C3.ai, Inc. (AI)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

Overview

C3 AI is an Enterprise AI software company.

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.

•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.

•Tooling Layer, includes the interfaces onto the platform covering the full development lifecycle, from raw data to a governed, running application.

•C3 AI Studio, is the control plane to develop, deploy and operate large-scale enterprise AI applications.

•C3 Code, is an agentic application builder that uses natural-language instructions to let users configure and deploy Enterprise AI applications, including data pipelines, AI models, business logic, security controls, and user interfaces, orchestrating multiple AI agents working in parallel against an organization's enterprise data.

•Applications and Application Modules, our third layer, are a portfolio of pre-built, industry-specific offerings that assemble on the platform to solve business problems.

▪Applications are a portfolio of pre-built, extensible, industry-specific, outcome-complete solutions that each address a focused set of business problems, complete with machine-learning models and user experiences, pre-assembled and configured on the platform to deliver a measurable result.

▪Application Modules are independently deployable building blocks within an application, spanning data aggregation, data transformation, analytics, models, analytic and machine learning capabilities, UI services, orchestration, and governance. Every application module conforms to a shared type system, so modules interoperate; customers can acquire and assemble them individually or receive them as part of an application.

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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.

How We Generate Revenue

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.

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.

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.

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.

Service fees include revenue from services such as consulting, training, and paid implementation services. For service fees, revenue is typically recognized over time as the services are performed.

Go-to-Market Strategy

Our go-to-market strategy has been historically focused on large organizations recognized as leaders in their respective industries or public sectors that are attempting to solve complicated business problems by digitally transforming their operations. These large organizations, or lighthouse customers, include companies and public agencies within the oil and gas, power and utilities, aerospace and defense, industrial products, life sciences, and financial services industries, among others. This has resulted in C3 AI powering some of the largest and most complex Enterprise AI applications. These lighthouse customers serve as proof points for other potential customers in their respective industries. As a result, we have a customer base of a relatively small number of large organizations that generate high average total subscription contract value, but we expect that, over time, as more customers adopt our technology based on the proof points provided by these lighthouse customers, the revenue represented by these lighthouse customers will decrease as a percentage of total revenue. As our C3 Agentic AI Platform and much of our other C3 AI software are industry agnostic, we also expect to expand into other industries.

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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.

Acquiring new customers and expanding our business with our existing customers is the purpose of our go-to-market effort and drives our growth. Making new and existing customers successful is critical to our long-term success. After we help our customers solve their initial use cases, they frequently identify incremental opportunities within their operations and expand their use of our products. The increased engagement is measured by a combination of increased vCPU/vGPU usage, increased C3 AI Software subscriptions and subscriptions to the C3 Agentic AI Platform for in-house AI application development.

The size and sophistication of our customers’ businesses demonstrate the flexibility, speed, and scale of our products, and maximize the potential value to our customers. To be a credible partner to our customers, who often are industry leaders, we deploy an experienced and highly educated team of C3 AI personnel and partners. We also complement and supplement our sales force with a number of go-to-market partners.

•Industry Partners. We have developed an alliance program to partner with recognized leaders in their respective industries, such as Baker Hughes and Booz Allen Hamilton; to develop, market, and sell solutions that are natively built on or tightly integrated with the C3 Agentic AI Platform.

•Hyperscale Cloud and Infrastructure. We have formed global strategic go-to-market alliances with hyperscale cloud providers including Microsoft Azure, Amazon Web Services, or AWS, and Google Cloud.

•Consulting and Services Partners. We partner with a number of consulting firms and system integrators specializi

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K. You should review the disclosure under the heading “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K 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.

Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ended April 30 and the associated quarters, months and periods of those fiscal years.

A discussion regarding our financial condition and results of operations for the fiscal year ended April 30, 2026 compared to the fiscal year ended April 30, 2025 is presented below. A discussion regarding our financial condition and results of operations for the fiscal year ended April 30, 2025 compared to the fiscal year ended April 30, 2024 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended April 30, 2025, filed with the Securities and Exchange Commission, or SEC, on June 23, 2025.

Overview

C3 AI is an Enterprise AI application software company.

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 have five core product areas, which we collectively refer to as our “C3 AI Software”:

•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. 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 seamlessly across the enterprise, delivering trusted, high-impact outcomes at scale.

•C3 AI Studio, is the integrated development environment in the C3 Agentic AI Platform that enables engineers, data scientists, and increasingly business analysts, to design, build, test, and deploy AI applications.

•C3 AI Applications, built using the C3 Agentic AI Platform, is a portfolio of pre-built, extensible, industry-specific and application-specific SaaS Enterprise AI applications that can be rapidly installed and deployed.

•C3 Generative AI, combines the utility of LLMs, agentic AI, generative AI, reinforcement learning, natural language processing, and the C3 Agentic AI Platform to reflect, collaborate, and execute complex workflows.

•C3 Code, enables users to build, configure, and deploy a complete, production-grade Enterprise AI applications automatically — including data pipelines, AI models, business logic, security controls, and user interfaces — using natural language instructions. C3 Code orchestrates multiple AI agents working in parallel against an organization's enterprise data, designed to significantly reduce the time and specialized resources required to develop and deploy enterprise AI applications.

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.

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How We Generate Revenue

We generate revenue primarily from the sale of subscriptions, which accounted for 91%, 84% and 90% of our total revenue in the fiscal years ended April 30, 2026, 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.

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.

We also generate revenue from professional services, which primarily include prioritized engineering services and services fees. Professional services revenue represented 9%, 16% and 10% of our total revenue for the fiscal years ended April 30, 2026, 2025 and 2024, respectively.

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 78%, 70% and 80% of total professional services revenue for the fiscal years ended April 30, 2026, 2025 and 2024, respectively.

Service fees include revenue from services such as consulting, training, and paid implementation services. For service fees, revenue is typically recognized over time as the services are performed.

Our total revenue was $250.3 million for the fiscal year ended April 30, 2026, representing a 35.7% decrease compared to the prior fiscal year. Our subscription revenue was $227.1 million for the fiscal year ended April 30, 2026, representing a 31% decrease compared to the prior fiscal year. Our professional services revenue was $23.2 million for the fiscal year ended April 30, 2026, representing 62% decrease compared to the prior fiscal year.

Go-to-Market Strategy

Our go-to-market strategy has been historically focused on large organizations recognized as leaders in their respective industries or public sectors that are attempting to solve complicated business problems by digitally transforming their operations. These large organizations, or lighthouse customers, include companies and public agencies within the oil and gas, power and utilities, aerospace and defense, industrial products, life sciences, and financial services industries, among others. This has resulted in C3 AI powering some of the largest and most complex Enterprise AI applications. These lighthouse customers serve as proof points for other potential customers in their respective industries. As a result, we have a customer base of a relatively small number of large organizations that generate high average total subscription contract value, but we expect that, over time, as more customers adopt our technology based on the proof points provided by these lighthouse customers, the revenue represented by these lighthouse customers will decrease as a percentage of total revenue. As our C3 Agentic AI Platform and much of our other C3 AI software are industry agnostic, we also expect to expand into other industries.

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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.

Acquiring new customers and expanding our business with our existing customers is the purpose of our go-to-market effort and drives our growth. Making new and existing customers successful is critical to our long-term success. After we help our customers solve their initial use cases, they frequently identify incremental opportunities within their operations and expand their use of our products. The increased engagement is measured by a combination of increased vCPU/vGPU usage, increased C3 AI Software subscriptions and subscriptions to the C3 Agentic AI Platform for in-house AI application development.

The size and sophistication of our customers’ businesses demonstrate the flexibility, speed, and scale of our products, and maximize the potential value to our customers. To be a credible partner to our customers, who often are industry leaders, we deploy an experienced and highly educated team of C3 AI personnel and partners. We also complement and supplement our sales force with a number of go-to-market partners.

•Industry Partners. We have developed an alliance program to partner with recognized leaders in their respective industries, such as Baker Hughes and, Booz Allen Hamilton; to develop, market, and sell solutions that are natively built on or tightly integrated with the C3 Agentic AI Platform.

•Hyperscale Cloud and Infrastructure. We have formed global strategic go-to-market alliances with hyperscale cloud providers includin

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