C3.ai’s Q3 results were a significant disappointment. Here is how each category grades out.
| Category | Grade | Notes |
|---|---|---|
| Revenue Performance | D | $53.3M came in well below the prior quarter’s $75.1M run-rate, a sharp sequential decline. |
| Earnings Beat/Miss | F | Non-GAAP EPS of -$0.40 missed the -$0.29 estimate by a wide margin. |
| Guidance Quality | D | Q3 actuals fell below the company’s own $72M-$80M guidance range, a credibility hit. |
| Margin Trends | F | A 17% GAAP gross margin signals deep structural pressure. |
| Cash Flow | C | The $675M cash position from Q2 provides meaningful runway despite deteriorating results. |
| Management Confidence | C | A $135M annual cost savings target offers a plan, but execution remains unproven. |
Revenue collapsed sequentially, gross margins fell to levels inconsistent with a scalable software model, and EPS missed estimates by a meaningful margin. The company’s own guidance proved too optimistic. A substantial cash cushion buys time for restructuring, but the stock has declined 31.9% since Q2 earnings, reflecting ongoing investor concern about the company’s trajectory.
C3.ai enters Thursday’s session under significant pressure. After-hours, the stock dropped roughly 20% following Q3 FY2026 results, and the regular session close of $10.31 already reflects a stock down 23.5% year-to-date. The after-hours move will be the critical open to watch.
Key levels: $8.50 represents potential support if the full after-hours decline holds at open. A partial recovery would put $9.50 in focus. The RSI closed at 39.93, approaching oversold territory, which could limit downside but won’t override a deteriorating fundamental story.
What to watch: Analyst price target cuts are likely before open given a revenue miss and reduced Q4 guidance. Volume will likely spike well above average. Expect elevated volatility throughout the morning session as institutional positioning adjusts to the revised full-year outlook.
| KPI | Result |
|---|---|
| Revenue | $53.3M |
| GAAP Gross Margin | 17% |
| Non-GAAP Op Loss | ($63.4M) |
| Cash & Securities | $621.9M |
| Federal Bookings | +134% Y/Y |
The stock is down 20% because this quarter fundamentally changes how the model is valued. C3.ai must now prove it can restore margin integrity and return to growth. Until that happens, the multiple compresses.
Q4 FY26 Revenue: $48M–$52M
FY26 Revenue: $246.7M–$250.7M
Implies full-year revenue decline Y/Y.
CEO Stephen Ehikian focused on restructuring:
Message: turnaround underway.
This is not a “margin wobble.” This is a full reset quarter. Stock down 20% after-hours.
Revenue missed expectations, gross margin collapsed, and full-year guidance implies contraction. The stock is trading accordingly.
| Metric | Actual | Est. | Beat/Miss |
|---|---|---|---|
| Revenue | $53.3M | ~$75M prior run-rate | ❌ Miss |
| GAAP Gross Margin | 17% | ~40% prior | ❌ Major Miss |
| Non-GAAP Gross Margin | 37% | ~50%+ expected | ❌ Miss |
| Non-GAAP EPS | ($0.40) | ($0.29) | ❌ Miss |
he gross margin compression is the biggest problem. A 17% GAAP gross margin is not a scalable software profile.
We are updating this story in real time as new information breaks. Stay on this page for the latest developments, key quotes, numbers, and market reaction as they happen.
Live coverage has ended. The full story is below.
C3.ai (NYSE: AI | AI Price Prediction) reports fiscal third-quarter results after the close on February 25, 2026. After a volatile year for enterprise AI software, this print is less about hype and more about whether execution is stabilizing at the gross margin and bookings level.
C3.ai’s last report delivered a headline “beat,” but it came with a profitability question investors cannot ignore. Fiscal Q2 2026 revenue was $75.1 million, and the company reported a non-GAAP net loss per share of $(0.25).
The bigger issue was gross margin. C3.ai reported GAAP gross profit of $30.4 million, which equated to a 40% GAAP gross margin. For a software model that investors typically underwrite on high gross margins, that is the line item that forces a reset in how quickly profitability can emerge. (C3.ai also reported non-GAAP gross margin of 54%, but the GAAP level is what shapes skepticism in a risk-off tape.)
Leadership and operating posture are also part of the setup. Founder Thomas Siebel is no longer CEO, and Stephen Ehikian is now responsible for proving the business can execute with tighter predictability and cleaner unit economics.
| Metric | Q3 FY26 (Guidance) | Full Year FY26 (Guidance) |
|---|---|---|
| Total Revenue | $45.64M | $298.74M |
| EPS Est. | -$0.29 | -$1.20 |
Using management’s guidance as the reference point, the key is whether C3.ai can deliver within the band without another gross margin stumble that expands the distance to profitability.
There are three focal points that matter most tonight.
First is gross margin direction. C3.ai already put a hard number on Q2: 40% GAAP gross margin. Investors will be looking for evidence that margin pressure was transitory rather than structural, because if 40% is “sticky,” the profitability timeline changes meaningfully.
Second is Federal durability. Management said bookings across federal, defense, and aerospace grew 89% year-over-year and represented 45% of total bookings. That’s real momentum, but it also increases sensitivity to procurement timing and program continuity — so investors will want clear commentary on pipeline conversion, not just booked wins.
Third is partner-led scale. C3.ai said 89% of total bookings were driven with and through its partner ecosystem, and the joint 12-month qualified opportunity pipeline with partners increased 108% year-over-year. If those metrics hold up again, the “distribution story” becomes more credible, and that’s the cleanest path to re-accelerating revenue without ballooning sales expense.
C3.ai doesn’t need a perfect quarter to improve sentiment, but it does need a clean one. That means landing revenue inside the guide, showing a better gross margin trajectory than the last print, and backing up the Federal and partner narrative with enough detail that investors can underwrite FY26 without feeling like they’re guessing. If those pieces line up, the stock can start to trade on execution again instead of skepticism.
Contact [email protected] for any questions or corrections.
Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
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