Enterprise artificial intelligence (AI) software provider C3.ai (NYSE: AI) 2025 is off to a rocky start. The company's shares have fallen 10% this year, although there hasn't been any company-specific news that could trigger this pullback.
However, this appears to be an opportunity for investors to add promising artificial intelligence stocks to their portfolios. Let's take a look at the reasons behind the potential long-term and 2025 gains from investing in C3.ai.
C3.ai may be off to a rocky start in 2025, but the 15 analysts covering the stock have a consensus 12-month price target of $40. This would represent a 29% jump from current levels. On the bright side, it wouldn't be surprising to see C3.ai actually achieve this kind of results in the coming year.
After all, C3.ai has been growing well in recent quarters. The company's revenue for the first six months of fiscal 2025 (ending October 31, 2024) increased nearly 25% year over year to $181.5 million. That's a significant jump from the 14% year-over-year revenue growth C3.ai achieved in the first six months of its last fiscal year.
The strong acceleration in C3.ai's growth can be attributed to growing demand for the company's multiple products focused on generating artificial intelligence. It gives customers access to applications serving multiple industries, provides them with a software platform they can use to develop custom AI applications, and helps organizations deploy generative AI assistants to improve operational efficiency.
C3.ai offers its AI software through major cloud service providers, such as letterGoogle Cloud, Microsoft sky blue, and Amazon Network services. What's more, C3.ai has been able to deepen its ties with these large companies, with the company announcing a strategic alliance with Microsoft in November 2024 that may help expand the reach of its generative AI products.
Additionally, C3.ai management said on the company's December 2024 earnings call that existing customers are expanding their relationships. Additionally, C3.ai's enterprise artificial intelligence software products are gaining traction among U.S. government agencies, which should bring new opportunities to the company given that adoption of the technology in government applications is likely to grow at a compound annual growth rate of 20%. Growth opportunities. By 2033, it will generate up to $78 billion in annual revenue by the end of the forecast period.
Meanwhile, the global generative artificial intelligence software market is expected to generate $52 billion in annual revenue by 2028, up from $5.1 billion in 2023. C3.ai is currently at the beginning of an impressive growth curve and is expected to generate $388 million in revenue this fiscal year, which would be a 25% increase over the previous fiscal year.
Even better, analysts expect C3.ai to maintain double-digit revenue growth over the next few fiscal years as well.
YCharts' AI revenue estimates for this fiscal year's data.
C3.ai's pullback this month is why the stock is currently trading at 11 times sales, which is relatively cheaper than the 14 times sales a month ago.
AI PS ratio data provided by YCharts.
The stock's current sales multiple is very close to its five-year average sales multiple of 10. C3.ai can justify this sales multiple, which is slightly higher than the U.S. technology industry's sales multiple of 8, with strong growth expected in the coming years. Assuming C3.ai can maintain a price-to-sales ratio of 10 in three years and generate $553 million in revenue in fiscal 2027, as we can see in the first chart, its market capitalization could reach $5.5 billion.
Over the next three years, this will be a 37% increase from current levels. However, analysts have increased their growth expectations for the company in recent months, a trend that is likely to continue in the future due to the fast-growing nature of the markets in which the company operates. As a result, stronger earnings are possible, as the market is likely to give C3.ai a higher sales multiple if its revenue growth is better than expected.
So savvy investors looking to add an artificial intelligence stock to their portfolio would be wise to keep C3.ai on their radar. The company's accelerating growth and relatively cheaper valuation than its better-known peers make it an attractive investment at current prices.
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John Mackey is the former CEO of Amazon subsidiary Whole Foods Market and a board member of The Motley Fool. Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends C3.ai and recommends the following options: long $395 Microsoft January 2026 call options and short $405 Microsoft January 2026 call options. The Motley Fool has a disclosure policy.
This artificial intelligence (AI) stock is already down 10% through 2025, but Wall Street analysts believe it will surge Originally Posted by The Motley Fool