CEO Departure and Revenue Drop Exacerbate C3.ai's Execution Risks Amid Persistent Losses

What happened

C3.ai's stock plunged 55% in 2025, largely due to the September departure of founder and longtime CEO Thomas Siebel for health reasons, which triggered a sharp revenue decline. This leadership change compounds existing challenges highlighted in filings, including deep net losses of $289 million in FY2025 and $117 million in Q1 FY2026, with volatile free cash flow. Despite a differentiated AI platform, strong liquidity of $711.9 million, and 192 partner agreements in FY2025, the business relies on unproven scalability from initial deployments to consumption-based revenue. New CEO Stephen Ehikian faces intensified pressure to navigate long sales cycles, fierce competition, and rapid technological shifts, while regulatory hurdles like the EU AI Act add complexity. Investor confidence hinges on demonstrating that partner-led motions can convert to sustainable subscription growth and operating leverage, but current trends suggest heightened uncertainty.

Implication

The CEO transition introduces critical execution risk at a time when C3.ai needs to prove its model can scale, potentially delaying growth initiatives and exacerbating revenue volatility. Revenue decline underscores the fragility of the business model, making it essential to track remaining performance obligations and deployment conversions for visibility into future performance. With $711.9 million in cash providing a temporary buffer, persistent losses could rapidly erode liquidity, increasing the urgency for cost control and operational efficiency. Competitive pressures from internal builds and cloud vendors, coupled with regulatory changes, add layers of complexity that may hinder recovery and margin improvement. Long-term, any investment case depends on clear evidence that initial partner-led deployments can ramp into profitable, consumption-based streams, but current headwinds suggest patience is warranted.

Thesis delta

The news of CEO departure and revenue decline reinforces the existing HOLD thesis by amplifying governance and execution risks already identified in the DeepValue report. It does not shift the core investment narrative, which remains contingent on proving scalability and operating leverage, but it increases the scrutiny on new leadership's ability to stabilize the business. Investors should now prioritize the watch items—subscription growth, RPO trends, and free cash flow—with even greater caution, as failure to show progress could tilt the thesis towards SELL.