According to a recent report, the global enterprise AI software market is estimated to grow at 24% CAGR from $18 billion in 2020 to reach $44 billion by 2024. Tom Siebel’s C3.ai (NYSE: AI) is a recently listed player in this market, which announced its third-quarter results that surpassed the market’s expectations.

C3.ai’s Financials

C3.ai’s third-quarter revenues grew 19% to $49.1 million, ahead of the market’s estimate by 2.3%. Adjusted loss per share of $0.23 surpassed the Street’s estimates of $0.16.

Its subscription revenues grew 23.3% over the year to $42.7 million. Professional service revenues dropped 3.7% to $6.4 million.

For the fourth quarter, C3.ai expects revenues of $50-$51 million, compared with the market’s forecast of $48.4 million.

C3.ai’s Offerings

C3.ai was set up in 2009 by entrepreneur Tom Siebel and Patricia House to become an enterprise AI software provider that can help organizations accelerate their digital transformation journey. Its AI suite provides comprehensive services that help organizations build enterprise-scale AI applications more efficiently and cost-effectively.

Today, the C3.ai suite offers four key products. Its core technology is a comprehensive application development and runtime environment that allow customers to rapidly design, develop, and deploy Enterprise AI applications of any type.

The second suite of offerings is the C3.ai Applications that have been built using the C3.ai Suite and include a large portfolio of industry-specific and application-specific turnkey AI solutions that can be immediately installed and deployed. C3.ai is also partnering with the likes of Microsoft and Adobe to deliver industry-specific AI CRM. As part of its tie-ups with these leaders, C3.ai has integrated the Microsoft CRM stack, the Adobe marketing automation stack, and its own stack to bring to the market a family of applications that offer AI-enabled CRM software.

Finally, its recently launched C3 AI Ex Machina is a predictive analytics application that empowers people to develop, scale, and produce AI-based insights without the need to write code. Users can use the simple and intuitive drop-down tools to apply predictive analytics to their business and improve the digitization of company operations. Users can solve a limitless amount of use cases, such as customer churn prevention, supplier delay mitigation, assess reliability prediction, and fraud detection.

It was also recently granted a patent for systems, methods, and devices for an enterprise AI application development platform. The patent protects the use of model-driven architecture for the design, development, deployment, and operation of next-gen cyber-physical software applications and business processes, the application of advanced data aggregation, data persistence, data analytics, and machine learning methods, as well as methods meant for implementing abstraction and continuous processing of aggregated data with a model-driven architecture. It also protects embedding capabilities in a model-driven architecture type system and the use of canonical data models.

C3.ai believes that it has a rapidly growing addressable market size. It pegs the market at $174 billion in 2020, growing to $271 billion in 2024. It includes enterprise AI software, enterprise infrastructure software, and enterprise applications market as part of this addressable opportunity.

I think C3.ai is in a strong position to address this market. In the third quarter, 86% of its revenue was its SaaS-based recurring revenue. 65% of that comes from applications that include a portfolio of offerings for various verticals such as banking and utilities. The remaining 35% of its software revenue comes from the platform where companies like Shell are running over 200 projects built on top of its platform. C3.ai believes that in a steady state, license revenue will contribute 60% of its revenues and the remaining 40% will come from its platform offerings.

C3.ai’s PaaS Strategy

C3.ai has a PaaS strategy that focuses on AI solutions. Its stack also includes highly verticalized offerings that cater to industries such as banking, utilities, transportation, health care, and retail. But it does not, as yet, have an ISV-focused PaaS strategy. An ISV strategy could help it open up its platform for more use-cases that expand its deployment in other verticals and, in turn, help these developers get access to a customer base looking for highly efficient AI-based solutions.

C3.ai’s stock is currently trading at $157.69 with a market capitalization of $18.6 billion. It touched a 52-week high of $166. 60 earlier this month. The stock had fallen to a 52-week low of $50.23 in March last year. C3.ai had listed in December last year when it raised $651 million by selling its stock at $42 apiece. Its valuation at the time of listing was $9.6 billion. Prior to listing, it had raised $228.5 million in funding from investors including Breyer Capital, InterWest Partners, Sutter Hill Ventures, TPG Growth, Thomas Siebel, Wildcat Venture Partners, Pat House, Bolt Innovation Group, and Constellation Technology Ventures. Its last round of funding was held in January 2018, when it raised $100 million at an undisclosed valuation. An earlier round held in March 2017 had valued the company at $1.4 billion.