Retail investors' AI bet C3.ai's shares climb on strong results, forecast

(Reuters) - C3.ai's shares jumped about 18% in premarket trading on Thursday after strong demand for AI software helped the company deliver third-quarter results ahead of analyst expectations and firmed its full-year forecast on strong enterprise demand.

The company's shares have surged 165% since the end of 2022, valuing the company at $3.56 billion, drawing strong interest from active traders, especially retail investors, looking to bet on the boom in artificial intelligence (AI).

However, in that same period, Nvidia, the poster child for AI, has rocketed 431%, or more than five-fold, in market value.

In the latest quarter, strong demand from federal customers helped C3.ai's subscription revenue increase 23% to $70.4 million and beat analysts' average estimate of $66.77 million, according to LSEG data. Subscription revenue is about 90% of total revenue.

"The company is having notable success in the federal sector while signing more multi-year subscription agreements that trend similarly to consumption revenue behavior," said D.A. Davidson analyst Gil Luria.

C3.ai's stock was last trading at $34.98, on track to hit a more than six-month high at market open and already above the $28.50 median price target of the 14 brokerages covering C3.ai.

Their average rating, according to LSEG data, is "hold." D.A. Davidson has an equivalent rating on C3.ai but raised its target price to $30 from $28.

Redwood City, California-based C3.ai also narrowed its 2024 revenue forecast to $306-$310 million, from $295-$320 million.

Still, the new forecast was largely above analysts' estimates of $306.1 million.

The company also said its chief accounting officer Hitesh Lath will transition to the chief financial officer role, effective March 1, replacing Juho Parkkinen.

Parkkinen will remain at the company as vice president of finance, C3.ai said.

(Reporting by Medha Singh in Bengaluru; Editing by Savio D'Souza)