1 Magnificent Artificial Intelligence (AI) Stock Down 84% You Might Regret Not Buying on the Dip in 2025
C3.ai offers over 130 ready-made applications that make it easy for businesses to adopt artificial intelligence (AI).
C3.ai's annual revenue growth just accelerated for the third straight year, which is a sign of significant momentum.
C3.ai stock is down 84% from its record high, but it's starting to look very attractive considering the size of its addressable market.
10 stocks we like better than C3.ai ›
C3.ai (NYSE: AI) was founded in 2009, long before the artificial intelligence (AI) boom captivated Wall Street. Not every business has the financial resources or technical expertise to develop AI from scratch, so many of them are turning to C3.ai, which supplies a portfolio of ready-made applications.
C3.ai went public in 2020 during a frenzy in the tech sector, which quickly drove its stock to a peak of $161. It was wildly overvalued at that price, and it has since declined by around 84%. But the stock is starting to look attractive based on the company's solid growth and enormous future opportunity, so here's why investors might want to buy the dip.
C3.ai serves businesses in 19 different industries including financial services, retail, manufacturing, healthcare, and oil and gas. It offers 130 turnkey AI applications that can be customized to suit the needs of each of its customers, and it can deliver a finished product within six months of an initial briefing.
For banks and financial institutions, the C3.ai Anti-Money Laundering application can boost successful detections by a whopping 200% compared to traditional methods, and it reduces false-positive alerts by 85%, which means human workers spend less time chasing down bad leads. The company also offers a tool called C3.ai Smart Lending, which reduces the time it takes for banks to approve loans by integrating AI into the assessment process.
In addition to its growing portfolio of applications, C3.ai offers an agentic AI platform where businesses can create and deploy powerful virtual assistants to automate tasks, analyze data, and even make important decisions. The platform connects to over 200 third-party software and storage applications so businesses can unify their data to extract the most value from their agents. Agentic AI could unlock a global productivity boom, so investors should expect this platform to become increasingly popular.
C3.ai's products are available through leading cloud providers like Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud. Businesses can rent the computing capacity offered by those cloud platforms to seamlessly scale their C3.ai applications, so they don't need to maintain any of their own infrastructure. It makes C3.ai accessible and affordable for enterprises of varying sizes.
Speaking of which, C3.ai closed 264 new customer agreements during its fiscal year 2025 (ended April 30), which was a 38% increase compared to the prior year.
C3.ai generated a record $389.1 million in revenue during fiscal 2025, which was a 25% increase compared to the previous year. That was the fastest rate of growth since fiscal 2022, and it marked the third consecutive year of acceleration, which highlights the company's momentum.
Management's guidance suggests C3.ai could have another record year in fiscal 2026, with as much as $484.5 million in revenue in the cards, which would represent a further increase of 25% from its fiscal 2025 result.
But C3.ai continues to lose money, so investors should keep a close eye on its bottom line. The company's operating costs increased across the board in fiscal 2025, which led to a net loss of $288.7 million on a generally accepted accounting principles (GAAP) basis. That was a slight uptick from its loss in the prior year.
Even on a non-GAAP (adjusted) basis, which excludes one-off and noncash expenses, C3.ai still lost $52.3 million. The company has a solid balance sheet with $742 million in cash, equivalents, and short-term investments on hand, so it can afford to sustain losses of that size for a few more years. However, management will have to prioritize profitability eventually or else it will need to raise more cash, which could dilute existing shareholders and negatively impact their returns.
When C3.ai stock peaked in 2020, its price-to-sales (P/S) ratio was over 75, which was a completely unsustainable valuation. But the 84% decline in the stock since then, combined with the company's consistent revenue growth, have pushed its P/S ratio down to just 8.3.
That's actually a 13% discount to its three-year average of 9.6 (which excludes the exuberant 2020 period):
CEO Thomas Siebel thinks enterprise AI could be a $1.3 trillion opportunity by 2032 (based on a report by Bloomberg), and the company's current annual revenue is a drop in the bucket by comparison. In other words, if enterprises continue turning to C3.ai for their AI needs, the company could generate a mind-boggling amount of growth over the long term even if it captures just a tiny fraction of its addressable market.
From that perspective, C3.ai stock might be a great addition to a diversified portfolio, especially now that it's trading at a reasonable valuation.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
1 Magnificent Artificial Intelligence (AI) Stock Down 84% You Might Regret Not Buying on the Dip in 2025 was originally published by The Motley Fool
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