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01/10 00:13
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary presents mixed signals: strong revenue growth and bookings contrast with operational losses and cash flow deficits. The strategic focus on expanding markets and partnerships provides optimism, but gross margin pressures and economic uncertainties pose risks. The Q&A reveals confidence in future growth but lacks concrete guidance. Given the company's mid-sized market cap, the stock is likely to experience a neutral reaction (-2% to 2%) as positive and negative factors balance each other out.
Revenue Total revenue for the quarter was $75.1 million, a quarter-over-quarter increase of 7%. Subscription revenue for the quarter was $70.2 million, a quarter-over-quarter increase of 16.5% and representing 93% of total revenue.
Bookings Our bookings during the quarter were $86.4 million, an increase of 49% from last quarter.
Non-GAAP Gross Profit Non-GAAP gross profit for the quarter was $40.9 million, and non-GAAP gross margin was 54%. Non-GAAP gross margin for Professional Services was 72%. Margins were moderated due to a high mix of IPDs and investments in expanding support capacity.
Non-GAAP Operating Loss Non-GAAP operating loss for the quarter was $42.2 million.
Non-GAAP Net Loss Non-GAAP net loss for the quarter was $34.8 million and $0.25 per share.
Free Cash Flow Free cash flow for the quarter was negative $46.9 million.
Cash Reserves We closed the quarter with $675 million in cash, cash equivalents and marketable securities.
C3 AI Agentic Process Automation: Launched this quarter, it enables enterprises to encapsulate full business and industrial processes through autonomous AI agents. This innovation allows customers to describe complex workflows in natural language, and the system builds and deploys the resultant AI agent in minutes. It expands the addressable market opportunity to include the robotic process automation market.
Federal Market Expansion: Bookings across Federal, Defense, and Aerospace increased by 89% year-over-year, accounting for 45% of total bookings. New agreements were signed with multiple U.S. government agencies, including the Department of Health and Human Services and the U.S. Intelligence Community.
Private Sector Growth: Major customer wins include AMD, GSK, Signature Aviation, and others. GSK is using the C3 Agentic AI platform enterprise-wide, while Signature Aviation advanced to full production across 20 facilities.
Partner Ecosystem Growth: 89% of bookings in Q2 were closed through the partner ecosystem. The Microsoft partnership alone generated over $130 million in bookings, with 24 joint agreements closed in Q2.
Revenue Growth: Revenue grew 7% sequentially to $75.1 million, with subscription revenue increasing by 16.5% quarter-over-quarter.
Operational Efficiency: Non-GAAP expenses were reduced by $10.7 million quarter-over-quarter through personnel cost reductions, cloud infrastructure cost savings, and improved operational efficiency.
Focus on High-Growth Sectors: Efforts are concentrated on federal, state, and local markets, as well as energy, healthcare, and manufacturing sectors.
Sales Execution and Product Focus: Implemented a detailed execution plan to drive sales with discipline and focus on delivering rapid economic value. Sharpened focus on areas with demonstrable leadership, such as industrial asset performance and supply chain optimization.
Government Shutdown Impact: The 43-day government shutdown created significant headwinds for the company's Federal business, affecting operations in the Department of War, civilian sectors, and related markets such as shipbuilding, healthcare, manufacturing, and industrials.
Gross Margin Pressure: Gross margins are expected to remain moderated in the near term due to a high mix of Initial Production Deployments (IPDs), which carry greater costs during the initial phase, and investments in expanding support capacity.
Operational Losses: The company reported a non-GAAP operating loss of $42.2 million for the quarter, reflecting ongoing challenges in achieving profitability.
Free Cash Flow Deficit: The company experienced a negative free cash flow of $46.9 million during the quarter, indicating liquidity challenges.
Expense Management Challenges: While the company reduced expenses by $10.7 million quarter-over-quarter, it still faces challenges in balancing cost reductions with strategic investments in sales and customer services.
Economic Uncertainty in Federal Sector: The Federal market, while a growth vector, is subject to economic uncertainties and government mandates, which could impact future operations and revenue.
Revenue Guidance for Q3 FY26: $72 million to $80 million
Revenue Guidance for FY26: $289.5 million to $309.5 million
Non-GAAP Loss from Operations for Q3 FY26: $44 million to $52 million
Non-GAAP Loss from Operations for FY26: $180.5 million to $210.5 million
Future Sales and Marketing Expenses: Sequentially higher expenses in Q3 and Q4 due to major marketing events, including World Economic Forum and Transform.
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The earnings call summary presents mixed signals: strong revenue growth and bookings contrast with operational losses and cash flow deficits. The strategic focus on expanding markets and partnerships provides optimism, but gross margin pressures and economic uncertainties pose risks. The Q&A reveals confidence in future growth but lacks concrete guidance. Given the company's mid-sized market cap, the stock is likely to experience a neutral reaction (-2% to 2%) as positive and negative factors balance each other out.
The earnings call revealed a 19% YoY revenue decline, operating losses, and the withdrawal of FY26 guidance, signaling uncertainty and potential financial challenges. Despite strategic partnerships and optimism for future profitability, the lack of clear guidance and execution challenges weigh negatively. The market cap suggests moderate reaction, leading to a negative sentiment prediction of -2% to -8%.
The company's revenue growth, strategic alliances, and strong cash position are positive indicators. Despite an operating loss, the guidance suggests improvement in cash flow and profitability in future quarters. The Q&A revealed some concerns about the lack of clarity on specific deals and guidance, but overall sentiment remains positive due to strong revenue growth and strategic partnerships. The stock's market cap suggests a moderate reaction, leading to a positive prediction.
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