Zhitong Finance APP learned that $C3.ai (AI.US)$ First quarter subscription revenue and full-year revenue guidance were lower than expected, and analysts from Bank of America Securities and Morgan Stanley also lowered their target price for C3.ai after the company announced its first quarter financial performance.

The financial report shows that C3.ai's first quarter total revenue increased by 20.5% to $87.2 million, better than the analyst's expected $86.94 million; adjusted loss per share was $0.05, market expectation was a loss of $0.13 per share. However, facing high interest rates and unstable business, the company's cautious attitude towards investment in new software has affected the demand for C3.ai products. The company's first quarter subscription revenue was $73.5 million, lower than the average analyst's expectation of $79.1 million. Although the company's total revenue is slightly higher than expected, the significant decline in subscription revenue reflects the general concerns about corporate spending during periods of economic uncertainty. Looking ahead, the company maintains its revenue expectation for the fiscal year 2025 between $0.37 billion and $0.395 billion, with the mid-range below the analyst's expected $0.3839 billion.

Bank of America Securities reiterated its "underperform" rating on c3.ai, pointing out that the company's growth and profit margin situation remains poor. The bank also lowered c3.ai's target price from $24 to $20, citing limited potential for accelerated revenue growth, profit margin expansion, and bottoming out of backlogged orders.

Analysts at Bank of America Securities led by Brad Sills stated that c3.ai reported moderate growth in subscription revenue (up 19.7% year-on-year, higher than the bank's forecast of 19%), but maintaining unchanged revenue guidance for fiscal year 2025 does not mean the company has meaningfully participated in the AI adoption cycle.

Analysts point out that c3.ai's pilot trading indicators once again show a positive trend, with 52 transactions in the first quarter, higher than the 34 transactions in the fourth quarter of fiscal year 2024. However, analysts add that pilot business has not yet translated into substantial subscription revenue growth so far.

Brad Sills and his team pointed out that the company is still going through the transition from subscription to consumption, putting pressure on remaining performance obligations (RPO). The company's first quarter PRO decline reached a record 16% month-on-month, indicating limited visibility on when PRO will bottom out. Meanwhile, the company is investing for growth.

Analysts expect that pilot trading will bring more subscription revenue contributions. They also add that with the agreement term of 3 to 5 years, they expect RPO to bottom out and accelerate in the coming quarters. Analysts are closely watching this, as well as the subscription growth brought by pilot trading over the past two years. Analysts also hope for more continuity in the company's CFO office, as the turnover rate in that office has been a concern.

Morgan Stanley maintained its 'shareholding' rating on C3.ai, with a target price decreased from $23 to $21. Analysts led by Sanjit Singh stated that although the company's revenue growth has accelerated for six consecutive quarters, it is mainly driven by services, while software revenue is below market expectations.

Analysts state that the signed agreements, pilots, and contributions from partners are all showing strong momentum, but they are sticking with their 'shareholding' rating on the stock due to underperforming revenue growth and operating margin.