C3 AI switches business models and reduces sales forecast; stock plunges

C3.ai Inc. shares plunged more than 15% in after-hours trading Wednesday, after the company’s chief executive announced a changed business model and reduced annual revenue guidance.

C3 AI AI,
-2.23%
CEO Thomas Siebel announced that the software company would now charge customers based on how much they use C3’s software, instead of requiring a specific subscription price. Siebel said the change would bring C3’s pricing model in line with companies such as Snowflake Inc. SNOW,
-2.05%
and major cloud-computing providers, and promised a faster pathway to adjusted profit, now expected in the 2024 fiscal year.

“The economic downturn is real,” Siebel said in a statement. “Our customers are scrutinizing big deals like never before, which also makes this a smart time to launch consumption pricing.”

C3 executives guided for fiscal second-quarter revenue of $60 million to $62 million, while analysts on average were modeling sales of $71.7 million. They reduced their annual revenue forecast by roughly 17%, to a range of $255 million to $270 million from a previously stated range of $308 million to $316 million.

For the fiscal first quarter, C3 reported a loss of $71.9 million, or 67 cents a share, on revenue of $65.3 million, up from $52.4 million a year ago. After adjusting for stock compensation and related payroll taxes, the company reported a loss of 12 cents a share, improving from an adjusted loss of 22 cents a share last year. Analysts on average expected an adjusted loss of 28 cents a share on sales of $66 million, according to FactSet.

C3 went public in late 2020 at $42 a share, and saw the stock hit triple digits in its first day of trading. Shares have suffered since, closing Wednesday at $18 and falling close to $15 in after-hours trading following the announcement. C3 stock has declined 42.4% so far this year, as the S&P 500 index SPX,
-0.78%
has fallen 16.4%.

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