C3.ai (AI) The Mizuho Technology Conference 2024 summary

Market vision and industry trends

• Enterprise AI is seen as the next major wave after RDBMS and CRM, with a market potential exceeding $1 trillion, possibly $2 trillion with generative AI included.

• The inflection point for enterprise AI adoption was November 2022, driven by generative AI advancements.

• The value in the AI stack is shifting from infrastructure and silicon to applications, expected to capture 70% of the value chain.

• The proliferation of use cases and executive interest in generative AI is unprecedented, with tens of thousands of senior executives seeking solutions.

• Cybersecurity risks are heightened by generative AI, increasing attack surfaces and requiring greater vigilance.

Company strategy and product positioning

• Focus is on building turnkey, production-ready enterprise AI applications that deliver measurable economic benefits, such as $2 billion annually for Shell and 25% increased aircraft availability for the US Air Force.

• The company aims to establish global market leadership in enterprise AI, leveraging a $2 billion investment in its software stack.

• Transitioned from subscription-based to consumption-based pricing, enabling more predictable revenue and broader customer adoption.

• Entry-level deployments are rapid and cost-effective, with initial projects delivered in six months for $500,000, scaling to larger contracts.

• Most customers attempt in-house AI solutions and fail before adopting the company's platform, which is positioned as a comprehensive, scalable alternative.

Financial outlook and investment approach

• The company maintains a structurally profitable business model, with cost of sales well below gross margin.

• Cash flow is currently prioritized for growth and market share, with expectations to be cash positive next year.

• The shift to consumption-based pricing temporarily slowed growth but has led to a return to accelerating top-line and subscription revenue growth.

• The company holds significant cash reserves and would invest further in technology and brand if market conditions allowed.

• Management believes immediate profitability is not in shareholders' best interests, favoring long-term growth and leadership.