C3.ai (AI) risk factors, FY2025 10-K

Risks Related to Our Business and Our Industry

1. 01We have a history of losses, we anticipate our operating expenses will continue to increase in the future, and we may not be able to achieve or maintain profitability in the future
2. 02Our business depends on our ability to attract new customers and on our existing customers purchasing additional subscriptions from us and renewing their existing subscriptions
3. 03Our current C3 AI Software, as well as applications, features, and functionality that we may introduce in the future, may not be widely accepted by our customers, may receive negative attention or may require us to compensate or reimburse third parties, any of which may lower our margins and harm our business
4. 04We face intense competition and could lose market share to our competitors, which could adversely affect our business, financial condition and results of operations
5. 05Our sales cycles can be long and unpredictable, particularly with respect to large subscriptions, and our sales efforts require considerable time and expense
6. 06Certain revenue metrics such as net dollar-based retention rate or annual recurring revenue may not be accurate indicators of our future financial results
7. 07Changes in our subscription or pricing models could adversely affect our operating results
8. 08Our revenue growth depends in part on the success of our strategic relationships with third parties, including channel partners, and if we are unable to establish and maintain successful relationships with them, our business, operating results, and financial condition could be adversely affected
9. 09If the market for our C3 AI Software fails to grow as we expect, or if businesses fail to adopt our C3 AI Software, our business, operating results, and financial condition could be adversely affected
10. 10If we fail to respond to rapid technological changes, extend our C3 AI Software, or develop new features and functionality, our ability to remain competitive could be impaired
11. 11If we were to lose the services of our CEO or other members of our senior management team, we may not be able to execute our business strategy
12. 12The failure to effectively develop and expand our marketing and sales capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our C3 AI Software
13. 13If we fail to develop, maintain, and enhance our brand and reputation cost-effectively, our business and financial condition may be adversely affected
14. 14We may not successfully manage our growth or plan for future growth
15. 15If we are unable to ensure that our C3 AI Software interoperates with a variety of software applications that are developed by others, including our partners, we may become less competitive and our business may be harmed
16. 16Our ability to sell subscriptions to our C3 AI Software could be harmed by real or perceived material defects or errors in our C3 AI Software
17. 17The failure to attract and retain additional qualified personnel or to maintain our company culture could harm our business and prevent us from executing our business strategy
18. 18We believe that a critical component to our success and our ability to retain our best people is our culture. As we continue to grow and develop a public company infrastructure, we may find it difficult to maintain our company culture
19. 19Our annual and quarterly results and key metrics are likely to fluctuate significantly and may not fully reflect the underlying performance of our business
20. 20Our performance metrics and certain other operational data in this report are subject to assumptions and limitations and may not provide an accurate indication of our future or expected results
21. 21We generally recognize revenue from subscriptions to our C3 AI Software over the terms of such subscriptions. Consequently, increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern
22. 22Any failure to offer high-quality maintenance and support services for our customers may harm our relationships with our customers and, consequently, our business
23. 23Macroeconomic uncertainties have had, and could continue to have, an adverse impact on our business, our operations, and the markets and communities in which we, our partners, and users operate
24. 24We could suffer disruptions, outages, defects, and other performance and quality problems with our C3 AI Software or with the public cloud and internet infrastructure on which it relies
25. 25We utilize third-party service providers to host and deliver our C3 AI Software, and any interruptions or delays in these services could impair our C3 AI Software and harm our business
26. 26We may face exposure to foreign currency exchange rate fluctuations
27. 27Sales to government entities and highly regulated organizations are subject to a number of challenges and risks
28. 28Our business could be adversely affected if our employees cannot obtain and maintain required security clearances, we cannot obtain and maintain a required facility security clearance, or we do not comply with legal and regulatory obligations regarding the safeguarding of classified information
29. 29If we are unable to achieve and sustain a level of liquidity sufficient to support our operations and fulfill our obligations, our business, operating results and financial position could be adversely affected
30. 30We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all
31. 31We may acquire other businesses or receive offers to be acquired, which could require significant management attention, disrupt our business or dilute stockholder value
32. 32Issues raised by the use of AI, including ML, in our C3 Agentic AI Platform may result in reputational harm or liability or otherwise adversely affect our business, financial condition and results of operations
33. 33Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could adversely affect our financial results or financial condition
34. 34Increased scrutiny regarding environmental, employment, social, and governance matters could adversely impact our reputation, our ability to retain employees, and the willingness of customers and others to do business with us

Risks Related to Our International Operations

1. 35We are continuing to expand our operations outside the United States, where we may be subject to increased business and economic risks that could harm our business
2. 36Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks
3. 37We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we are not in compliance with applicable laws
4. 38In addition, if our channel partners fail to obtain appropriate import, export, or re-export licenses or permits, we may also be adversely affected through reputational harm, as well as other negative consequences, including government investigations and penalties
5. 39We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-corruption, anti-bribery, and similar laws, and non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition and results of operations

Risks Related to Taxes

1. 40We may be subject to liabilities on past sales for taxes, surcharges, and fees
2. 41Taxing authorities may challenge our position that we do not have sufficient nexus in a taxing jurisdiction or that our C3 AI Software is exempt from use, telecommunications, VAT, GST, and other taxes, which could result in increased tax liabilities for us or our customers, which could harm our business
3. 42We may have exposure to greater than anticipated tax liabilities, which could harm our business
4. 43Our ability to use our net operating losses and certain other tax attributes to offset future taxable income or taxes may be subject to certain limitations

Risks Related to Our Intellectual Property

1. 44We are currently, and may be in the future, party to intellectual property rights claims and other litigation matters, which, if resolved adversely, could harm our business
2. 45Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses
3. 46Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets
4. 47Our use of third-party open source software could negatively affect our ability to offer and sell subscriptions to our C3 AI Software and subject us to possible litigation
5. 48Because of the characteristics of open source software, there may be fewer technology barriers to entry by new competitors and it may be relatively easy for new and existing competitors with greater resources than we have to compete with us
6. 49If open source software programmers, many of whom we do not employ, or our own internal programmers do not continue to develop and enhance open source technologies, we may be unable to develop new technologies, adequately enhance our existing technologies or meet customer requirements for innovation, quality and price
7. 50Our software development and licensing model could be negatively impacted if the Apache License, Version 2.0 is not enforceable or is modified so as to become incompatible with other open source licenses

Risks Related to Ownership of Our Class A Common Stock

1. 51The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment
2. 52Short sellers may engage in manipulative activity intended to drive down the market price of our Class A common stock, which could also result in related regulatory and governmental scrutiny, among other effects
3. 53The dual class structure of our common stock has the effect of concentrating voting control with the holders of our Class B common stock, limiting your ability to influence corporate matters
4. 54Substantial future sales of shares of our Class A common stock and Class B common stock by existing holders in the public market could cause the market price of our Class A common stock to decline
5. 55Provisions in our constituent documents and Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our Class A common stock may be lower as a result
6. 56Our Class A common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business
7. 57We will continue to incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business

General Risks

1. 58If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
2. 59We may be involved in legal proceedings that have a negative impact on our business
3. 60Our business could be disrupted by catastrophic events