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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Equity Bottom-Up

<ul><li>In-line 2QFY26 revenue and EBIT beat on cost controls, but gross margin pressure from IPDs. </li><li>2QFY26 revenue of $75.1 million was essentially on target and cost controls drove a better-than-expected bottom line with EBIT of ($42 million) [Street = ($52 million)]. </li><li>However, non-GAAP gross margin was 54.5%, up 280 bps but more than 300 bps below Street expectations.</li></ul>

In-line 2QFY26 revenue and EBIT beat on cost controls, but gross margin pressure from IPDs. 2QFY26 revenue of $75.1 million was essentially on target and cost controls drove a better-than-expected bottom line with EBIT of ($42 million) [Street = ($52 million)]. However, non-GAAP gross margin was 54.5%, up 280 bps but more than 300 bps below Street expectations.

C3.ai, Inc.  - IPDs and the Gross Margin Squeeze

<ul><li>Essential enterprise AI orchestration layer. C3 AI operates as the critical bridge between powerful foundational AI models from providers like OpenAI, Anthropic, and Google and the complex reality of enterprise operations.</li><li>Rather than competing with foundation model providers, C3 AI sits above them in the technology stack, adding capabilities that large language models (LLMs) alone cannot deliver, including enterprise data integration, granular security controls, regulatory compliance, hallucination minimization, and pre-built industry applications.</li><li>The company’s LLM-agnostic architecture allows customers to integrate and switch between any foundation model, while treating the LLM as just one component of a complete enterprise solution.</li></ul>

Essential enterprise AI orchestration layer. C3 AI operates as the critical bridge between powerful foundational AI models from providers like OpenAI, Anthropic, and Google and the complex reality of enterprise operations.Rather than competing with foundation model providers, C3 AI sits above them in the technology stack, adding capabilities that large language models (LLMs) alone cannot deliver, including enterprise data integration, granular security controls, regulatory compliance, hallucination minimization, and pre-built industry applications.The company’s LLM-agnostic architecture allows customers to integrate and switch between any foundation model, while treating the LLM as just one component of a complete enterprise solution.

Thematic (Sector/Industry)

<ul><li>The global Smart Cities market size was valued at $1.5 trillion in 2020 and is projected to grow to $11 trillion by 2030, a CAGR of more than 20%.</li><li>While North America is currently the largest market, Asia-Pacific is projected to overtake it in a few years.</li><li>Smart Cities are urban areas that utilize digital infrastructure and interconnected systems, most likely using artificial intelligence (AI). </li></ul>

The global Smart Cities market size was valued at $1.5 trillion in 2020 and is projected to grow to $11 trillion by 2030, a CAGR of more than 20%.While North America is currently the largest market, Asia-Pacific is projected to overtake it in a few years.Smart Cities are urban areas that utilize digital infrastructure and interconnected systems, most likely using artificial intelligence (AI). 

Tech Talk: Smart Cities Delivering on the Promise

United States

C3.ai, Inc. operates as a software company. The Company focuses on developing, deploying, and operating enterprise AI applications. C3.ai serves customers worldwide.

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C3.ai Inc (AI US)

C3.ai, Inc. - IPDs and the Gross Margin Squeeze

2QFY26 revenue of $75.1 million was essentially on target and cost controls drove a better-than-expected bottom line with EBIT of...

Water Tower Research

Enterprise AI Pure Play at a Crossroads

C3 AI operates as the critical bridge between powerful foundational AI models from providers like OpenAI, Anthropic, and Google and the complex...

Water Tower Research

Tech Talk: Smart Cities Delivering on the Promise

The global Smart Cities market size was valued at $1.5 trillion in 2020 and is projected to grow to $11 trillion by 2030, a CAGR of more than 20%.

Water Tower Research

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