C3 AI, a leading provider of artificial intelligence services for enterprises, is set to report its quarterly financial results after the market closes. Investors are eager to know whether they should buy this AI stock ahead of its earnings announcement.

In this post, we’ll explore C3 AI’s recent performance, its valuation, and what investors should watch for in the upcoming earnings report. We’ll also dive into a discounted cash flow model to determine the stock’s intrinsic value.

C3 AI stock Accelerating Revenue Growth

One of the most impressive aspects of C3 AI’s recent performance is its accelerating revenue growth. Over the past two years, the company has demonstrated significant improvement in its financials.

• Fiscal Year 2023 (Q4): Revenue growth was flat, showing no signs of acceleration.
• Fiscal Year 2024: Revenue growth began to pick up, increasing by 11% in Q1, 17% in Q2, 18% in Q3, and 20% in Q4.
• Fiscal Year 2025: Growth has continued to accelerate, with revenue rising by 21% in the first quarter and jumping to 29% in the most recent quarter.

This consistent acceleration in revenue growth is a strong indicator of the company’s ability to scale its operations and attract enterprise clients.

C3 AI stock Strategy: A Proven Approach

C3 AI has adopted a strategy similar to that of Palantir, another major player in the AI space. The company approaches enterprises with a compelling proposition:

1. Demonstrate Value First: C3 AI offers to showcase its capabilities without requiring upfront payment.
2. Deliver Tangible Results: Enterprises can see firsthand how the AI services can reduce costs, increase revenue, or mitigate risks.
3. Secure Long-Term Contracts: Once the value is demonstrated, C3 AI negotiates contracts with the enterprises.

This approach has proven highly effective, as businesses are more likely to commit after witnessing measurable benefits.

Stock Performance: A Mixed Picture

Despite C3 AI’s strong operational performance, its stock price has only increased by 9.85% over the past year. This muted response can be attributed to the stock’s already high valuation.

• Premium Valuation: C3 AI, along with other AI-focused companies like SoundHound AI and Big Bear AI, has been trading at a premium due to the market’s enthusiasm for artificial intelligence.
• Priced-In Expectations: The stock’s valuation had already factored in strong growth expectations, leaving little room for price appreciation even as the company delivered excellent results.

This highlights the importance of paying attention to valuation when investing in high-growth stocks. Even a great business can be a poor investment if the stock is overvalued.

Upcoming Earnings: What to Watch

C3 AI stock guidance for the upcoming quarter has raised some concerns. The company forecasts revenue growth of 25% at the midpoint, which would mark a slowdown compared to the 29% growth achieved in the most recent quarter.

• Potential Disappointment: If C3 AI meets its guidance, it would break its streak of consecutive quarters of accelerating revenue growth.
• Sandbagging Reputation: The company has a history of providing conservative guidance and then exceeding expectations. While this may seem positive, it can create unrealistic market expectations and increase downside risk if the company fails to beat its guidance.

Valuation: Is C3 AI Overvalued?

As of February 8, 2025, C3 AI is trading at a forward price-to-sales (P/S) ratio of 8.2, which is relatively expensive for a company at this stage of its growth.

• Discounted Cash Flow Analysis: Based on a discounted cash flow model, the intrinsic value of C3 AI’s stock is estimated at $328 per share.
• Current Market Price: The stock is currently trading at $315, suggesting it is fairly valued to slightly overvalued.

Should You Buy C3 AI Stock Now to make millions?

Given the current valuation and the risks associated with C3 AI’s earnings report, it may be prudent to wait for the results before making an investment decision.

• Downside Risks: The company’s reputation for sandbagging guidance means the market expects it to exceed its forecasts. A failure to do so could lead to a significant drop in the stock price, as seen with The Trade Desk in a recent earnings report.
• Wait-and-See Approach: Investors should consider waiting for the earnings release, digesting the results, and then evaluating the stock’s potential.

Final Thoughts

C3 AI is a promising company with strong revenue growth and a proven strategy for attracting enterprise clients. However, its high valuation and the risks associated with its upcoming earnings report make it a cautious play for investors.

If you’re considering investing in C3 AI, it’s essential to focus on valuation and wait for the earnings results to assess the company’s performance and future prospects.

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By staying informed and making data-driven decisions, you can navigate the complexities of investing in high-growth AI stocks like C3 AI.