Motley Fool says wait to buy small-cap AI software maker C3.ai after off earnings

Investors may want to avoid shares of C3.ai, a developer of AI software, despite their seemingly attractive valuation, the Motley Fool writes. The company recently posted “very disappointing” quarterly results, and there is no guarantee that the setbacks will end there, the publication noted. It advises investors to wait until C3.ai proves it can return to sustainable growth.

Anthony Di Pizio, a contributing tech analyst at Motley Fool, advises investors to refrain from buying C3.ai shares for now, despite their depressed valuation. Since the beginning of the year, the stock is off more than 54% at $15.62 per share. The shares are currently trading at a P/S ratio of 5.1, near a three-year low, Di Pizio noted, but "buying it here still carries major risks."

Now, C3.ai is navigating a "series of disruptions that could lead to a prolonged period of uncertainty," Di Pizio claims. On Wednesday, September 3, the company released its earnings for the fiscal-2026 first-quarter (ended July 31), with revenue falling more than 19% year over year to $70.26 million. C3.ai had previously guided for these figures a month earlier. At that time, D.A. Davidson downgraded C3.ai to an "underperform" rating from "neutral."

The company was founded by Thomas Siebel, who served as its CEO until the start of this month, when he stepped down for health reasons. Siebel played an active role in the sales process by working with customers and helping the company close major deals, so "his departure is already having an effect across the business," Di Pizio argues.

He believes C3.ai stock will probably trend even lower if the company's revenue continues to decline, so "a cheap valuation will not mean anything in that case."  The management will have to slash expenses to prevent further "blowout losses" at the bottom line. Di Pizio warns: "if those cuts come from growth-oriented line items like marketing, it will become even harder to turn this situation around."

As a result, investors might want to avoid C3.ai stock until the company proves it can return to sustainable growth.

Most Wall Street analysts remain cautious about the outlook for C3.ai stock, MarketWatch data shows. The most common recommendation on the company’s shares is “hold," with seven of the 14 analysts. Another five analysts advise “sell” (including “sells” and “underweight”), while only two recommend “buy.”

The AI translation of this story was reviewed by a human editor.