C3.ai Stock Slides 35% in 6 Months, Buy the Dip or Stay Cautious?

C3.ai, Inc. AI has shed more than a third of its market value in six months and the decline reflects several internal and external pressures weighing on investor sentiment. The stock has lost 35% in the same time frame compared with the industry’s decrease of 8.2%.Slowing revenue momentum, weaker margins and persistent losses have overshadowed optimism surrounding enterprise AI adoption. Execution missteps, especially in sales, also caused the company to miss the growth trajectory it enjoyed previously. Meanwhile, a prolonged government shutdown disrupted a key end-market, adding unnecessary friction at a time when C3.ai needed stability to rebuild confidence.Price PerformanceImage Source: Zacks Investment ResearchHeadwinds Dragging Down the StockOne of the biggest issues hurting C3.ai is the deterioration in sales execution over the past two quarters. Management acknowledged that deal velocity weakened significantly earlier this year, leading to shrinking revenues and notable margin compression. The CEO pointed specifically to a breakdown in sales discipline and qualification, causing delays in converting demand into production-ready deployments.A second challenge came from an unexpected 43-day U.S. government shutdown, which disrupted activity across multiple federal agencies, the company’s fastest-growing vertical. The shutdown slowed procurement in defense, healthcare and civilian agencies, limiting C3.ai’s ability to close deals despite strong underlying demand. These disruptions also spilled into adjacent commercial markets such as manufacturing and shipbuilding.Additionally, C3.ai continues to operate with high operating losses. Although management reduced expenses by more than $10 million sequentially, free cash flow was still deeply negative at nearly $47 million. Gross margins remain pressured due to a heavy mix of Initial Production Deployments (IPDs), which carry higher upfront costs before scaling into more profitable subscription relationships.This combination of operational missteps, temporary external headwinds and ongoing losses has made investors cautious and kept the stock under pressure.Factors That Could Support a ReboundDespite recent challenges, several trends could help stabilize and eventually lift C3.ai’s performance. For starters, bookings surged 49% sequentially in second-quarter fiscal 2026, indicating that demand for enterprise AI remains solid even as near-term revenues fluctuate. The federal segment was a standout, with bookings soaring 89% year over year and now representing 45% of total company bookings, indicating durable momentum in a high-value market.C3.ai is also benefiting from a strengthening partner ecosystem. Roughly 89% of bookings in the quarter came through partners like Microsoft, AWS, McKinsey and Booz Allen. The Microsoft alliance alone produced more than 100 customer agreements across 17 industries in just one year, showcasing the scalability of these channels.Product innovation is another bright spot. The launch of C3 AI Agentic Process Automation broadens the company's reach into the workflow automation and RPA market, potentially unlocking new revenue streams. Management noted growing customer success stories, such as GSK, Signature Aviation and industrial partners, which reinforce the platform’s ability to deliver measurable economic value.Finally, the new CEO has implemented a detailed operational plan centered on tighter sales rigor, improved qualification of IPDs and aggressive accountability across all departments. With $675 million in cash on hand, C3.ai has the runway to execute a turnaround without near-term liquidity risk.C3.ai’s Estimate Revision TrendThe Zacks Consensus Estimate for fiscal 2026 loss per share has narrowed in the past seven days, as shown in the chart.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for fiscal 2026 and 2027 sales implies a year-over-year decline of 23.2% and growth of 11.8%, respectively. Meanwhile, Palantir Technologies Inc.’s PLTR sales in 2026 are likely to increase 41.1% year over year, whereas SoundHound AI, Inc.’s SOUN sales in fiscal 2026 are likely to grow 38.9%.C3.ai ValuationAI is priced at a discount relative to its industry. It has a forward 12-month price-to-sales ratio of 6.8, which is well below the industry average. Meanwhile, Palantir Technologies and SoundHound’s forward 12-month price-to-sales ratios are 73.05 and 13.22, respectively.P/S (F12M)Image Source: Zacks Investment ResearchEnd NotesC3.ai’s recent slide reflects a mix of internal execution issues, margin pressure and external disruptions that have clouded its near-term outlook. Yet, the company is not without meaningful strengths that argue against abandoning the stock.While sales missteps and elevated losses remain concerns, the sharp rebound in bookings, growing traction in the federal segment, expanding partnerships with large cloud and consulting platforms, and a renewed operational playbook under new leadership suggest that the foundation for recovery is being rebuilt.At the same time, a solid cash position and ongoing product innovation help limit downside risk, making a hold stance more appropriate for existing investors who can wait for execution to normalize. However, despite attractive valuation levels, the business still faces uncertain revenue visibility and a need to prove consistent sales discipline, which means new buyers should remain cautious until the company demonstrates steadier growth, cleaner margins and better follow-through on its strategic initiatives.AI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report C3.ai, Inc. (AI): Free Stock Analysis Report Palantir Technologies Inc. (PLTR): Free Stock Analysis Report SoundHound AI, Inc. (SOUN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks