C3 AI shares sink over 20% after steep Q3 miss and weak outlook
Updated 18:41 EST - February 25, 2026
C3.ai Inc. fell sharply in after-hours trading as the company missed fiscal Q3 expectations and issued a light Q4 outlook. The print raised fresh questions about growth durability, sales execution, and the timing of revenue conversion from recent bookings.
Q3 (fiscal 2026) at a glance
- Revenue: $53.3 million, down 46% year over year (Street: $75.91 million)
- Adjusted EPS: loss of $0.40 (Street: loss of $0.29); prior-year loss was $0.12
- Subscription revenue: $48.16 million, down 43.8% year over year
- Professional services: $5.1 million, down 61.1% year over year
Why the stock got hit
The miss was broad: deeper losses, a sharp top-line decline, and guidance well below consensus. For Q4, management expects $48-$52 million in revenue (vs. ~$77.7 million expected), implying flat to down sequentially from Q3. Full-year revenue is guided to $246.7-$250.7 million.
Where demand is showing up
C3 AI closed 44 agreements in the quarter, adding or expanding work with the U.S. Department of Agriculture, U.S. Department of Energy, NATO Communications and Information Agency, the Royal Navy, Thales, Exxon Mobil, GSK, U.S. Steel, Plains All American Pipeline, Seaspan, and McLaren Automotive. Federal, defense, and aerospace bookings rose 134% year over year and represented 55% of total bookings.
The mix continues to tilt toward large, complex programs. That can lift average deal size but typically introduces longer sales cycles and slower revenue recognition. The company also reported eight new agreements for its C3 Generative AI offering.
Leadership and operating reset
After Tom Siebel stepped down due to health issues last July, Stephen Ehikian took over as CEO. He cited a leaner cost structure, a flatter sales organization, tighter focus on core applications, faster product delivery, and an enterprise-wide go-to-market as key changes implemented over the past six months.
What finance teams should watch next
- Bookings-to-revenue conversion: Federal deals are growing, but watch how quickly they turn into recognized revenue.
- Mix and margins: Subscription vs. services balance and any commentary on gross margin trajectory.
- Cash burn and expenses: Management says costs are down; look for proof in operating cash flow and opex trends.
- Concentration risk: With 55% of bookings from federal/defense, budget cycles and procurement timelines matter.
- Q4 delivery vs. guide: Low bar set-monitor pipeline conversion, renewals, and expansion within existing accounts.
- Competitiveness: Pricing pressure and win rates against larger AI and cloud suites.
The investor read
The story is now about execution and time-to-revenue. Bookings growth in public sector is encouraging, but the Street wants evidence that the reorg and focus shift can stabilize sales and narrow losses-soon.
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