C3.ai, Inc. Q3 FY2026 earnings call

CEO noted last quarter's results were below objectives, cost structure too high, and organization not correct. Launched five strategic initiatives: right-size cost structure and reduce cash burn; flatten sales organization with sales leaders reporting directly to CEO; focus on product areas with market leadership and quick economic value for customers; prioritize large-scale enterprise-wide transformations; increase velocity of product design and delivery. Applied agentic AI in sales, marketing, product engineering to increase productivity. Identified $135 million in non-DAP operating expense reductions over the coming year, $60 million related to headcount reduction (approx 26% headcount reduction). Strong federal business bookings: total bookings across federal defense and aerospace increased 134% year-over-year, accounting for 55% of total bookings; examples like U.S. Department of Agriculture and Energy selected C3 AI. International demand growing with NATO Communications and Information Agency, Japan's Ministry of Defense, UK Royal Navy selecting C3AI. Commercial sector: extended partnership with a large EMP company, applied C3 AI reliability application and agentic AI; European subsea engineering services provider applied C3 generative AI to automate engineering reporting.

Total revenue for the quarter was $53.3 million. Subscription revenue was $48.2 million, representing 90% of total revenue. Professional services revenue was $5.1 million, with $3.3 million from Prioritized Engineering Services (PES). Subscription and PES revenue combined was $51.5 million, accounting for 97% of total revenue. Bookings during the quarter were $46.9 million. Non-GAAP gross profit was $19.6 million and non-GAAP gross margin was 37%. Non-GAAP gross margin for professional services was 82%. Non-GAAP operating loss was $63.4 million. Non-GAAP net loss was $56.4 million and 40 cents per share. Free cash flow was negative $56.2 million. During the third quarter, 14 IPDs were signed, including 5 Gen AI IPDs. Cumulatively, 408 IPDs were signed, with 258 still active.

Q4 fiscal year 26 revenue guidance: $48 million to $52 million. Non-GAAP loss from operations guidance for Q4: $56 million to $64 million. Fiscal year 26 revenue guidance: $246.7 million to $250.7 million. Non-GAAP loss from operations guidance for fiscal year 26: $219.5 million to $227.5 million. Q4 and fiscal year 26 non-GAAP loss from operations guidance excludes pre-tax restructuring expenses of approximately $10 million to $12 million.

Q: Kingsley Crane with Canaccord Genuity asked about quality of IPDs and customer opportunities.

A: Steven said they are being selective with IPDs signed up for, expecting higher likelihood of converting to production contracts.

Q: Brian Essex with JP Morgan asked about 36% reduction in sales and marketing and investment growth vs cost efficiency.

A: Hitesh said cost reduction covers all functions and locations; Steven said customer conversations are moving to large-scale transformational change across departments.

Q: Sanjit Singh with Morgan Stanley asked about recurring nature of business and performance in North America and Europe.

A: Sanjit was told 90% of revenue was from subscription with no non-recurring subscription revenue; Steven said weakness in North America and Europe was simply sales execution and he'll fix it by flattening the organization there