C3.ai, Inc.

Previous wording

We generate revenue primarily from the sale of subscriptions, which accounted for 86% and 84% of our total revenue in the three months ended July 31, 2025 and 2024, respectively. Our cloud-native software offerings allow us to manage, update, and monitor the software regardless of whether the software is deployed in our public cloud environment, in our customers’ self-managed private or public cloud environments, or in a hybrid environment.

Current wording

We generate revenue primarily from the sale of subscriptions, which accounted for 93% and 86% of our total revenue in the three months ended October 31, 2025 and 2024, respectively, and 90% and 85% of our total revenue in the six months ended October 31, 2025 and 2024. Our cloud-native software offerings allow us to manage, update, and monitor the software regardless of whether the software is deployed in our public cloud environment, in our customers’ self-managed private or public cloud environments, or in a hybrid environment.

Previous wording

We also generate revenue from professional services, which primarily include prioritized engineering services and services fees. Professional services revenue represented 14% and 16% of our total revenue for the three months ended July 31, 2025 and 2024, respectively.

Current wording

We also generate revenue from professional services, which primarily include prioritized engineering services and services fees. Professional services revenue represented 7% and 14% of our total revenue for the three months ended October 31, 2025 and 2024, respectively, and 10% and 15% of our total revenue in the six months ended October 31, 2025 and 2024, respectively.

Previous wording

Prioritized engineering services are undertaken when a customer requests that we accelerate the design, development, and delivery of software features and functions that are planned in our future product roadmap. When we agree to this, we negotiate an agreed upon fee to accelerate the development of the software as well as other terms, such as relevant specifications. When the software feature is delivered, it becomes integrated to our core product offering, is available to all subscribers of the underlying software product, and enhances the operation of that product going forward. Such prioritized engineering services result in production-level computer software-compiled code that enhances the functionality of our production products — which is available for our customers to use over the life of their software licenses. Prioritized engineering services revenue is recognized as professional services over the period in which the software development is completed. Prioritized engineering services revenue accounted for 87% and 77% of total professional services revenue for the three months ended July 31, 2025 and 2024, respectively.

Current wording

Prioritized engineering services are undertaken when a customer requests that we accelerate the design, development, and delivery of software features and functions that are planned in our future product roadmap. When we agree to this, we negotiate an agreed upon fee to accelerate the development of the software as well as other terms, such as relevant specifications. When the software feature is delivered, it becomes integrated to our core product offering, is available to all subscribers of the underlying software product, and enhances the operation of that product going forward. Such prioritized engineering services result in production-level computer software-compiled code that enhances the functionality of our production products — which is available for our customers to use over the life of their software licenses. Prioritized engineering services revenue is recognized as professional services over the period in which the software development is completed. Prioritized engineering services revenue accounted for 80% and 73% of total professional services revenue for the three months ended October 31, 2025 and 2024, respectively, and 85% and 75% of our total professional services revenue in the six months ended October 31, 2025 and 2024, respectively.

Previous wording

RPO was $223.2 million as of July 31, 2025, which includes $67.4 million of non-cancellable commitments where actual product selection and quantities of specific products or services will be determined at a later date. RPO was $235.1 million as of April 30, 2025.

Current wording

RPO was $232.5 million as of October 31, 2025, which includes $56.1 million of non-cancellable commitments where actual product selection and quantities of specific products or services will be determined at a later date. RPO was $235.1 million as of April 30, 2025.

Previous wording

RPO represents the amount of our contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancellable contracted amounts that will be invoiced and recognized as revenue in future periods. Our RPO as of July 31, 2025 is comprised of $29.9 million related to deferred revenue and $193.3 million of commitments from non-cancellable contracts. Our RPO as of April 30, 2025 was comprised of $36.6 million related to deferred revenue and $198.5 million of commitments from non-cancellable contracts.

Current wording

RPO represents the amount of our contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancellable contracted amounts that will be invoiced and recognized as revenue in future periods. Our RPO as of October 31, 2025 is comprised of $34.7 million related to deferred revenue and $197.8 million of commitments from non-cancellable contracts. Our RPO as of April 30, 2025 was comprised of $36.6 million related to deferred revenue and $198.5 million of commitments from non-cancellable contracts.

Previous wording

We executed 28 and 52 initial production deployment agreements during the fiscal quarters ended July 31, 2025 and 2024, respectively.

Current wording

We executed 20 and 36 initial production deployment agreements during the fiscal quarters ended October 31, 2025 and 2024, respectively.

Previous wording

During the three months ended July 31, 2025, we restructured our sales and services organization to provide a more seamless, high-touch customer experience with a consistent focus on realizing significant economic benefit rapidly from each C3 AI customer engagement. However, the restructuring had a disruptive effect on our financial performance in the three months ended July 31, 2025. This disruptive effect, together with the impact of our Executive Chairman’s unanticipated health issues preventing him from participating in the sales process as actively as he had in the past, may have had a negative effect on our sales results in the three months ended July 31, 2025. Our future success and financial performance depends on the ability of our restructured sales and services organization to achieve desired productivity levels in a reasonable period of time. See“The failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our C3 AI Software.” included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Current wording

During the three months ended July 31, 2025, we restructured our sales and services organization to provide a more seamless, high-touch customer experience with a consistent focus on realizing significant economic benefit rapidly from each C3 AI customer engagement. However, the restructuring has had a disruptive effect on our financial performance. This disruptive effect, together with onboarding of new leadership, and the impact of our Executive Chairman’s unanticipated health issues preventing him from participating in the sales process as actively as he had in the past, may have had and may continue to have a negative effect on our sales results. Our future success and financial performance depends on the ability of our restructured sales and services organization to achieve desired productivity levels in a reasonable period of time. See“The failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our C3 AI Software.” included in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Previous wording

The international market opportunity for Enterprise AI software is large and growing, and we believe there is a significant opportunity to continue to grow our international customer base. We believe that the demand for our C3 AI Software will continue growing as international awareness of the benefits of digital transformation and Enterprise AI software grows. We plan to continue to make investments to expand geographically by increasing our direct sales team in international markets and supplementing the direct sales effort with strategic partners to significantly expand our reach and market coverage. We derived approximately 9% and 13% of our total revenue for the three months ended July 31, 2025 and 2024, respectively, from international customers.

Current wording

The international market opportunity for Enterprise AI software is large and growing, and we believe there is a significant opportunity to continue to grow our international customer base. We believe that the demand for our C3 AI Software will continue growing as international awareness of the benefits of digital transformation and Enterprise AI software grows. We plan to continue to make investments to expand geographically by increasing our direct sales team in international markets and supplementing the direct sales effort with strategic partners to significantly expand our reach and market coverage. We derived approximately 5% and 13% of our total revenue for the three months ended October 31, 2025 and 2024, respectively, and 7% and 13% of our total revenue for the six months from ended October 31, 2025 and 2024, respectively, international customers.

Previous wording

Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions and uncertainties, including labor shortages, supply chain disruptions, inflation, higher interest rates, and fluctuations or volatility in capital markets, which are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.

Current wording

Our business and financial condition have been, and may continue to be, impacted by adverse macroeconomic conditions and uncertainties, including U.S. federal government shutdowns, labor shortages, supply chain disruptions, inflation, higher interest rates, and fluctuations or volatility in capital markets, which are causing customers to optimize consumption, rationalize budgets, and prioritize cash flow management.

Previous wording

Our business and financial results may be adversely affected by macroeconomic conditions, including geopolitical instability, a potential U.S. government shutdown, delays in budget approvals, or increased tariffs or global trade tensions. These and other market risks could have unforeseen and negative impacts on our operations and performance.

Current wording

Our business and financial results may be adversely affected by other macroeconomic conditions, including geopolitical instability, potential future U.S. federal government shutdowns, delays in budget approvals, or increased tariffs or global trade tensions. These and other market risks could have unforeseen and negative impacts on our operations and performance.

Previous wording

Comparison of the Three Months Ended July 31, 2025 and 2024

Current wording

Comparison of the Three and Six Months Ended October 31, 2025 and 2024

Previous wording

Subscription revenue accounted for 86% and 84% of our total revenue for the three months ended July 31, 2025 and 2024, respectively. Subscription revenue decreased by $13.2 million, or 18%, for the three months ended July 31, 2025, compared to the same period last year. Approximately 32% and 19%, respectively, of the total subscription revenue for the three months ended July 31, 2025 and 2024 was attributable to revenue from new customers, and the remaining 68% and 81%, respectively, was attributable to revenue from existing customers. Existing customers are those from whom revenue was recognized during the three months ended July 31, 2024.

Current wording

Subscription revenue accounted for 93% and 86% of our total revenue for the three months ended October 31, 2025 and 2024, respectively. Subscription revenue decreased by $10.9 million, or 13%, for the three months ended October 31, 2025, compared to the same period last year. Approximately 37% and 24%, respectively, of the total subscription revenue for the three months ended October 31, 2025 and 2024 was attributable to revenue from new customers, and the remaining 63% and 76%, respectively, was attributable to revenue from existing customers. Existing customers are those from whom revenue was recognized during the three months ended October 31, 2024.

Previous wording

Professional services revenue decreased by $3.8 million, or 28%, for the three months ended July 31, 2025, compared to the same period last year, predominantly due to a decrease in prioritized engineering services of $2.0 million and a decrease in professional services of $1.8 million as a result of a decrease in the number of implementation and training projects.

Current wording

Professional services revenue decreased by $8.3 million, or 63%, for the three months ended October 31, 2025, compared to the same period last year, predominantly due to a decrease in prioritized engineering services of $5.7 million and a decrease in professional services of $2.6 million as a result of a decrease in the number of service, consulting, and training projects for C3 AI Platform and C3 AI Application customers.

Previous wording

The increase in cost of subscription revenue for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher payroll and contractor costs of $7.1 million and higher data center costs of $0.3 million.

Current wording

The increase in cost of subscription revenue for the three months ended October 31, 2025 compared to the same period last year was primarily due to higher payroll and contractor costs of $7.1 million.

Previous wording

The decrease in total gross margin for the three months ended July 31, 2025 compared to the same period last year was driven by decline in both subscription and professional services margin.

Current wording

The decrease in total gross margin for the three months ended October 31, 2025 compared to the same period last year was driven by decline in both subscription and professional services margin. The subscription margin for the three months ended October 31, 2025 decreased primarily due to the decline in subscription revenue and higher payroll and contractor costs. The professional service margin decreased for the three months ended October 31, 2025 due to the decline in prioritized engineering service projects compared to the same period last year and higher payroll and contractor costs.

Previous wording

Sales and Marketing. The increase in sales and marketing expense for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher payroll costs of $15.1 million as a result of additional headcount and overall costs to support the growth in our business, and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, partially offset by lower advertising and marketing costs of $6.0 million.

Current wording

Sales and Marketing. The increase in sales and marketing expense for the three months ended October 31, 2025 compared to the same period last year was primarily due to higher payroll costs of $7.7 million as a result of additional headcount and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, partially offset by lower advertising costs of $5.0 million.

Previous wording

Research and Development. The increase in research and development expense for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher payroll and contractor costs of $9.4 million and higher data center costs of $1.4 million.

Current wording

Research and Development. The increase in research and development expense for the three months ended October 31, 2025 compared to the same period last year was primarily due to higher payroll and contractor costs of $5.1 million, partially offset by lower data center costs of $2.9 million.

Previous wording

General and Administrative. The increase in general and administrative expense for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher payroll costs of $4.0 million as a result of additional headcount and overall costs to support the growth in our business and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, and higher professional services costs of $0.7 million.

Current wording

General and Administrative. The increase in general and administrative expense for the three months ended October 31, 2025 compared to the same period last year was primarily due to higher payroll costs of $3.5 million as a result of additional headcount and increased stock-based compensation primarily related to additional equity awards granted to current and new employees, and higher general and administrative costs of $0.6 million.

Previous wording

The increase in cost of professional services revenue for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher payroll and contractor costs of $0.5 million.

Current wording

The increase in general and administrative expense for the six months ended October 31, 2025 compared to the same period last year was primarily due to higher payroll costs of $7.4 million as a result of increased headcount and increased stock-based compensation primarily related to additional equity awards granted to current and new employees and higher other general and administrative costs of $0.7 million, and higher professional services expenses of $0.9 million, partially offset by decline in corporate insurance costs of $0.5 million.

Previous wording

The decrease in interest income for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher prevailing interest rates on our marketable securities portfolio and higher volume of investments in the three months ended July 31, 2024.

Current wording

The decrease in interest income for the three and six months ended October 31, 2025 compared to the same period last year was primarily due to lower prevailing interest rates on our marketable securities portfolio and lower volume of investments in the three and six months ended October 31, 2025.

Previous wording

The increase in other income (expense), net for the three months ended July 31, 2025 compared to the same period last year was primarily due to higher foreign currency gains on the remeasurement of Euro-denominated cash and accounts receivable balances, in the three months ended July 31, 2025.

Current wording

The increase in other income (expense), net for the three and six months ended October 31, 2025 compared to the same period last year was primarily due to higher foreign currency gains on the remeasurement of Euro-denominated cash and accounts receivable balances, in the three and six months ended October 31, 2025.

Previous wording

The change in provision for income taxes for the three months ended July 31, 2025 compared to the same period last year was primarily related to foreign and state tax expense.

Current wording

The change in provision for income taxes for the three and six months ended October 31, 2025 compared to the same period last year was primarily related to foreign and state tax expense.

Previous wording

In addition to our financial results determined in accordance with generally accepted accounting principles in the United States, or GAAP, we believe free cash flow, a non-GAAP financial measure, is useful in evaluating liquidity and provides information to management and investors about our ability to fund future operating needs and strategic initiatives. We calculate free cash flow as net cash (used in) provided by operating activities less purchases of property and equipment. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash used in operating activities. This non-GAAP financial measure may be different than similarly titled measures used by other companies. Additionally, the utility of free cash flow is further limited as it does not represent the total increase or decrease in our cash balances for a given period. The following table below provides a reconciliation of free cash flow to the GAAP measure of net cash used in operating activities for the periods presented.

Current wording

In addition to our financial results determined in accordance with generally accepted accounting principles in the United States, or GAAP, we believe free cash flow, a non-GAAP financial measure, is useful in evaluating liquidity and provides information to management and investors about our ability to fund future operating needs and strategic initiatives. We calculate free cash flow as net cash used in operating activities less purchases of property and equipment. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash used in operating activities. This non-GAAP financial measure may be different than similarly titled measures used by other companies. Additionally, the utility of free cash flow is further limited as it does not represent the total increase or decrease in our cash balances for a given period. The following table below provides a reconciliation of free cash flow to the GAAP measure of net cash used in operating activities for the periods presented.

Previous wording

Since inception, we have financed operations primarily through sales generated from our customers and sales of equity securities. As of July 31, 2025 and April 30, 2025, we had $80.9 million and $164.4 million of cash and cash equivalents and $631.0 million and $578.3 million of marketable securities, respectively, which are available for use in current operations. Our marketable securities generally consist of high-grade U.S. treasury securities, certificates of deposit, U.S. government agency securities, commercial paper and corporate debt securities. We have generated operating losses from our operations as reflected in our accumulated deficit of $1.5 billion as of July 31, 2025. We expect to continue to incur operating losses and generate negative cash flows from operations in the next few quarters due to the investments we intend to make in our business, and as a result we may require additional capital to execute on our strategic initiatives to grow the business.

Current wording

Since inception, we have financed operations primarily through sales generated from our customers and sales of equity securities. As of October 31, 2025 and April 30, 2025, we had $103.2 million and $164.4 million of cash and cash equivalents and $571.8 million and $578.3 million of marketable securities, respectively, which are available for use in current operations. Our marketable securities generally consist of high-grade U.S. treasury securities, certificates of deposit, U.S. government agency securities, commercial paper and corporate debt securities. We have generated operating losses from our operations as reflected in our accumulated deficit of $1.6 billion as of October 31, 2025. We expect to continue to incur operating losses and generate negative cash flows from operations in the next few quarters due to the investments we intend to make in our business, and as a result we may require additional capital to execute on our strategic initiatives to grow the business.

Previous wording

During the three months ended July 31, 2025, cash used in operating activities was $33.5 million, an increase of $41.6 million compared to the same period last year. The increase was primarily attributable to an increase in cash paid for payroll and related costs, and to vendors, partially offset by an increase in cash received from customers.

Current wording

During the six months ended October 31, 2025, cash used in operating activities was $80.0 million, an increase of $49.4 million compared to the same period last year. The increase was primarily attributable to an increase in cash paid for payroll and related costs, and to vendors, partially offset by an increase in cash received from customers.

Previous wording

Investing Activities. Net cash used in investing activities of $51.2 million for the three months ended July 31, 2025 was attributable to purchases of marketable securities of $206.5 million and capital expenditures of $0.8 million mainly related to computer equipment and servers, partially offset by maturities and sales of marketable securities of $156.1 million.

Current wording

Investing Activities. Net cash provided by investing activities of $10.9 million for the six months ended October 31, 2025 was attributable to maturities and sales of marketable securities of $343.3 million, offset by purchases of marketable securities of $331.2 million and capital expenditures of $1.1 million mainly related to computer equipment and servers.

Previous wording

Net cash used in investing activities of $41.6 million for the three months ended July 31, 2024 was attributable to purchases of marketable securities of $230.9 million and capital expenditures of $0.9 million mainly related to the leasehold improvements associated with the new leased space, partially offset by maturities and sales of marketable securities of $190.3 million.

Current wording

Net cash used in investing activities of $18.9 million for the six months ended October 31, 2024 was attributable to purchases of marketable securities of $365.9 million and capital expenditures of $1.7 million mainly related to the leasehold improvements associated with the new leased space, partially offset by maturities and sales of marketable securities of $348.8 million.

Previous wording

Financing Activities. Net cash provided by financing activities of $1.3 million during the three months ended July 31, 2025 was due to proceeds from the exercise of stock options for Class A common stock.

Current wording

Financing Activities. Net cash provided by financing activities of $8.0 million during the six months ended October 31, 2025 was due to $5.0 million of proceeds from employee stock purchase and $3.0 million proceeds from the exercise of stock options for Class A common stock.

Previous wording

Net cash provided by financing activities of $0.2 million during the three months ended July 31, 2024 was due to $3.1 million of proceeds from the exercise of stock options for Class A common stock, partially offset by $2.9 million of taxes paid related to net share settlement of equity awards.

Current wording

Net cash provided by financing activities of $3.7 million during the six months ended October 31, 2024 was due to $5.0 million of proceeds from issuance of Class A common stock under the 2020 ESPP and $4.5 million of proceeds from the exercise of stock options for Class A common stock, partially offset by $5.8 million of taxes paid related to net share settlement of equity awards.