C3.ai AI and Palantir Technologies PLTR are two prominent players in the fast-growing enterprise AI software market. C3.ai provides a broad platform of AI applications and tools for businesses, while Palantir is known for its data analytics platforms used by government agencies and large companies. Both companies aim to help organizations harness big data and artificial intelligence to improve operations. They share similarities as high-growth “picks-and-shovels” plays on the AI trend, and each has seen surging investor interest amid the generative AI boom.
Recent quarters saw both companies re-accelerate growth after earlier lulls, and their stocks have been volatile with shifting market sentiment. Palantir stock soared a staggering 340.5% in 2024 amid rapid growth, and C3.ai surged almost 20%. Year to date, Palantir stock has gained 53.5%, while C3.ai shares down 34.6%.
C3.ai & Palantir Stocks Performances
Image Source: Zacks Investment Research
Given the hype around enterprise AI and the companies’ different paths to capitalize on it, now is a timely moment to evaluate which might offer better investment value. Let’s dive deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.
C3.ai is a pure-play enterprise AI software provider founded by tech veteran Tom Siebel. The company offers an extensive suite of more than 100 pre-built AI applications for various industries (from energy and manufacturing to finance), and a platform for clients to develop their own AI solutions. C3.ai’s strategy emphasizes partnerships with cloud giants and government agencies to extend its reach. For example, C3.ai is the most sought-after AI application on Microsoft’s MSFT Azure cloud marketplace and has a tie-up with Alphabet’s GOOGL Google Cloud. Since announcing an expanded alliance with Microsoft in late 2024, C3.ai closed 28 new deals through joint engagements, spanning nine industries. Sales cycles with Microsoft have shortened by approximately 20%, a testament to the strength of their joint go-to-market motions. As of the fiscal third-quarter end, C3.ai and Microsoft were engaged in more than 600 active enterprise opportunities globally. These alliances not only broaden their sales channels but could improve margins by leveraging partners’ infrastructure.
In addition, C3.ai has also won expanded contracts with the U.S. Department of Defense and multiple branches of the military – a domain where Palantir historically excels – signaling growing traction in government sectors as well.
In its fiscal third-quarter results, C3.ai reported total revenues of $98.8 million, marking a 26% increase year over year. Subscription revenues grew 22% year over year to $85.7 million, constituting 87% of total revenues. The company closed 66 agreements, including 50 pilots, a 72% increase year over year. Notably, C3.ai’s expanding partnerships and pilot programs indicate growing traction in both commercial and government sectors. Notably, revenues derived from software demonstration licenses contributed significantly, reaching $28.6 million. These demonstration licenses are provided to strategic partners like Microsoft and Amazon’s AWS, enabling them to independently present C3.ai’s applications to prospective enterprise clients.
C3.ai faces significant challenges, including the need to achieve sustainable profitability and navigate competition from both established players and emerging startups. The company anticipates some moderation in gross margins due to an increased mix of more costly pilots. It expects some moderation in operating margins in the near term due to additional investments in the business.
While the lack of profits is a risk, C3.ai’s improving revenue trajectory and disciplined focus on enterprise AI could lead to future profitability as it scales.
C3.ai’s stock valuation is more modest compared to Palantir’s, potentially offering more upside if it continues executing effectively. The company’s forward 12-month P/S ratio of 6.29 is slightly higher than the sector average of 5.6.
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