While tech giants command the market's attention in the rapidly evolving artificial intelligence (AI) landscape, C3.ai (AI -3.66%) has quietly emerged as a disruptive innovator. This specialized AI software company is capitalizing on strong demand for its differentiated platform of enterprise productivity tools enabling companies to harness AI's potential.

Despite the business' volatile stock (down by about 43% from its 52-week high as of this writing), the company's impressive growth trajectory and path to profitability paint a promising long-term outlook. Let's discuss whether shares of C3.ai deserve a spot in your portfolio now.

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A leader in enterprise AI applications

The ability of artificial intelligence to automate workflows and offer predictive data-driven insights is seen as a game-changer. C3.ai's agentic AI cloud-based platform and suite of solutions empower users to build, deploy, and manage custom AI applications using a low-code architecture up to 25 times faster than alternative methods. This flexibility makes it ideal for specialized uses in multiple industries.

In the oil and gas sector, C3.ai's generative and agentic AI drives infrastructure optimization, with customers such as ExxonMobil and Baker Hughes integrating it to enhance production efficiency. Other high-profile corporate customers cited by the company include United States Steel, and Bristol Myers Squibb, underscoring the breadth of the market opportunity.

The company is also proving to be a valuable contractor to the U.S. Department of Defense and other federal agencies, representing 20% of its bookings in the past year. Since 2023, C3.ai's Predictive Analytics and Decision Assistant (PANDA) has been a mission-critical component of the Air Force predictive maintenance program, tasked with ensuring aircraft availability and reducing operational costs under a recently expanded $450 million contract ceiling through 2029.

These wins, alongside deployments for the Missile Defense Agency, reaffirm its capabilities that may still be in the early stages of unlocking significant opportunities.

Strong growth momentum

A large part of the company's commercial success is driven by strategic partnerships with hyperscale cloud providers, which are expanding its reach. As a preferred vendor within the Microsoft Azure ecosystem, C3.ai's platform integrates seamlessly, enabling rapid deployment of turnkey AI applications. Its availability on Amazon Web Services and Alphabet's Google Cloud further broadens its accessibility.

For its fiscal 2025 year, ended April 30, revenue totaled $389 million, a 25% increase from 2024, driven by its diversifying customer base across new industries. Notably, revenue not connected to the oil and gas segment climbed by 48% year over year.

Management is optimistic about sustained growth, forecasting fiscal 2026 revenue of $447.5 million to $484.5 million, representing a 15% to 25% rise. In the fourth-quarter earnings call, CEO Tom Siebel shared his expectation for achieving consistent positive cash flow by fiscal 2027, setting the stage for annualized adjusted profitability thereafter.

Investors who are confident in the company's ability to execute its growth strategy have plenty of reasons to buy and hold the stock for the long run.

Reasons for caution

There's a lot to like about C3.ai as a compelling growth stock in the technology sector and as a disruptive pure play on AI. Still, it's smart to take a step back and consider what could go wrong before making any investment decision.

Its main challenge over the next few years will be to navigate a fiercely competitive environment. Larger players like Palantir Technologies or smaller rivals such as BigBear.ai, which offer alternative enterprise AI solutions, could erode C3.ai's market share. There is also some concern that its cloud partners could begin introducing more of their own AI application development solutions.

It's unclear whether the company will manage to maintain an innovative edge into the next decade. Signs of slowing growth or the possibility that its recurring losses could extend beyond the next few years are the key risks for investors to balance.

My take on C3.ai stock

I'm bullish on the stock and view its recent price weakness as a buy-the-dip opportunity. Strong financial results over the next few quarters that reaffirm the company's bookings and growth trajectory could be the catalysts needed to reach a new all-time high. Investors should expect the stock to remain volatile, but I believe C3.ai has all the pieces in place to reward shareholders over the long run.