(Reuters) – C3.ai shares slump 10% in premarket trading on Thursday, after the company forecast a bigger fiscal 2024 operating loss as it ramps up investments in its generative artificial intelligence solutions.
Weaker spending by enterprises grappling with high interest rates has hurt the broader software industry but AI has remained a bright spot.
The AI application software firm said on Wednesday it was seeing sales cycles prolonging as customers created new governance functions to approve AI applications before use, effectively delaying clients’ decision making process.
Coupled with the growing spending on pilot programs with potential customers, it has added pressure on the company’s profitability outlook.
Brokerage D.A. Davidson & Co cut its price target on the stock to $28 from $30 “given the deterioration of profitability”.
The average rating of 14 analysts covering the stock is “hold”, and their median price target is $28, according to LSEG.
C3.ai also has a short interest of 29.71% of its outstanding shares as of November 15, Lynx Insights data showed.
However, the software company has seen its shares gain over 160% so far this year, driven by a surge in interest in AI-linked stocks after chatbot ChatGPT’s successful launch late last year.
The stock is a popular name among retail traders, and was among the top ten trending stocks on Thursday on amateur investor-focused website Stocktwits.
On Wednesday, C3.ai said it expects annual adjusted operating loss to be between $115 million and $135 million, compared with its prior forecast of $70 million-$100 million.
Revenue of $73.2 million in the second quarter ended Oct. 31 missed LSEG estimates of $74.3 million, as the company saw sales decline in Europe, Middle East and Africa.
(Reporting by Chavi Mehta in Bengaluru; Editing by Krishna Chandra Eluri)
