C3.ai Just Nabbed a Bigger Air Force Contract. Should You Buy AI Stock Here?

Globe and Mail

4 days ago

AI stocks have taken center stage in recent years, with established players like Nvidia (NVDA) delivering blockbuster returns. Yet not every AI name has captured investors' attention and wallets equally. C3.ai (AI), an enterprise AI software provider, has flown relatively under the radar despite consistently scaling its platform usage and expanding marquee contracts.
Last week, C3.ai announced that the U.S. Air Force Rapid Sustainment Office (RSO) has boosted its contract ceiling to $450 million through October 2029, up from the original $100 million ceiling that's already been fully tapped. The additional $350 million supports the rollout of C3.ai's PANDA predictive maintenance platform across the service's aircraft fleet. With Ed Abbo, C3.ai's CTO, calling RSO 'potentially the largest production AI deployment in the DoD today,' investors may finally take notice.
For investors weighing whether to buy into AI's next wave, here's why C3.ai's fresh contract lift could signal a turning point for AI stock.
About AI Stock
Based in California, C3.ai is an enterprise AI software company specializing in predictive analytics, machine learning, and AI-driven applications. The company has invested over $3 billion in developing one of the most advanced enterprise software platforms available today and currently offers approximately 131 ready-to-deploy enterprise applications.
What sets C3.ai apart is its patented C3 Agentic AI platform, which is designed to address major business challenges such as AI hallucinations, data security, multi-format data handling, and cybersecurity threats.
Valued at $3.5 billion by market cap, C3.ai shares have staged a strong rebound after a sluggish start to 2025. The stock hit a 52-week low near $17 in April but has since rallied, gaining 12.7% just over the past month, all thanks to its strong Q4 earnings.
Since C3.ai remains unprofitable, it does not have a forward or trailing P/E ratio. However, the company trades at a forward sales multiple of 7.6 times, significantly higher than the sector median of 2.8 times, suggesting a premium valuation.
Generative AI Pilots Build Long-Term Revenue Pipeline
After a pandemic-related slowdown in 2021, C3.ai has steadily regained mo
On May 28, the company reported Q4 earnings that beat both revenue and earnings estimates. It generated a record $108.7 million in revenue, a 26% year-over-year increase, and posted a loss per share of $0.16, beating the consensus by $0.04. This strong performance lifted the stock by 25% the following trading day.
Subscription income rose 9% to $87.3 million, and engineering services revenue jumped 196% to $17 million. Together, these streams grew 22% from the prior year and accounted for 96% of C3.ai's total revenue.
Partnerships continued to drive growth in Q4. A multi-year extension with Baker Hughes (BKR), now responsible for roughly 20% of the company's revenue, strengthened co-investment and co-selling efforts in the oil and gas sector. At the same time, C3.ai maintained strong alliances with Microsoft (MSFT) Azure and Amazon (AMZN) Web Services, which together generated the majority of new deal flow and sped up access to large enterprise clients. Overall, partners accounted for a significant share of new agreements during the quarter, shortening sales cycles and expanding C3.ai's reach.
On the balance sheet, C3.ai concluded its fiscal Q4 with $742.7 million in cash and cash equivalents, providing a solid liquidity cushion to support ongoing growth initiatives.
Looking ahead, C3.ai expects revenue to grow 15%–25% in fiscal 2026, matching analysts' 20% forecast. However, the company projects an operating loss between $65 million and $100 million, only a modest improvement over the $88 million adjusted operating loss recorded in fiscal 2025.
What Do Analysts Say About C3.ai Stock?
Analysts remain cautious on C3.ai, reflecting ongoing concerns over the company's dependence on large-scale contracts and its slow path to profitability.JPMorgan trimmed its price target last week to $23 from $27, pointing to 'limited progress' in core subscription growth and a persistently weak profitability profile.
Morgan Stanley took a slightly more optimistic tone, raising its target to $22 from $20, but reiterated an 'Underweight' rating, signaling limited conviction in a turnaround.
The broader analyst consensus stands at 'Hold' from a group of 14 tracked analysts. Four rate the stock a 'Strong Buy,' five recommend 'Hold,' while two suggest a 'Moderate Sell" and three assign a 'Strong Sell.'
Despite the mixed outlook, the average 12-month price target sits at $30.67, implying about 25% upside from current levels. The most bullish forecast of $50 suggests the stock could more than double over the next 12 months.
The Bottom Line
C3.ai's latest $450 million Air Force contract underscores its enterprise AI strength and deepens its defense foothold. While revenue momentum and high-profile partnerships suggest upside, persistent losses and lofty valuation ratios warrant caution. Investors should weigh growth potential against profitability hurdles before deciding if AI stock merits a strategic position now.