C3.ai reported a non‑GAAP net loss per share of $0.40 for the third quarter of fiscal 2026, missing the consensus estimate of $0.29. Total revenue for the quarter was $53.3 million, falling short of the $75.82 million expected by analysts. The miss on both earnings and revenue signals a sharp deterioration in the company’s commercial performance.
Revenue in Q3 FY2026 was $53.3 million, a 46% decline from the $98.8 million recorded in Q3 FY2025. The non‑GAAP loss per share widened from $0.12 in the prior year to $0.40, underscoring the growing cost burden and weaker top line. The sequential drop from $75.1 million in Q2 FY2026 to $53.3 million in Q3 further illustrates the momentum loss.
GAAP gross margin contracted to 17% from 59% year‑over‑year, while non‑GAAP gross margin fell to 37% from 69%. Management attributed the compression to a heavier mix of early‑stage and initial production deployments, which carry lower margins than mature contracts. The margin squeeze reflects both pricing pressure and the cost intensity of scaling new AI solutions.
Full‑year revenue guidance was slashed to $246.7‑$250.7 million, a dramatic cut from the previous $447.5‑$484.5 million range. The reduction signals management’s loss of confidence in near‑term demand and a recognition that the company’s growth trajectory has stalled. The guidance cut is the most significant change in the company’s outlook in recent years.
C3.ai announced a 26% workforce reduction as part of a broader restructuring plan aimed at reducing cash burn and improving operational efficiency. CEO Stephen Ehikian said, "Clearly inadequate and well below our objectives. We failed to close business as planned and in particular, our performance in North America and Europe was disappointing." The layoffs are intended to align the organization with the company’s new cost structure and strategic priorities.
Segment analysis shows federal, defense, and aerospace bookings grew 134% year‑over‑year, representing 55% of total bookings. While this segment remains a bright spot, the weakness in commercial and international markets has offset the gains, contributing to the overall revenue decline. The mix shift toward lower‑margin early‑stage deployments has also pressured gross margins.
After the earnings release, analysts downgraded C3.ai to Market Perform from Outperform, citing the revenue miss, EPS miss, and the drastic guidance cut. The market reaction was driven by the sharp shortfall in both top‑line and bottom‑line metrics, the severe margin compression, and the announcement of a large workforce reduction, all of which highlight the company’s operational challenges.
The long‑term outlook for C3.ai remains uncertain. The company ended the quarter with $621.9 million in cash, providing a runway for restructuring, but insider selling of 1.88 million shares over three months raises concerns about internal confidence. The company’s ability to regain growth will depend on executing the restructuring plan, improving commercial performance, and restoring profitability in a competitive AI market.
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