Artificial intelligence company C3.ai Inc. posted second quarter financial results today that just beat Wall Street’s expectations, but its stock barely moved in extended trading.

The company, which refers to itself as C3 AI, reported a loss before certain costs such as stock compensation of 11 cents per share on revenue of $62.4 million, up 7% from a year earlier. The results came in ahead of Wall Street’s forecast of a 16 cent loss on sales of $60.8 million. They resulted in a net loss of $68.8 million, up from the $56.7 million net loss it recorded a year earlier.

C3 AI is a provider of enterprise AI development software. The C3 AI Application Platform is a comprehensive suite of tools and services for companies that want to build enterprise-scale AI applications to accelerate their digital transformation. The company claims that its platform enables teams to build AI apps more efficiently and at lower cost than rival approaches.

The big news from the quarter was that C3 AI has successfully completed a business model transition that it announced three months ago, switching from a subscription-based pricing model to a consumption-based model instead.

At the time, C3 AI said the switch would bring it in line with the industry standard way of doing business for software-as-a-service companies. It explained that consumption-based pricing is used to good effect by the likes of Amazon Web Services Inc. and Snowflake Inc. It works similarly to how a company might pay its utility bills, which higher charges the more they make use of C3 AI’s services, and lower charges if they use them less. According to C3 AI, customers will benefit from being able to access a single AI Enterprise application and unlimited use of that platform.

To implement the new business model, C3 AI said it was fundamentally reshaping its sales organization. Three months on, the company says this restructuring has largely been completed and that its sales organization is now composed of highly technical domain experts. In the short term, C3 AI warned investors that it expects to suffer with lower revenue growth and a decrease in its remaining performance obligation, though in the medium-to-long term, it believes the shift will significantly accelerate its growth.

The timing is certainly interesting, as C3 AI’s subscription revenue grew by an impressive 26% from a year earlier to $59.5 million. However, it has already taken a hit in its RPO, which came to $417.3 million, down from $465.5 million a year ago.

C3 AI Chief Executive Thomas Siebel (pictured) said the company delivered a “solid” second quarter. “We made substantial progress ramping up our consumption-based sales motion effort, which has been well received by our customers, partners, and sales organization,” he said. “We expect consumption-based sales will be a substantial contributor to growth in forthcoming quarters.”

Investors are unlikely to reap any benefits in the short-term, however. For the third quarter, C3 AI said it sees revenue of between $63 million and $65 million, which is lower than the analyst’s consensus estimate of $66.8 million. For the full year, C3 AI is forecasting total revenue of $255 million to $270 million, versus Wall Street’s target of $260.8 million.

Photo: SiliconANGLE

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