C3.ai generated a record $87.2 million in revenue during Q1, which was a 21% increase from the year-ago period. That growth rate has now accelerated for six consecutive quarters, and 21% marked the fastest pace in almost two years.

The strong result stems from a change in strategy that C3.ai’s management implemented at the beginning of fiscal 2023 (which started on May 1, 2022). The company decided to switch from a subscription-based revenue model to a consumption-based model, which eliminated lengthy negotiating periods with potential customers, allowing them to sign up far more quickly.

The transition led to an expected slowdown in C3.ai’s business in the initial stages as it converted its existing customers to the new model, but it’s now paying off with faster acquisitions of new customers and accelerating revenue growth.

C3.ai is still losing money at the bottom line. Its net loss came in at $62.8 million during Q1, which was a slight improvement from $64.3 million in the year-ago period. However, on a non-GAAP (adjusted, and not meeting generally accepted accounting principles) basis (which strips out one-time and non-cash expenses like stock-based compensation), the company’s loss was just $6.8 million.

C3.ai’s revenue is growing much faster than its operating expense (21% versus 8.8% in Q1), and that trend is expected to continue, which could drive the company to profitability within the next few quarters.

C3.ai went public in December 2020, during a stock market frenzy that was fueled by record low interest rates and truckloads of pandemic-related U.S. government stimulus spending. Its stock peaked at $161 shortly after its initial public offering (IPO), and it’s currently trading 84% below that price.

Because C3.ai isn’t profitable, we can’t value its stock using the traditional price-to-earnings (P/E) ratio. Instead, we can use the price-to-sales (P/S) ratio, which divides the company’s market capitalization by its trailing-12-month revenue.

Based on that calculation, C3.ai stock trades at a P/S ratio of 9.6. That’s significantly below its peak of more than 80 back in December 2020, which was an unsustainable valuation.

However, 9.6 is also a slight discount to its three-year average P/S ratio of 10.2 — which excludes the 2020 period — suggesting the stock is relatively cheap at the moment:

C3.ai Chief Executive Officer Thomas Siebel believes AI is a mega-market event, comparable to the dawn of the internet and the smartphone. He says the AI software market is worth $450 billion at the moment, with the potential to grow to $1.3 trillion by 2032. So, Cathie Wood isn’t alone when it comes to her bullish perspective on AI software.

Based on C3.ai’s current revenue, the company hasn’t even scratched the surface of its opportunity. Considering its current stock price, now might be a great time to buy in for the long term.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Cathie Wood Says Software Is the Next Big AI Opportunity — 1 Super Stock You’ll Regret Not Buying If She’s Right was originally published by The Motley Fool