C3. ai, Inc. reports that AI is entering a new phase of commercial execution, with Initial Production Deployments (IPDs) becoming the key driver behind its sales reset. The company’s management is repositioning IPDs as the primary customer entry point, focusing on smaller, impactful deployments that deliver measurable economic value before scaling enterprise-wide. This approach prioritizes disciplined, conversion-focused deployments over large, upfront expansions. In the second quarter of fiscal 2026, IPD activity appeared to stabilize. During the quarter, C3. ai secured 20 new IPDs, including six involving generative AI, bringing the total number of IPDs to 394, with 269 currently active in pilots, extensions, or conversion discussions. The company highlighted that IPDs increasingly act as the proving ground for customers to validate outcomes and build internal confidence for broader production rollouts. Several major clients such as GSK, Dow, and Holcim followed this trajectory, starting with targeted IPDs before expanding across multiple business units. Operationally, C3. ai has tightened execution standards around IPDs, introducing stricter upfront qualification criteria, milestone-based delivery requirements, and enhanced executive oversight.

These steps aim to ensure each deployment aligns with clear economic objectives and improve conversion rates. Management attributed recent performance challenges mainly to execution issues rather than waning enterprise AI demand. Financially, the IPD-driven strategy has near-term effects. A greater proportion of IPDs and delivery requirements has moderated gross margins, as initial deployments tend to incur higher upfront costs and involve a heavier services component. Management views this margin impact as a deliberate trade-off, emphasizing conversion quality and long-term customer value over short-term margin gains. Looking forward, management stressed that enhancing IPD execution and conversion discipline will be crucial to reestablishing consistent growth. Demonstrating measurable economic value early in deployments is expected to support wider production adoption over time. As the sales reset advances, tracking IPD-to-production conversions will likely become a key indicator of execution success. How It Stacks Up to Competitors