C3.ai, Inc. Q2 FY2025 earnings call

• The company had another outstanding quarter with strong top and bottom-line performance, marking the seventh consecutive quarter of accelerating revenue growth. Revenue grew from 11% in Q1 '24 to 29% in Q2 '25.
• Subscription revenue was $81.2 million, up 22% year-over-year. Subscription and Prioritized Engineering Services revenue combined was $90.8 million, 96% of total revenue, up 27% from the prior year. Non-BakerHughes revenue grew 41% year-over-year.
• New Microsoft alliance provided a tailwind, with the partner ecosystem including Google, AWS, Microsoft, etc. 62% of agreements closed with hyperscalers.
• Closed 58 agreements in Q2, including 36 pilots. Entered new/expanded agreements with companies like Exxon Mobil, Coke, Dow, and federal agencies.
• Generative AI deployed in production, closed 15 new generative AI agreements, introduced C3 Generative AI Accelerator program. Award of US patent for agentic AI strengthened market position.

Total revenue for the quarter was $94.3 million, exceeding the high-end of revenue guidance. Subscription revenue was $81.2 million, increasing 22% year-over-year. Subscription and Prioritized Engineering Services revenue combined was $90.8 million, accounting for 96% of total revenue, an increase of 27% compared to the prior year. Non-BakerHughes revenue grew by 41% year-over-year. Non-GAAP gross profit was $66.3 million, representing approximately a 70% gross margin.

• Q3 fiscal year 2025 revenue guidance: $95.5 million to $100.5 million.
• Fiscal year 2025 revenue guidance raised to $378 million to $398 million.
• Q3 non-GAAP operating loss guidance: $38.6 million to $46.6 million. Fiscal year 2025 non-GAAP operating loss guidance updated to $105 million to $135 million.
• No longer targeting cash flow positive for full fiscal year 2025, but expects Q4 2025 to be cash flow positive.

• Dependence on Baker Hughes agreement, though revenue mix is diversified.
• Complexities in modeling the AI computing business, leading to challenges in financial forecasting.
• Various risks and uncertainties that could cause actual results to differ materially from expectations, as per SEC filings.

Q: History of the relationship with Microsoft and thoughts on federal spending change under the new administration?

A: Tom Siebel discussed that he and Judson Altoff (Microsoft's Chief Customer Officer) coordinated the agreement. He expects a dramatic acceleration of AI adoption in the federal government, especially in the defense and intelligence community.

Q: What's unique about C3.ai compared to Microsoft, competition, and impact on revenue?

A: C3.ai provides turnkey applications using Azure AI services. It's positioned as Microsoft's preferred Enterprise AI partner. Sales force expansion from ~100 to potentially ~10,000 will drive revenue.

Q: Cash flow pushout and linkage to unbilled receivables?

A: Hitesh Lath stated investing in market share is necessary, expects cash flow positive in fiscal 2026. Explained Prioritized Engineering Services and that unbilled receivables are part of normal operations.