Investment Report on C3.ai and Comparison with Palantir
Introduction C3.ai and Palantir are two key players in the burgeoning AI software market, which is witnessing exponential growth due to increased adoption of AI solutions across industries. This report evaluates C3.ai's current business and future prospects, its customers, partnerships, financials, and growth trajectory. Additionally, it includes a comparative analysis of C3.ai and Palantir on valuation, growth metrics, and positioning in the AI market.
Business Overview
C3.ai: C3.ai offers enterprise AI solutions tailored to sectors such as energy, manufacturing, utilities, financial services, and defense. It provides a comprehensive suite of applications that enable predictive analytics, optimization, and operational efficiency. C3.ai recently transitioned to a consumption-based pricing model, aligning costs with customer usage, which has driven market adoption and improved revenue growth.
Palantir: Palantir specializes in data integration, big data analytics, and AI-driven insights, primarily serving government agencies and large enterprises. Its flagship platforms, Palantir Gotham and Foundry, are widely recognized for their applications in national security, supply chain optimization, and predictive maintenance.
Financial Performance (2024)
C3.ai:
Fiscal year revenue grew by 16% to $310.6 million.
Q4 FY2024 revenue increased by 20% year-over-year, reaching $86.6 million.
Strong federal segment growth, with revenue doubling year-over-year.
Palantir:
Achieved profitability with net income of $302 million in 2024.
Revenue grew by 24% year-over-year to $2.2 billion.
Significant expansion in commercial revenue and sustained growth in government contracts.
Key Customers and Partnerships
C3.ai Customers:
Energy: Shell, ExxonMobil, Baker Hughes.
Utilities: Con Edison.
Government: U.S. Air Force, U.S. Navy, U.S. Marine Corps, and the Defense Counterintelligence and Security Agency.
Palantir Customers:
Government: U.S. Department of Defense, NHS (UK).
Commercial: BP, Airbus, Ferrari.
Strategic Partnerships:
C3.ai has a strategic alliance with Microsoft, leveraging Azure to scale AI applications. This partnership could expand its sales reach significantly.
Palantir’s partnerships with IBM and AWS bolster its AI and cloud capabilities, enhancing its data integration offerings.
Market Valuation and Metrics
C3.ai:
Price-to-Sales (P/S) Ratio: 9.4x.
Becoming profitable, focused on scaling and investing in growth.
Palantir:
Price-to-Earnings (P/E) Ratio: 80x, reflecting premium valuation due to profitability and market leadership.
Price-to-Sales (P/S) Ratio: 13.2x.
AI Software Market Expansion 2024-2030
The AI software market is projected to grow at a CAGR of 35% through 2030, driven by:
Increased AI adoption across industries such as healthcare, defense, and finance.
Rising demand for generative AI and machine learning platforms.
Growing investments in AI infrastructure and R&D.
Comparison: Growth Prospects
C3.ai:
Positioned to benefit from its diverse customer base and generative AI solutions.
Adoption of the consumption-based model aligns with market demand for flexibility.
Palantir:
Well-established in government and defense, expanding into commercial sectors.
Focus on AI/ML advancements and leveraging its proprietary platforms for scalable solutions.
Conclusion
While C3.ai is growing its presence in the AI market through innovation and partnerships, it remains unprofitable, which could impact investor sentiment in the short term, however, it's forward earnings valuation under 10% indicates it may be a buying opportunity.
Palantir, with its profitability and established customer base, commands a higher valuation but also faces challenges in maintaining its growth rate and valuation now looks extended.
As the AI software market expands, both companies are poised to capture significant opportunities, though their trajectories differ based on strategic focus and market dynamics.
ED Note:
Currently we have no position in either Palantir and C3Ai, however, they are on our watch list!
update: Jan 6 2024
We purchased some shares in Ai
