'Catastrophic' report: analyst advised to sell shares of AI company C3.ai

Analyst D.A. Davidson has downgraded the stock of C3.ai, which develops AI software, essentially advising them to sell. He expects the company's value to fall by more than 40%. The reason for the revision was the preliminary revenue results for the past quarter, which were significantly worse than forecasts. However, Wall Street's opinions on what to do with C3.ai shares differ. For example, Wedbush analysts reiterated their "buy" advice, giving the company time to recover.

Analyst D. A. Davidson's Lucky Schreiner downgraded C3.ai shares from Neutral to Underperform (worse than the market), which is equivalent to advising to sell them, CNBC reports. He also sharply cut the target price of the company's securities from $25 immediately to $13, implying a drop of more than 41% from the closing level on Friday, August 8.

The reason for the deterioration was C3.ai's preliminary results for the first quarter of fiscal 2026, which ended July 31. D.A. Davidson called them "disastrous," Investing.com adds. On Friday night, C3.ai reported preliminary revenue of $70.3 million, which was about $34 million below Wall Street's forecast, CNBC notes. According to Schreiner, it marked "the largest underperformance in the company's history." The reason for this failure is unclear, but "given the magnitude of the underperformance, it's clear that the company has a long way to go to get back on track," the analyst added. D.A. Davidson, however, conceded that part of the failure could have been caused by a restructuring of its sales and service department, as part of which the company brought in new regional executives.

"Previously, we only questioned the sustainability of [C3.ai's] revenue growth because of the increasing reliance on one-time revenue, but now we see preliminary results reflecting that trend," said Schreiner, whose note was quoted by CNBC. The company's business is likely to show further deterioration before a recovery begins, the analyst said. D.A. Davidson also stressed that the C3.ai takeover scenario, which previously seemed possible amid active AI deals, is now unlikely at least until financials stabilize over several quarters. At the same time, the company's share price remains overvalued compared to its competitors, the analyst said.

D.A. Davidson also lowered its FY 2026 revenue growth forecast for C3.ai to 26% year-over-year. The analyst believes that net additions after the first quarter will be "minimal" for the full year. That said, he estimates C3.ai has about $711 million in cash, enough for about four years of operations at current loss levels.

C3.ai shares plunged 33.5% to $14.7 in trading on Aug. 11. That became their lowest since January 2023. Given this sell-off, the market value of the company, which was considered one of the stars of the AI market in 2021, has gone down by more than 50% since the beginning of 2025.

Wedbush analyst Dan Ives looks at the situation more positively. He cut his target price on shares of C3.ai from $35 to $23 (up 4% from Friday's close), while reiterating a buy advice rating (Outperform rating). "We maintain the Outperform rating) and give the company several quarters to reverse the negative trend in sales," Ives wrote. However, "if the company fails to turn things around, there could be even tougher times ahead," he added in a statement to Investing.com.

Analyst at UBS also lowered their target price on C3.ai shares from $27 to $23, while maintaining a neutral rating, Investing.com reports. UBS pointed out that nearly half of C3.ai's revenue last quarter - $51 million - came from one-time license sales and Professional Engineering Services (PES) related to software implementation and customization. This, an investment bank analyst said, underscores the volatility of the company's revenues. It is the uncertainty about the company's main sources of revenue that was the key reason for the investment bank to maintain a neutral rating.

According to MarketWatch, a total of 17 analysts have rated C3.ai shares, and their opinions are almost equally divided. Five advise to buy its securities, six advise to hold, and another six advise to sell. The consensus target price is $28.3, up almost 28% from Friday's close.

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