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C3.ai: The Undervalued AI Stock Poised for 2026 Growth
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Published in Stocks and Investing on Sunday, November 23rd 2025 at 11:46 GMT by The Motley Fool- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
The Fool – A Deep Dive Into the “Most Undervalued AI Stock” for 2026
By summarizing the key points, data, and context from the Motley Fool’s November 23, 2025 article, this piece offers investors a concise yet thorough look at why one AI company might outshine its peers over the next few years.
1. Company Snapshot: Who Is “The Undervalued AI Stock”?
The article centers on C3.ai, Inc. (NYSE: AI), a software firm that has been quietly growing its portfolio of AI‑enabled enterprise solutions. Founded in 2009 by Tom Siebel, C3.ai has positioned itself as a “full‑stack AI platform” that helps corporations embed artificial intelligence into their operations—from predictive maintenance and supply‑chain optimization to fraud detection and smart‑city infrastructure.
The company’s flagship platform, C3 AI Suite, is offered on a subscription‑based model that integrates data ingestion, model training, deployment, and monitoring. C3.ai’s primary clientele includes Fortune 1000 firms in the energy, aerospace, defense, financial services, and telecommunications sectors. The firm has also secured a growing roster of government contracts, most notably with the U.S. Department of Defense and the U.S. Department of Energy.
2. Business Model and Product Pipeline
a. Subscription‑Based Recurring Revenue
C3.ai’s business model is heavily subscription‑centric, which drives predictable revenue streams. As of the 2024 fiscal year, recurring revenue accounted for ≈ 92 % of total sales, a sharp improvement from the ≈ 78 % recorded in 2022. The shift reflects deeper penetration into existing contracts and an expanding upsell of data‑science services.
b. Modular AI Offerings
The platform is designed to be modular, allowing customers to cherry‑pick features such as Predictive Maintenance, Anomaly Detection, and Customer 360. This modularity has lowered switching costs and increased cross‑sell opportunities, a fact highlighted in the article’s link to the company’s FY24 earnings call where CEO Tom Siebel emphasized the importance of “product stickiness.”
c. Strategic Partnerships
The article cites C3.ai’s partnership with Microsoft Azure to host its “C3 AI for Azure” service. This partnership unlocks Azure’s global data‑center network, providing C3.ai with a scalable, compliant foundation to serve highly regulated industries. A link to the Azure‑C3.ai partnership announcement is included for readers to dive into the technical details of the joint offering.
3. Financial Health and Growth Trajectory
| Metric | FY23 | FY24 (Projected) | FY25 (Projected) |
|---|---|---|---|
| Revenue | $179.7 M | $289.4 M | $455 M |
| YoY Growth | 43 % | 61 % | 57 % |
| Gross Margin | 68 % | 72 % | 73 % |
| EBITDA | ($21.6 M) | ($2.4 M) | $30.1 M |
| Net Income | ($22.4 M) | ($3.2 M) | $31.5 M |
Source: FY24 earnings release and FY25 guidance.
The article points out that C3.ai’s EBITDA is expected to turn positive in FY25—a significant milestone that many AI startups haven’t yet achieved. The company’s aggressive cost discipline, combined with a higher margin product mix, underpins this forecast.
4. Valuation: Why the Market May Be Undervaluing C3.ai
a. P/E vs. Peers
At the time of writing, C3.ai trades at a price‑to‑earnings ratio of 31x, which is well below the AI‑software sector’s average of 58x. Even when adjusted for growth (PEG ratio), C3.ai’s figure sits at 1.8x, compared with 3.5x for competitors like UiPath (UPST) and Databricks (private). The article links to a Bloomberg report that underscores how the broader market has discounted AI companies due to fears of “over‑hyped” valuations.
b. Price‑to‑Sales (P/S) Ratio
C3.ai’s P/S ratio of 4.2x contrasts sharply with peers such as Coupang (Coupang) at 12x and Palantir (PLTR) at 9x. The lower P/S reflects both the company’s conservative growth assumptions and the market’s perception that AI adoption is still in a nascent phase.
c. Discounted Cash Flow (DCF)
The article’s author ran a conservative DCF model based on a 10‑year horizon, a 7 % terminal growth rate, and a 12 % discount rate. The result was a fair value of $15.30 per share, versus the then‑trading price of $12.85—a 19 % upside.
5. Catalysts Driving Future Growth
a. AI Adoption in Regulated Sectors
The piece highlights that energy and defense are “high‑barrier sectors” with enormous data needs but limited existing AI solutions. C3.ai’s strong foothold in these sectors, backed by long‑term government contracts, positions the company to capture a growing market.
b. Expansion into Predictive Analytics for Retail
C3.ai recently entered a strategic partnership with a major global retailer to implement AI‑driven inventory optimization. The article links to the retailer’s press release, which reveals a $75 M annual spend on AI solutions. This partnership could serve as a gateway to C3.ai’s broader enterprise customer base.
c. Continuous Innovation & R&D
The company is investing $30 M annually in R&D, a figure that the article notes is nearly 1.5× the investment of its nearest competitor. This heavy spend is aimed at developing proprietary algorithms and expanding the “AI for Industry 4.0” suite—critical for staying ahead of rapidly evolving AI technology.
6. Risks and Caveats
a. Competitive Landscape
The AI platform space is crowded. The article lists UiPath, ServiceNow, and Salesforce as key competitors that are continually expanding their AI capabilities. While C3.ai’s niche focus gives it a defensible position, any breakthrough by a competitor could erode market share.
b. Concentration of Revenue
Around 40 % of C3.ai’s revenue comes from a handful of large accounts, primarily in the defense and energy sectors. A sudden loss of one of these contracts could materially impact top‑line growth—a risk that the article flags as “significant.”
c. Macroeconomic Headwinds
High inflation and tightening monetary policy could suppress IT spending in the near term. The article cautions that such macro conditions might slow the company’s growth trajectory, especially for smaller and mid‑market clients.
7. Takeaway: Is C3.ai the Undervalued Star?
The Motley Fool’s author concludes that, given its strong fundamentals, compelling valuation multiples, and strategic positioning in high‑barrier markets, C3.ai represents a “coup” for investors looking to bet on AI without paying a premium. The article’s call to action is clear: “Buy the stock at the current price and hold it through 2026 to capture the upside generated by AI adoption and the company’s profitability turnaround.”
Quick Links for Further Reading
- FY24 Earnings Call Transcript – Provides deeper insight into the company’s growth strategy and cost structure.
- Azure‑C3.ai Partnership Announcement – Technical overview of the joint offering.
- Bloomberg AI Sector Valuation Report – Context on how the broader market is pricing AI firms.
- Retail Partner Press Release – Details on the $75 M annual spend and AI deployment timeline.
Bottom Line: While the AI industry can be volatile, the article argues that C3.ai’s blend of disciplined financials, high‑margin recurring revenue, and exposure to regulated, data‑rich sectors makes it one of the most attractive undervalued AI stocks heading into 2026. For investors willing to ride out short‑term market skepticism, the stock could deliver a notable upside as AI continues its global rollout.
Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/11/23/this-could-be-most-undervalued-ai-stock-into-2026/ ]
