C3.ai (AI) reports its fiscal second quarter, August to October, in early December. The date is not announced yet; last year it reported on Wednesday, December 3, after the close. The stock closed at $11.69 on November 6, 47% above its February low close of $7.95.
This is a turnaround quarter. Revenue fell from $75.1M a year earlier to $52.4M in the first quarter. Tom Siebel returned as chief executive in May, and the company cut about 40% of its staff. The first quarter still came in above guidance, and free cash flow turned positive at $2.1M.
Most of Q2 was signed before it began. Subscriptions were 94% of first-quarter revenue, and they are recognized over the contract term. Three numbers from the first-quarter 10-Q point to a small rise. Deferred revenue grew $17.3M in three months, from $36.4M to $53.7M. Bookings rose 73% from the prior quarter, and federal bookings rose 138% from a year earlier. Remaining performance obligations held at $200.0M while the company recognized $52.4M of revenue.
The weak spot is new business. About 1% of first-quarter subscription revenue came from new customers, against 32% a year earlier. That suits a small beat, not a large one.
Our build. Subscriptions grow to $50.6M and services hold near $3.0M, for $53.6M: 0.8% above the $53.2M consensus from 13 analysts and above the $53.0M middle of the $51M to $55M guide. A 45% non-GAAP gross margin, the "mid-40s" the CFO guided, gives a $36.9M non-GAAP operating loss, inside the guide of $34.5M to $42.5M, and EPS of -$0.20 against -$0.21.
The cost reset is the bigger story. Non-GAAP expenses fell from $128.1M a year earlier to $88.5M in the first quarter, and management expects about $135M of annual savings, some arriving only in the second half. Cash and securities were $651.1M at July 31, with no borrowings.
The full-year guide is the test. Revenue of $210M to $240M needs $104M to $134M from the last two quarters, against about $106M in the first two if Q2 lands at our forecast. We get $221.0M for the year, 0.3% below the $221.7M consensus, and that still needs revenue to grow every quarter from here.
What to watch: deferred revenue, the share of revenue from new customers, federal bookings and whether the full-year guide holds.
The full preview, with the quarterly revenue build, the cost bridge and the scenario range, is here: C3.ai (AI) Q2 FY27 Earnings Preview and Forecast.
Source: Equibles. Consensus as of October 29.
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