Developing artificial intelligence (AI) software from scratch requires billions of dollars in infrastructure and chips, mountains of data, and extensive technical expertise. The majority of businesses can't string all three ingredients together, especially if they aren't in the technology industry, so they seek alternative solutions instead.
C3.ai(NYSE: AI) has developed more than 130 ready-made and customizable AI applications for businesses in 19 different industries. It was the world's first enterprise AI company when it was founded in 2009, which was long before the AI boom gripped Wall Street. C3.ai is experiencing a surge in demand for its software at the moment, but the company hasn't even scratched the surface of what could be a $1.3 trillion opportunity by 2032 (according to Bloomberg).
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C3.ai stock is down by 42% in 2025 on the back of the sharp sell-off in the broader market, but it also remains significantly below its all-time high from 2020. The stock is now trading at an attractive valuation relative to its history, so this could be a great long-term entry point for investors. Plus, a single share costs under $25, so C3.ai is accessible for investors with portfolios of all sizes.
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Delivering AI to a variety of industries
C3.ai can deliver a ready-made AI application within just six months of an initial briefing with a customer. These applications are ideal for businesses in manufacturing, healthcare, financial services, and oil and gas, which typically wouldn't have the resources to develop AI software from scratch.
Plus, C3.ai's applications can be deployed through leading cloud platforms like Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, which most enterprises already use. This makes it easy for businesses to access the computing capacity they need to run C3.ai's applications at scale, because each of those cloud providers operates centralized data centers.
For one bank with $3 trillion in assets under management, the C3.ai Anti-Money Laundering application has driven an eye-popping 200% increase in the number of suspicious transactions identified, while also reducing false-positive alerts by 85%. This fortifies the bank's security and compliance processes, while significantly improving efficiency.
C3.ai doesn't disclose exactly how many customers it has, but it closed 66 new deals during the fiscal 2025 third quarter (ended Jan. 31), which was a whopping 72% increase from the year-ago period. It highlights the strength of the demand picture for AI software right now, especially among non-technology companies.
C3.ai's revenue growth is picking up steam
C3.ai delivered $98.7 million in total revenue during the fiscal 2025 third quarter, which was a record high. It represented year-over-year growth of 26%, which followed a 29% increase in the second quarter just three months earlier. These were the strongest revenue growth rates the company has delivered in almost three years.
The recent strength is due to a change C3.ai made to its business model back in early fiscal 2023, when it moved away from subscription-based revenue in favor of consumption-based billing. It eliminates contract negotiations, which allows C3.ai to onboard customers more quickly, as they now only pay for what they use. The company said it would lead to a temporary dip in its revenue growth while existing customers transitioned, but assured investors it would pay off in the long run. Things appear to be playing out exactly as planned right now.
C3.ai is still generating losses at the bottom line because it's focused on acquiring new customers and growing its business, and that costs money. Its operating expenses totaled $403.8 million during the first nine months of fiscal 2025, which was an 11.3% increase compared to the same period in fiscal 2024. But since the company's revenue grew much faster, its net loss only increased by 1% to $209 million during the nine-month period.
In other words, C3.ai has managed to acquire more customers and generate more revenue without causing a blowout at the bottom line. To be clear, investors will eventually want to see the company deliver profits, but it's also important to capitalize on the AI boom in the nearer term.
Plus, C3.ai had $724 million in cash, equivalents, and marketable securities on hand at the end of the recent quarter, so it can afford to sustain its current losses for the next couple of years. However, the company will have to prioritize profitability eventually, because investors will tire of the dilution that comes with the constant issuance of new shares to raise money.
C3.ai stock looks like a good value right now
C3.ai stock is down 42% this year amid the bear market in the tech sector, but it's also down 87% from its record high, which was set during the tech frenzy in 2020. It was trading at an eye-watering valuation of more than 80 times sales back then, which simply wasn't sustainable.
However, the sharp decline in the stock combined with the company's consistent revenue growth has pushed its price-to-sales (P/S) ratio down to a more reasonable level of 6.9. That is actually a 28% discount to its three-year average of 9.6 (which excludes 2020):
As I mentioned at the top, C3.ai could be playing in a $1.3 trillion market by 2032, so its current revenue is a mere drop in the bucket compared to the magnitude of the potential opportunity ahead. Plus, considering C3.ai is currently growing its revenue at the fastest pace in years, this could be a great time for investors to take a long-term position in its stock -- especially in light of the current discount to its three-year average 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.
