C3 AI (AI) has experienced an astonishing 260% year-to-date increase in the public markets. One would expect Wall Street to be fully supportive of this artificial intelligence specialty firm, led by the renowned Tom Siebel, founder of Siebel Systems. However, there are concerns among tech analysts about the 14-year-old company, ranging from how it counts its customers to the turnover in its CFOs. Despite this, C3 has gained a significant number of supporters. In 2022, during the AI boom, C3's shares skyrocketed, pushing its market cap above $4 billion. Bullish investors believed that the company truly stood as a leader in enterprise AI, as indicated by its coveted ticker symbol, AI. In the fiscal fourth quarter of 2023, C3 generated $72. 4 million in revenue, primarily from subscriptions, but reported a GAAP net loss per share of $0. 58. So, who is correct in their assessment?Is C3 a rising star, a supernova, or something in between?Analysts and short-sellers on both sides weigh in on this question. The substantial increase in value of C3's stock has prompted concerns among some analysts and short-sellers who believe it may be overheated. Worries include the size of C3's customer base, the turnover of its CFOs, and how its revenue growth compares to competitors. Kingsley Crane, Canaccord Genuity senior analyst, points out that although C3 is rapidly improving profitability, its subscription revenue has remained relatively flat over the past few quarters. Thus, when considering revenue growth and profitability, the company falls into the bottom quartile for software companies in the public markets. Crane adds that while many companies face this discrepancy, he believes C3's fundamentals do not align with its current market price. One particular issue is how C3 counts its customers, with changes made over time. Ben Axler, founder and CIO of Spruce Point Capital Management, highlighted the revisions made by C3 in their claims about their customer count. The company's customer count includes a variety of offerings, such as paid trials, one-time purchases, subscriptions, and professional services. Crane elaborates that if C3 is doing business with a company like Shell in multiple divisions, the company would count them as multiple customers but as a single customer entity, resulting in a discrepancy between the reported customer count and the actual number of customer entities. According to the latest count by C3, they claim to have 287 customers. However, skeptics believe that this count may signify a lack of business opportunities. Sahm Adrangi, founder of Kerrisdale Capital Management, questions why C3's customer count has remained relatively flat if the company truly has a competitive product.

Additionally, C3 has experienced significant turnover in its CFO role, having had four CFOs since 2019. Data from Bedrock AI reveals that less than 10% of US public companies with a market capitalization of $1 billion or more have experienced CFO turnover since 2019. In C3's 14-year history, there have been nine CFOs. Although the reasons for the turnover are not entirely clear, Tom Siebel attributes it to the evolution and growth of the company. He explains that the skill set required to manage a small company differs from that needed to run a global corporation with thousands of employees. Despite these concerns, C3 operates in a promising market. According to Gil Luria, senior software analyst at D. A. Davidson, C3 has built a business centered around machine learning and predictive AI applications, which positions them as one of the largest providers of enterprise AI and one of the pioneer pure plays in this industry. Tom Siebel believes that the size of the AI market is a crucial factor in C3's growth potential, stating the addressable market opportunity for enterprise AI alone could reach up to $700 billion. However, C3's customer count may be limited due to their focus on large industrial customers with substantial data sets who are not digitally native. This limitation has not hindered the size of the opportunities for the company. R "Ray" Wang, founder of Constellation Research, explains that C3's growth is evident both in the public and private sectors. In the public sector, C3 is gaining market share from competitors like Palantir, while in the private sector, it primarily attracts forward-thinking companies who understand the value of their offerings. The shifting accounting of customers has been addressed by Siebel, who assures that C3 has strived to accurately represent its customer count throughout its evolution as a company. Despite the concerns raised by bearish individuals, C3's stock continues to climb relentlessly. However, Sahm Adrangi argues that the company's growth should be compared to that of Palantir, noting that C3's revenue increased by 5. 6% in the last fiscal year, compared to a 24% spike in Palantir's revenue. Nonetheless, AI is still in its early stages, and C3's role as a leader in the industry should not be underestimated. Tola Capital Partner Aaron Fleishman emphasizes the challenges faced by enterprise AI companies in getting their products fully functional and scalable. Ultimately, deciding whether to side with the bulls or bears depends on one's belief in the AI hype and confidence in Tom Siebel's track record. Siebel, for one, sees an enormous opportunity ahead, comparing the skepticism towards AI in 2023 to betting against the internet in 1996.