C3.ai, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended April 30, 2025 included in the Annual Report on Form 10-K for the fiscal year ended April 30, 2025, which was filed with the Securities and Exchange Commission, or SEC, on June 23, 2025. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Unless the context otherwise requires, all references in this report to “C3.ai,” “C3 AI,” the “Company”, “we,” “our,” “us,” or similar terms refer to C3.ai, Inc. and its subsidiaries.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended April 30, 2026 included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2026, which was filed with the Securities and Exchange Commission, or SEC, on June 24, 2026. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Unless the context otherwise requires, all references in this report to “C3.ai,” “C3 AI,” the “Company”, “we,” “our,” “us,” or similar terms refer to C3.ai, Inc. and its subsidiaries.

Previous wording

C3 AI is an Enterprise AI application software company.

Current wording

C3 AI is an Enterprise AI software company.

Previous wording

We have built a family of software applications that enable our customers to rapidly develop, deploy, and operate large-scale Enterprise AI applications. Customers can deploy C3 AI solutions on major public cloud infrastructures, private cloud or hybrid environments, or directly on their servers and processors. We provide three primary families of software solutions, which we collectively refer to as our “C3 AI Software”:

Current wording

We have built a family of software offerings that enable our customers to rapidly develop, deploy, and operate large-scale Enterprise AI applications and use cases. Customers can deploy C3 AI's offerings on major public cloud infrastructures, private cloud or hybrid environments, or directly on their own servers and processors. We organize our offerings, which we collectively refer to as our “C3 AI Software,” into three layers: the C3 Agentic AI Platform, a tooling layer, and a portfolio of applications and application modules.

Previous wording

•C3 Agentic AI Platform, our core technology, is a comprehensive, end-to-end application development and runtime environment that is designed to allow our customers to rapidly design, develop, and deploy Enterprise AI applications.

Current wording

•C3 Agentic AI Platform, our core technology and the foundation on which our other offerings run, is a comprehensive, end-to-end application development and runtime environment that is designed to allow our customers to rapidly design, develop, and deploy Enterprise AI applications. The C3 Agentic AI Platform enables the creation of enterprise-grade AI agents that can autonomously perceive data, reason over complex systems, and take action to achieve defined business goals. These agents operate within secure, governed workflows and integrate across the enterprise. Data unification, artificial intelligence and machine learning lifecycle management, and the orchestration of models, tools, and autonomous agents are core capabilities of the platform.

Previous wording

These solutions, and our patented model-driven architecture, enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration. We significantly reduce the effort and complexity of the AI software engineering problem.

Current wording

These offerings, and our patented model-driven architecture, enable organizations to simplify and accelerate Enterprise AI application development, deployment, and administration. We significantly reduce the effort and complexity of the AI software engineering problem.

Previous wording

We generate revenue primarily from the sale of subscriptions, which accounted for 90% and 87% of our total revenue in the three months ended January 31, 2026 and 2025, respectively, and 90% and 86% of our total revenue in the nine months ended January 31, 2026 and 2025. 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 94% and 86% of our total revenue in the three months ended July 31, 2026 and 2025, 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.

Previous wording

We primarily recognize revenue from subscriptions on a ratable basis over the contract term or on a usage basis for consumption-based arrangements. We also recognize revenue upon delivery to the customer for software licenses that do not require maintenance and support services. In addition, customers typically pay a usage-based runtime fee for production use of our C3 AI Software for specified levels of capacity. Customers who choose to run the software in our cloud environment pay the hosting costs charged by our cloud providers. We deploy a consumption-based pricing model, beginning with an initial production deployment phase which may include access to the C3 Agentic AI Platform, one or more C3 AI Applications or C3 Generative AI, and C3 AI Center of Excellence, or COE support services. Following the initial production deployment period, customers either pay a monthly fee and consumption charges using virtual Central Processing Unit or vCPU and virtual Graphics Processing Unit or vGPU hours as the metric to calculate payment or enter into a time-certain multi-period commitment that may include consumption charges. Our subscriptions also include our maintenance and support services. Additionally, we offer premium stand-ready support services through our C3 AI COE which is included as part of the subscription when purchased.

Current wording

We primarily recognize revenue from subscriptions on a ratable basis over the contract term or on a usage basis for consumption-based arrangements. We also recognize revenue upon delivery to the customer for software licenses that do not require maintenance and support services. In addition, customers typically pay a usage-based runtime fee for production use of our C3 AI Software for specified levels of capacity. Customers who choose to run the software in our cloud environment pay the hosting costs charged by our cloud providers. We frequently deploy a consumption-based pricing model, beginning with a short proof of value or an initial production deployment phase which may include access to the C3 Agentic AI Platform, one or more C3 AI Applications or C3 Generative AI, and C3 AI Center of Excellence (“COE”) support services. Following a short proof of value or an initial production deployment period, customers generally either pay a monthly fee and consumption charges using virtual Central Processing Unit or vCPU and virtual Graphics Processing Unit or vGPU hours as the metric to calculate payment or enter into a time-certain multi-period commitment that may include consumption charges. Our subscriptions also include our maintenance and support services. Additionally, we offer premium stand-ready support services through our C3 AI COE which is included as part of the subscription when purchased.

Previous wording

We also generate revenue from professional services, which primarily include prioritized engineering services and services fees. Professional services revenue represented 10% and 13% of our total revenue for the three months ended January 31, 2026 and 2025, respectively, and 10% and 14% of our total revenue in the nine months ended January 31, 2026 and 2025, respectively.

Current wording

We also generate revenue from professional services, which primarily include prioritized engineering services and services fees. Professional services revenue represented 6% and 14% of our total revenue for the three months ended July 31, 2026 and 2025, 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 65% and 43% of total professional services revenue for the three months ended January 31, 2026 and 2025, respectively, and 80% and 65% of our total professional services revenue in the nine months ended January 31, 2026 and 2025, 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 in the subsequent general release, 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 accounted for 55% and 87% of total professional services revenue for the three months ended July 31, 2026 and 2025, respectively.

Previous wording

Our go-to-market strategy includes a way for new customers to subscribe to our products at smaller initial contract sizes and pay for services based on their monthly consumption of vCPU and vGPU hours or at fixed rates. Customers generally begin with a short proof of value or one to two-quarter-long initial production deployment agreements which includes the necessary resources required to deploy the C3 Agentic AI Platform and/or C3 AI Applications and receive necessary training to operate and maintain the software in production use. Following the initial production deployment period, customers either pay a monthly fee and consumption charges using vCPU and vGPU hours utilized as the metric to calculate payment or enter into a time-certain multi-period commitment that may include consumption charges.

Current wording

Our go-to-market strategy includes a way for new customers to subscribe to our products at smaller initial contract sizes and pay for services based on their monthly consumption of vCPU and vGPU hours or at fixed rates. Customers generally begin with a short proof of value or an initial production deployment, which includes the necessary resources required to deploy the C3 Agentic AI Platform and/or C3 AI Applications and receive necessary training to operate and maintain the software in production use. Following the short proof of value or initial production deployment period, customers generally either pay a monthly fee and consumption charges using vCPU and vGPU hours utilized as the metric to calculate payment or enter into a time-certain multi-period commitment that may include consumption charges.

Previous wording

RPO as of January 31, 2026 is comprised of $40.0 million related to deferred revenue and $185.4 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 as of July 31, 2026 is comprised of $53.7 million related to deferred revenue and $146.3 million of commitments from non-cancellable contracts. Our RPO as of April 30, 2026 was comprised of $36.4 million related to deferred revenue and $166.7 million of commitments from non-cancellable contracts.

Previous wording

As it relates to our subscription-based pricing agreements, we monitor remaining performance obligations, or RPO. While RPO provides insight into committed revenue, it may not accurately reflect future revenue growth, particularly for pay-as-you go consumption pricing agreements and due to factors such as timing of renewals, the timing of conversion of an initial production deployment into a recurring subscription contract, purchases of additional capacity, average contract terms, and seasonality. As a result, it is important to review RPO in conjunction with revenue and other financial metrics disclosed elsewhere in this Quarterly Report on Form 10-Q.

Current wording

RPO excludes amounts related to monthly usage-based runtime and hosting charges. While RPO provides insight into committed revenue, it may not accurately reflect future revenue growth, particularly for pay-as-you go consumption pricing agreements and due to factors such as timing of renewals, the timing of conversion of short proof of value or an initial production deployment into a recurring subscription contract, purchases of additional capacity, average contract terms, and seasonality. As a result, it is important to review RPO in conjunction with revenue and other financial metrics disclosed elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

We are focused on expanding our customer base across diverse sectors, with significant momentum in the federal, defense, and aerospace markets driven by new U.S. government agreements and increased international adoption.

Current wording

We are focused on expanding our customer base across diverse sectors, with significant momentum in the federal, defense, and aerospace markets driven by new federal agreements and increased international adoption.

Previous wording

•Operational Right-Sizing: We are reducing our cash burn through a 26% reduction in our global workforce and a targeted 30% reduction in annualized non-employee costs. We expect to substantially complete the implementation of the Plan by the second quarter of fiscal year 2027.

Current wording

•Operational Right-Sizing: We are reducing our cash burn through a reduction in our global workforce, and a reduction in annualized non-employee costs. We expect to substantially complete the implementation of the Plan by the second quarter of fiscal year 2027.

Previous wording

We believe we are in the nascent stages of a large and expanding market for AI enabled digital transformation. As a result, we intend to continue to invest in brand awareness, market education, strategic paid media, and thought leadership, particularly as it relates to agentic and generative AI. We engage the market through digital, radio, outdoor, airport, and print advertising; virtual and physical events, including our C3 Transform annual user conference; and C3 AI Webinars, a series of events featuring C3 AI customers, C3 AI partners, and C3 AI experts in AI, Machine Learning, or ML, and data science.

Current wording

We believe we are in the nascent stages of a large and expanding market for AI enabled digital transformation. We intend to focus our marketing investment on targeted brand awareness, market education, and thought leadership, particularly as it relates to agentic and generative AI. In connection with our restructuring, we have substantially reduced advertising and other discretionary marketing costs and have concentrated our remaining efforts to focus on cost-efficient, higher-return channels, principally digital programs, virtual and physical events, including our C3 Transform annual user conference, C3 Code Accelerator, a program to accelerate customer adoption through intensive one- or two-day onsite engagements, and C3 AI Webinars, a series of events featuring C3 AI customers, partners, and experts in AI, machine learning, or ML, and data science.

Previous wording

In addition to the activities of our field sales organization, our success in attracting new customers will depend on our ability to expand our ecosystem of strategic partners and the number of industry verticals that they serve. Our strategic go-to-market alliances vastly extend our reach globally. Some of our most notable partners include Microsoft, Baker Hughes, AWS, and Google. Each strategic partner is a leader in its industry, with a substantial installed customer base and extensive marketing, sales, and services resources that we can leverage to engage and serve customers anywhere in the world. Using our C3 Agentic AI Platform as the development suite, we leverage our model-driven architecture to efficiently build new cross-industry and industry-specific applications based on identifying requirements across our customer base of industry leaders and through our industry partners. Our strategy with strategic partners is to establish a significant use case and prove the value of our C3 Agentic AI Platform, C3 AI Applications, and C3 Generative AI with a flagship customer in each industry in which we participate. We have done this with our strategic vertical industry partner in oil and gas, Baker Hughes, as well as with our iconic global customers, some of whom are deploying C3 AI technology to optimize thousands of critical assets globally across their upstream, midstream, and downstream operations. We establish formal sales and marketing plans with each partner, including specific sales goals and dedicated budgets, and we work closely with these partners to identify specific target accounts. We intend to grow the business we do with each partner and to add more partners as we expand the vertical markets we serve. We also offer revenue generating initial production deployments of our applications as part of our customer acquisition strategy.

Current wording

In addition to the activities of our field sales organization, our success in attracting new customers will depend on our ability to expand our ecosystem of strategic partners and the number of industry verticals that they serve. Our strategic go-to-market alliances vastly extend our reach globally. Some of our most notable partners include Microsoft, Baker Hughes, AWS, and Google. Each strategic partner is a leader in its industry, with a substantial installed customer base and extensive marketing, sales, and services resources that we can leverage to engage and serve customers anywhere in the world. Using our C3 Agentic AI Platform as the development suite, we leverage our model-driven architecture to efficiently build new cross-industry and industry-specific applications based on identifying requirements across our customer base of industry leaders and through our industry partners. Our strategy with strategic partners is to establish a significant use case and prove the value of our C3 Agentic AI Platform, C3 AI Applications, and C3 Generative AI with a flagship customer in each industry in which we participate. We have done this with our strategic vertical industry partner in oil and gas, Baker Hughes, as well as with our iconic global customers, some of whom are deploying C3 AI technology to optimize thousands of critical assets globally across their upstream, midstream, and downstream operations. We establish formal sales and marketing plans with each partner, including specific sales goals and dedicated budgets, and we work closely with these partners to identify specific target accounts. We intend to grow the business we do with each partner and to add more partners as we expand the vertical markets we serve. We also offer revenue generating with a short proof of value or initial production deployments of our applications as part of our customer acquisition strategy.

Previous wording

In September 2024, we entered into a new global alliance agreement with Microsoft — focused on sales, marketing, and solution delivery across all geographies and all industries — to accelerate the adoption of Enterprise AI. The agreement establishes us as a preferred AI application software provider on Microsoft Azure. The collaboration includes joint sales, joint go-to-market strategies, and immediate availability of all C3 Enterprise AI solutions through Azure sales channels, including the Microsoft Commercial Cloud, technical integration, and aligned product development. We plan to invest aggressively to support this distribution channel.

Current wording

Our global alliance agreement with Microsoft is focused on sales, marketing, and solution delivery across all geographies and all industries to accelerate the adoption of Enterprise AI. The agreement establishes us as a preferred AI application software provider on Microsoft Azure. The collaboration includes joint sales, joint go-to-market strategies, and availability of all C3 Enterprise AI solutions through Azure sales channels, including the Microsoft Commercial Cloud, technical integration, and aligned product development. We continue to invest aggressively to support this distribution channel.

Previous wording

In January 2025, we also entered into a new strategic alliance with McKinsey & Company, a global management consulting firm, to help clients and prospects across industries and geographies accelerate Enterprise AI transformations at scale. The alliance combines the deep technical expertise of McKinsey’s AI practice, QuantumBlack, and its track record of deploying and scaling AI solutions across industries with our cutting-edge Enterprise AI software applications to help clients unlock the power of Enterprise AI and agentic AI to realize significant operational improvements and unlock new growth opportunities.

Current wording

We also maintain a strategic alliance with McKinsey & Company, a global management consulting firm, to help clients and prospects across industries and geographies accelerate Enterprise AI transformations at scale. The alliance combines the deep technical expertise of McKinsey’s AI practice, QuantumBlack, and its track record of deploying and scaling AI solutions across industries with our cutting-edge Enterprise AI software applications to help clients unlock the power of Enterprise AI and agentic AI to realize significant operational improvements and unlock new growth opportunities.

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 continuing to invest in our direct sales teams in international markets and supplementing the direct sales effort with strategic partners to significantly expand our reach and market coverage. We derived approximately 12% and 14% of our total revenue for the three months ended January 31, 2026 and 2025, respectively, and 9% and 13% of our total revenue for the nine months from ended January 31, 2026 and 2025, respectively, 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 selective investments to expand geographically by investing in our direct sales teams in international markets and supplementing the direct sales effort with strategic partners to significantly expand our reach and market coverage. We derived approximately 20% and 9% of our total revenue for the three months ended July 31, 2026 and 2025, respectively, from international customers.

Previous wording

Subscription Revenue. Our subscription revenue is primarily comprised of software licenses, software-as-a-service offerings, stand-ready COE support services, initial production deployments of our C3 AI Applications or Generative AI, and hosting charges. Sales of our software licenses grant our customers the right to use our software, either on their own cloud instances or their internal hardware infrastructures, during the contractual term. We also offer a premium stand ready service through our COE. Sales of our software-as-a-service offerings include a right to use our software during the contract term. In addition, customers pay a usage-based runtime fee for our C3 AI Software for specified levels of guaranteed minimum consumption. Our subscriptions also include our maintenance and support services, which include critical and continuous updates to the software that are integral to maintaining the intended utility of the software over the contractual term. For a significant majority of our offerings, our software subscriptions and maintenance and support services are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract. We also sell software licenses that do not require maintenance and support services. We currently have a small number of customers that license our offerings under a perpetual license model, and we expect that may continue for the foreseeable future for certain customers due to their specific contracting requirements.

Current wording

Subscription Revenue. Our subscription revenue is primarily comprised of software licenses, software-as-a-service offerings, stand-ready COE support services, a short proof of value or initial production deployments of our C3 AI Applications or Generative AI, and hosting charges. Sales of our software licenses grant our customers the right to use our software, either on their own cloud instances or their internal hardware infrastructures, during the contractual term. We also offer a premium stand ready service through our COE. Sales of our software-as-a-service offerings include a right to use our software during the contract term. In addition, customers pay a usage-based runtime fee for our C3 AI Software for specified levels of guaranteed minimum consumption. Our subscriptions also include our maintenance and support services, which include critical and continuous updates to the software that are integral to maintaining the intended utility of the software over the contractual term. For a significant majority of our offerings, our software subscriptions and maintenance and support services are highly interdependent and interrelated and represent a single distinct performance obligation within the context of the contract. We also sell software licenses that do not require maintenance and support services. We currently have a small number of customers that license our offerings under a perpetual license model, and we expect that may continue for the foreseeable future for certain customers due to their specific contracting requirements.

Previous wording

Professional Services Revenue. Our professional services revenue primarily includes consulting, training, paid implementation services and prioritized engineering services. We offer a complete range of professional service support both onsite and remotely, including training, application design, project management, system design, data modeling, data integration, application design, development support, data science, and application and C3 AI Software administration support. Professional services fees are based on the level of effort required to perform the specified tasks and are typically a fixed-fee engagement with defined deliverables and a duration of less than 12 months. In certain cases, customers seeking increased utility from their C3 Agentic AI Platform or C3 AI Application subscriptions can procure prioritized engineering services to develop and modify software features, which are typically part of our product roadmap, but on an accelerated basis.

Current wording

Professional Services Revenue. Our professional services revenue primarily includes consulting, training, paid implementation services and prioritized engineering services. We offer a complete range of professional service support both onsite and remotely, including training, application design, project management, system design, data modeling, data integration, development support, data science, and application and C3 AI Software administration support. Professional services fees are based on the level of effort required to perform the specified tasks and are typically a fixed-fee engagement with defined deliverables and a duration of less than 12 months. In certain cases, customers seeking increased utility from their C3 Agentic AI Platform or C3 AI Application subscriptions can procure prioritized engineering services to develop and modify software features, which are typically part of our product roadmap, but on an accelerated basis.

Previous wording

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. We expect our operating expenses to increase as we continue to invest to grow our business.

Current wording

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Following the restructuring plan described above, we expect our fiscal 2027 total operating expenses to decline as compared to total operating expenses for fiscal year 2026. Over the longer term, we may invest selectively in areas we believe will drive durable growth, which may cause operating expenses to increase.

Previous wording

General and Administrative. General and administrative expenses consists primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs associated with administrative services such as executive management and administration, legal, human resources, accounting, and finance. General and administrative expense also includes facilities costs, such as depreciation and rent expense, professional fees, and other general corporate costs, including allocated overhead and depreciation for facilities.

Current wording

General and Administrative. General and administrative expenses consist primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation and other related costs associated with administrative services such as executive management and administration, legal, human resources, accounting, and finance. General and administrative expense also includes facilities costs, such as depreciation and rent expense, professional fees, and other general corporate costs, including allocated overhead and depreciation for facilities.

Previous wording

Our general and administrative expense is expected to decline in absolute dollars as we implement our restructuring plan. We have incurred, and expect to continue to incur expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as expenses for general and director and officer insurance, investor relations, and professional services.

Current wording

We have incurred, and expect to continue to incur expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as expenses for general and director and officer insurance, investor relations, and professional services.

Previous wording

Interest income consists primarily of interest income earned on our cash, cash equivalents, and available-for-sale marketable securities. It also includes amortization of premiums and accretion of discount related to our available-for-sale marketable securities. Interest income varies each reporting period based on our average balance of cash, cash equivalents, and available-for-sale marketable securities during the period and market interest rates.

Current wording

Interest income consists primarily of interest income earned on our cash, cash equivalents, and available-for-sale marketable securities. It also includes amortization of premiums and accretion of discount related to our available-for-sale marketable securities. Interest income varies each reporting period based on our average balance of cash, cash equivalents, and available-for-sale marketable securities during the fiscal year and market interest rates.

Previous wording

Other income (expense), net consists primarily of foreign currency exchange gains and losses, losses from impairment of marketable securities, and realized gains and losses on sales of available-for-sale marketable securities. Our foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

Current wording

Other (expense) income, net consists primarily of foreign currency exchange gains and losses, losses from impairment of marketable securities, and realized gains and losses on sales of available-for-sale marketable securities. Our foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

Previous wording

Comparison of the Three and Nine Months Ended January 31, 2026 and 2025

Current wording

Comparison of the Three Months Ended July 31, 2026 and 2025

Previous wording

Subscription revenue accounted for 90% and 87% of our total revenue for the three months ended January 31, 2026 and 2025, respectively. Subscription revenue decreased by $37.5 million, or 44%, for the three months ended January 31, 2026, compared to the same period last year. Approximately 37% and 22%, respectively, of the total subscription revenue for the three months ended January 31, 2026 and 2025 was attributable to revenue from new customers, and the remaining 63% and 78%, respectively, was attributable to revenue from existing customers. Existing customers are those from whom revenue was recognized during the three months ended January 31, 2025.

Current wording

Subscription revenue accounted for 94% and 86% of our total revenue for the three months ended July 31, 2026 and 2025, respectively. Subscription revenue decreased by $11.1 million, or 18%, for the three months ended July 31, 2026, compared to the same period last year. Approximately 1% and 32%, respectively, of the total subscription revenue for the three months ended July 31, 2026 and 2025 was attributable to revenue from new customers, and the remaining 99% and 68%, respectively, was attributable to revenue from existing customers. Existing customers are those from whom revenue was recognized during the three months ended July 31, 2025.

Previous wording

Professional services revenue decreased by $8.0 million, or 61%, for the three months ended January 31, 2026, compared to the same period last year, predominantly due to a decrease in professional services of $5.6 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 and a decrease in prioritized engineering services of $2.4 million.

Current wording

Professional services revenue decreased by $6.8 million, or 68%, for the three months ended July 31, 2026, compared to the same period last year, predominantly due to decrease in prioritized engineering services of $6.9 million as a result of a decline in the number of features developed and delivered during the quarter, partially offset by an increase in professional services of $0.1 million due to timing of services provided during the quarter.

Previous wording

The decrease in total gross margin for the three months ended January 31, 2026 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 January 31, 2026 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 January 31, 2026 due to the decline in professional service projects compared to the same period last year.

Current wording

The decrease in total gross margin for the three months ended July 31, 2026 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 July 31, 2026 decreased primarily due to the decline in subscription revenue being higher than the decrease in cost of subscription revenue. The professional service margin decreased for the three months ended July 31, 2026 due to the decline in professional service projects compared to the same period last year.

Previous wording

Sales and Marketing. The increase in sales and marketing expense for the three months ended January 31, 2026 compared to the same period last year was primarily due to higher payroll costs of $12.0 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 $5.3 million and other marketing spend of $1.0 million.

Current wording

Sales and Marketing. The decrease in sales and marketing expense for the three months ended July 31, 2026 compared to the same period last year was primarily due to lower payroll costs of $18.0 million as a result of reduction in headcount and lower advertising costs of $2.2 million.

Previous wording

Research and Development. The decrease in research and development expense for the three months ended January 31, 2026 compared to the same period last year was primarily due to lower data center costs of $2.6 million, partially offset by higher payroll and contractor costs of $1.8 million and higher software related costs of $0.4 million.

Current wording

Research and Development. The decrease in research and development expense for the three months ended July 31, 2026 compared to the same period last year was primarily due to lower payroll and contractor costs of $15.6 million, lower cloud infrastructure costs of $3.6 million, partially offset by higher software related costs of $1.3 million.

Previous wording

General and Administrative. The decrease in general and administrative expense for the three months ended January 31, 2026 compared to the same period last year was primarily due to lower travel, entertainment and other expenses $1.9 million, lower professional services costs of $1.7 million and decline in corporate insurance cost of $0.4 million, partially offset by higher payroll costs of $2.4 million as a result of additional headcount and increased stock-based compensation primarily related to additional equity awards granted to current and new employees.

Current wording

General and Administrative. The increase in general and administrative expense for the three months ended July 31, 2026 compared to the same period last year was primarily due to higher professional services costs of $2.8 million, partially offset by lower facilities costs of $0.7 million and lower corporate insurance cost of $0.5 million.

Previous wording

The decrease in interest income for the three and nine months ended January 31, 2026 compared to the same period last year was primarily due to lower volume of investments and lower prevailing interest rates on our marketable securities portfolio in the three and nine months ended January 31, 2026.

Current wording

The decrease in interest income for the three months ended July 31, 2026 compared to the same period last year was primarily due to lower volume of investments and lower prevailing interest rates on our marketable securities portfolio in the three months ended July 31, 2026.

Previous wording

The increase in other income (expense), net for the three and nine months ended January 31, 2026 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 nine months ended January 31, 2026.

Current wording

The change in other (expense) income, net for the three months ended July 31, 2026 compared to the same period last year was primarily due to foreign currency losses on the remeasurement of Euro-denominated cash and accounts receivable balances, in the three months ended July 31, 2026.

Previous wording

The change in provision for income taxes for the three and nine months ended January 31, 2026 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 months ended July 31, 2026 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 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 provided by (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 provided by (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 January 31, 2026 and April 30, 2025, we had $88.8 million and $164.4 million of cash and cash equivalents and $533.1 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 $1.7 billion as of January 31, 2026. 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 July 31, 2026 and April 30, 2026, we had $136.4 million and $66.2 million of cash and cash equivalents and $514.6 million and $509.3 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 $1.9 billion as of July 31, 2026. 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 nine months ended January 31, 2026, cash used in operating activities was $135.8 million, an increase of $83.1 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 three months ended July 31, 2026, cash provided by operating activities was $2.1 million, an increase of $35.6 million compared to the same period last year. The increase was primarily attributable to an increase in cash received from customers, partially offset by cash paid for payroll and related costs, and to vendors.

Previous wording

Investing Activities. Net cash provided by investing activities of $51.2 million for the nine months ended January 31, 2026 was attributable to maturities and sales of marketable securities of $496.1 million, offset by purchases of marketable securities of $443.4 million and capital expenditures of $1.6 million mainly related to computer equipment and servers.

Current wording

Investing Activities. Net cash used in investing activities of $4.6 million for the three months ended July 31, 2026 was primarily attributable to purchases of marketable securities of $129.2 million, offset by maturities and sales of marketable securities of $124.5 million.