C3.ai Inc. (NYSE: AI), just announced an alliance with Microsoft Corp. (NASDAQ:MSFT).
At the time of writing, shares in Enterprise Artificial Intelligence Company are up by 25%.
According to a Tuesday press release, Microsoft is now the “preferred provider of cloud services for C3 AI” and it will also help the company market its products.
The C3.ai share price is down by about 10% from its high for the year to date in late February.
The MSFT announcement doesn’t have much impact on C3.ai
Microsoft hopes that this agreement will help to “improve existing capabilities and introduce innovative solutions, which help our mutual customers maximise delivery of high value enterprise AI with Azure.”
There’s still reason to think that C3 shareholders are reacting too strongly to this news.
It’s not because it is a new company. This has been the case since well before pandemic. Did this help the company achieve profitability? But not so far.
The C3.ai management has not made any projections on the possible revenue that this alliance may generate over the next few quarters.
These concerns together should cause investors to question whether C3.ai’s stock can sustain its current gains in the long-term.
In its Q1 fiscal year, C3 exceeded experts’ expectations
C3.ai has been working with Microsoft to deliver AI-enabled software since 2018 for notable clients such as Shell and Dow Inc.
Statista predicts that artificial intelligence will continue to grow with a rate greater than 28 percent annually through 2030.
C3 still lost 5 cents per share in the latest quarter reported, despite revenue increasing 42.2% year over year to $87.21 millions.
Analysts, however, had predicted a larger loss of 13 cents on $87.12 millions in revenue.
C3.ai’s stock is on the rise ever since its first quarter release.
Stock of C3.ai could fall to as low as $19.
The C3.ai investment is still risky despite exceeding expectations during the first quarter. Microsoft announced a strategic partnership with them today, as their subscription growth was slowing down.
This suggests that the artificial-intelligence company struggles to expand its client base and convert its pilot programs into contracts for a long time.
C3 also issued disappointing predictions for the entire year in September. C3 expects revenue in fiscal 2025 to be between $370 and $395 millions. Comparatively, experts had predicted $384 million.
The analysts of Deutsche Bank reduced their target price for C3.ai at that time from $22 to $19, warning about an approximately 40% drop in the stock’s value.
The stock price of C3.ai may have overreacted to Microsoft’s news. Here’s why. This article may change as new updates are released.
