pipeline and an expanding partner ecosystem. liquidity remains robust, with total cash and marketable securities of $711.9 million and a remaining cash balance (cash and cash equivalents) of roughly $81.0 million. However, the company withdrew prior guidance and guided only for QQ2 revenue of $72–$80 million and QQ2 non-GAAP operating loss of $49.5–$57.5 million, signaling near-term profitability and growth will depend on the pace of cost discipline, IPD-to-subscription conversions, and the ramp of partner-led demand.
Key Performance Indicators
QoQ: -35.38% | YoY:-19.44%
QoQ: -60.83% | YoY:-49.31%
QoQ: -40.30% | YoY:-71.96%
QoQ: -46.51% | YoY:-85.86%
QoQ: -43.33% | YoY:-72.00%
Key Insights
Revenue: Total QQ1 2026 revenue $70.3m, YoY -19.4%, QoQ -35.4% (subscription $60.3m, 86% of revenue; demo licenses $17.9m; professional services $10.0m; PES $8.7m; subscription+PES $69.0m, 98% of total). Gross Profit: Non-GAAP gross profit $36.3m; gross margin 52%; professional services gross margin >80%. Profitability: Non-GAAP operating loss $57.8m; non-GAAP net loss $49.8m; non-GAAP EPS -$0.37; weighted average shares 135.375m. Cash Flow & Liquidity: Operating cash flow -$33.5m; free c...
Financial Highlights
Revenue: Total QQ1 2026 revenue $70.3m, YoY -19.4%, QoQ -35.4% (subscription $60.3m, 86% of revenue; demo licenses $17.9m; professional services $10.0m; PES $8.7m; subscription+PES $69.0m, 98% of total). Gross Profit: Non-GAAP gross profit $36.3m; gross margin 52%; professional services gross margin >80%. Profitability: Non-GAAP operating loss $57.8m; non-GAAP net loss $49.8m; non-GAAP EPS -$0.37; weighted average shares 135.375m. Cash Flow & Liquidity: Operating cash flow -$33.5m; free cash flow -$34.3m; cash, cash equivalents, and marketable securities $711.9m; cash at end of period roughly $93.5m; cash & equivalents $80.9m; short-term investments $630.96m; net debt / net cash position -$80.9m. Balance Sheet: Total assets $968.7m; total liabilities $169.9m; stockholders’ equity $798.8m; retained earnings -$1.495b. IPD pipeline: 28 initial production deployments in Q1; cumulative IPDs 374 with 266 active; 60 large-scale engagements across state/local government, manufacturing, federal, defense. Guidance: QQ2 revenue: $72m–$80m; QQ2 non-GAAP op loss: $49.5m–$57.5m; prior guidance withdrawn; Q3 and full-year guidance to be provided with QQ2 results.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
70.26M |
-19.44% |
-35.38% |
| Gross Profit |
26.44M |
-49.31% |
-60.83% |
| Operating Income |
-124.82M |
-71.96% |
-40.30% |
| Net Income |
-116.77M |
-85.86% |
-46.51% |
| EPS |
-0.86 |
-72.00% |
-43.33% |
Management Commentary
- Strategy and leadership: Management emphasized a comprehensive global restructuring of sales and services and the appointment of Stephen Ehigian as CEO to drive growth and coherence across regions. Tom Siebel described the changes as necessary to restore execution capability, stating, “we have completely restructured our sales and service organizations globally.” - Market opportunity and product: The execs underscored the magnitude of the enterprise AI opportunity, with Stephen Ehigian highlighting, “the market opportunity here for enterprise AI is enormous,” and the team pointing to the Agentic AI platform and 131+ enterprise AI applications as a differentiator. - Execution risk and recovery plan: Tom acknowledged the miss as a result of “poor sales execution and poor resource coordination,” and outlined the renewal of leadership that would “dramatically ramp up the sales and service capacity globally.” Hitesh noted that Q2 guidance is anchored to August sales activity and pipeline under the new leadership, with a plan to resume broader guidance later in the year. - Partner-led dynamics and ecosystem: The company highlighted that 90% of deals in QQ1 were partner-led, with strong collaboration with Azure, AWS, GCP, and Quantum Black/McKinsey, signaling a scalable go-to-market approach leveraging cloud and consulting ecosystems. - Product/strategy acceleration: Siebel called out the strategic integrator program licensing the C3 Agentic AI platform, envisaging a large growth line with OEMs, SI, and government customers. quotes: “the financial results of the first quarter were completely unacceptable,” and “the strategic integrator program is being well received by OEMs, systems integrators, into the defense, intelligence, and civilian government communities.”
"the financial results of the first quarter were completely unacceptable. And completely unacceptable in virtually every respect."
— Tom Siebel
"the market opportunity here for enterprise AI is enormous. Every company, every government is exploring how to transition away from testing and experimenting with AI to actually rolling out across their core operations and workflows."
— Stephen Ehigian
Forward Guidance
Near-term: QQ2 revenue guidance of $72–$80 million and QQ2 non-GAAP operating loss guidance of $49.5–$57.5 million reflect ongoing operating discipline amid leadership transition. Management withdrew prior full-year guidance, signaling a plan to provide QQ3 and full-year 2026 guidance after stabilizing execution. Mid-term: Analyst consensus cited in the call suggested 2026 revenue in the $290–$300 million range, implying material upside if the partner-led go-to-market and IPD-to-subscription conversion momentum accelerates. Key catalysts include: - Accelerated conversion of IPDs to recurring subscriptions as support capacity expands and economies of scale improve. - Incremental revenue from the strategic integrator program (OEM and SI channel) leveraging the Agentic AI platform. - Increased non-GAAP profitability and free cash flow as scale improves and IPD-related costs normalize. - Strengthening of the sales force and GTM with the new CEO and commercial leadership, reducing channel conflict and improving win rates. Risks to monitor: execution risk during the transition, dependences on partner ecosystems (Azure, AWS, GCP), potential for IPD costs to stay elevated, and the cadence of IPD-to-subscription conversions before a meaningful gross margin expansion materializes.