C3.ai Stock Down 35% in Half a Year: Is This the Boom Lift for Buyers, or Should Investors Stay Sidelined?

C3.ai, Inc. (AI) has experienced a sharp 35% decline over the past six months, significantly underperforming the broader industry, which saw only an 8.2% dip in the same period. This disparity reveals deeper challenges beyond market headwinds—internal execution missteps combined with external disruptions have created a perfect storm of investor concern. Yet beneath the surface, emerging signals suggest the company may be engineering a turning point.

The Core Problems Weighing on Enterprise AI Adoption Momentum

The primary culprit behind C3.ai’s underperformance lies in deteriorating sales execution. Over the last two quarters, deal velocity slowed considerably, translating into revenue contraction and compressed margins that caught investors off guard. Management disclosed that weaknesses in sales discipline and deal qualification directly contributed to delays in converting market demand into live deployments.

Making matters worse, a 43-day U.S. government shutdown created unexpected friction across the company’s fastest-growing vertical. Federal agencies—spanning defense, healthcare and civilian sectors—saw procurement activities frozen, hampering C3.ai’s ability to close deals despite underlying demand remaining robust. This disruption rippled into adjacent commercial markets including manufacturing and shipbuilding, creating a headwind at precisely the wrong time.

The company’s profitability picture compounds these concerns. Despite cutting expenses by over $10 million sequentially, free cash flow remained deeply underwater at approximately $47 million. Gross margins continue facing pressure from a heavy concentration of Initial Production Deployments (IPDs), which demand substantial upfront investment before scaling into higher-margin subscription models.

Where the Boom Lift for Recovery Could Emerge

However, dismissing C3.ai entirely overlooks several compelling positive developments that could drive a meaningful rebound.

Bookings tell a different story than revenue. Second-quarter fiscal 2026 bookings surged 49% sequentially, a powerful indicator that enterprise demand for AI solutions remains intact despite near-term revenue fluctuations. The federal segment delivered exceptional growth, with bookings climbing 89% year-over-year and now comprising 45% of total company bookings. This demonstrates durable momentum in a high-value, defensible market.

The partner ecosystem is becoming a growth accelerator. Approximately 89% of bookings flowed through strategic partners—Microsoft, AWS, McKinsey and Booz Allen among them. The Microsoft partnership alone generated over 100 customer agreements across 17 industries within a single year, validating the scalability of these distribution channels and suggesting the company has cracked a sustainable playbook for expansion.

Product innovation continues to expand addressable markets. The introduction of C3 AI Agentic Process Automation positions the company in the workflow automation and RPA space, unlocking fresh revenue streams previously beyond reach. Customer wins including GSK and Signature Aviation underscore the platform’s capacity to deliver tangible business value.

New leadership has a concrete operational blueprint. The current CEO has implemented a disciplined turnaround plan emphasizing tighter sales rigor, improved IPD qualification and heightened accountability. With $675 million in cash reserves, the company possesses the financial runway to execute this transformation without liquidity constraints.

Valuation Perspective: Deep Discount Relative to AI Peers

C3.ai trades at a significant discount compared to industry participants. The forward 12-month price-to-sales ratio stands at 6.8, well below peer averages. For context, Palantir Technologies trades at 73.05 and SoundHound AI at 13.22 on the same metric.

The earnings revision trend offers a modest silver lining. Zacks Consensus Estimate adjustments for fiscal 2026 loss per share have tightened over recent days, suggesting analyst sentiment may be stabilizing.

However, growth expectations remain challenged. Consensus estimates project fiscal 2026 revenues will decline 23.2% year-over-year before recovering with 11.8% growth in fiscal 2027. This contrasts sharply with Palantir’s expected 41.1% growth and SoundHound AI’s projected 38.9% expansion, illustrating just how much C3.ai must prove to restore investor confidence.

The Verdict: A Hold for Current Owners, Caution for New Entrants

C3.ai’s six-month slide reflects a genuine combination of internal execution breakdowns, margin compression and unforeseen external disruptions that have justifiably clouded near-term visibility. The company is not without meaningful strengths, however.

For existing investors with patience, the case for holding remains defensible. The sharp sequential rebound in bookings, accelerating federal segment traction, deepening partnerships with cloud and consulting heavyweights, and a freshly articulated operational roadmap under new management all suggest the infrastructure for recovery is being erected. The solid cash position and ongoing product innovation further constrain downside risk.

For prospective buyers seeking the boom lift higher, caution is warranted. While valuation appears attractive on face value, the business still grapples with uncertain revenue visibility and must demonstrate sustained sales discipline. Until the company proves it can deliver consistent growth, cleaner margins and reliable execution against strategic initiatives, new capital should remain on the sidelines.

C3.ai currently carries a Zacks Rank #3 (Hold) designation, reflecting this balanced but defensive posture in an otherwise promising but still-unproven turnaround narrative.