C3 AI's Federal Bookings Jump 89% as Subscription Revenue Hits 93% of Total—Partner Ecosystem Drives Q2 Strength

Federal Segment Emerges as a Growth Engine with 89% Bookings Increase

C3 AI (NYSE: AI) reported fiscal Q2 2026 results showing significant acceleration in its federal business, highlighted by an 89% year-over-year growth in federal, defense, and aerospace bookings. This segment accounted for 45% of total Q2 bookings, indicating deepening demand from agencies including the U.S. Department of Health and Human Services, the U.S. Army, and Los Alamos National Laboratory. The momentum comes as agencies shift away from custom government-off-the-shelf builds to commercial AI solutions, with C3 AI at the center of this transition.

Recurring Revenue Dominates: Subscription Revenue at 93% of Total

The company continues its focus on scalable, recurring revenue streams. Of the $75.1 million total Q2 revenue, $70.2 million came from subscriptions, making up 93% of overall revenue. Combining subscription and prioritized engineering services revenue yields a figure representing 99% of total revenue—a strong indicator of stable customer relationships and consistent income.

Partner Ecosystem Drives 89% of Bookings and Fuels Qualified Pipeline Growth

Strategic partnerships were a cornerstone of Q2 results, with 89% of total bookings executed in collaboration with C3 AI’s partner network. The company reported closing 38 partner-driven agreements—including significant joint deals with Microsoft and AWS. Notably, C3 AI and Microsoft have now closed over 100 customer agreements in the alliance’s first year, spanning 17 industries and exceeding $130 million in bookings. The qualified opportunity pipeline with partners soared 108% YoY, underlining the network's impact on growth prospects.

Large-Scale Deals Reflect Strong Commercial and Federal Demand

C3 AI’s Q2 saw 17 agreements greater than $1 million and six over $5 million. Customers ranged from industry leaders such as AMD and GSK to key government agencies, demonstrating cross-sector confidence in C3 AI's offerings. Eight new or expanded agreements for C3 Generative AI in both public and private sectors reflect ongoing momentum for next-gen AI automation.

Operational Focus on Growth Sectors and Return to Profitability

CEO Stephen Ehikian highlighted a targeted execution plan centered on proven leadership segments and customer wins. The roadmap aims for renewed top-line growth and non-GAAP profitability. Cash and short-term assets totaled $675 million, providing financial stability amid a $0.75 GAAP loss per share ($0.25 non-GAAP). Forward guidance puts full-year fiscal 2026 revenue at $289.5–$309.5 million, with continued focus on expanding high-value, partner-led opportunities.

Key Takeaways: Enterprise AI Adoption Accelerates as Partner-Driven Growth Continues

• Federal bookings up 89% YoY; federal sector is a primary driver of overall bookings.
• Subscriptions provide 93% of revenue—highlighting business model strength.
• Strategic partners involved in 89% of deals and pipeline activity surging across platforms.
• New automation solutions and expanded GenAI agreements point to evolving enterprise AI needs.

Investors may want to watch for how C3 AI continues to leverage partnerships and its momentum in federal and commercial sectors. With a clear shift towards subscription models and automation, the company is positioned as a key player as AI adoption expands across large-scale enterprises and government organizations. The coming quarters will test whether C3 AI’s disciplined operational approach can deliver sustained growth and margin improvement.

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