C3.ai’s (NYSE:AI) stock tumbled about 18% premarket on Thursday after the company reported fiscal first quarter results and provided outlook, which drew cautious reactions from analysts.

BofA Securities reiterated its Underperform rating, noting that the company is still operating at an unfavorable growth and margin profile.

The firm adjusted its estimates to reflect C3.ai’s guidance and lowered its price target to $20 from $24 citing limited visibility for accelerating revenue growth, margin expansion and bottoming backlog.

Analysts led by Brad Sills said that C3.ai reported modest subscription revenue upside (19.7% year-over-year versus BofA’s estimate of 19%). However, an unchanged fiscal 2025 outlook does not suggest that C3 is participating in tailwinds from the AI adoption cycle in a meaningful way.

Pilot deal metrics are again positive with 52 in the first quarter, up from 34 in fiscal fourth quarter. However, pilots have not translated to material incremental subscription revenue growth as of now, according to the analysts.

Sills and his team noted that the company is still undergoing a transition to consumption from subscription, which is still weighing on remaining performance obligation, or RPO. However, fiscal first quarter RPO fell a record 16% quarter-over-quarter, indicating that visibility for when RPO could bottom out remains limited. In the meantime, the company is investing for growth.

The analysts expect more subscription contribution from pilot deals. They added that, with agreement terms of three to five years, they would expect to see RPO bottom out and reaccelerate in the coming quarters. The analysts are watchful for this and incremental subscription growth from traction with a steady pipeline of pilot deals in the last two years. They are also looking more continuity in the office of the CFO, as turnover there has been somewhat concerning.

JMP has maintained its Outperform rating and $40 price target on C3.ai’s stock, noting the 20.5% revenue growth in the fiscal first quarter, strong TCV bookings and in-line guidance.

Meanwhile, Morgan Stanley kept its Underweight rating on the stock and cut the price target to $21 from $23.

While revenue accelerated for the sixth quarter in a row, it was driven by services, as software revenue came in below consensus, said a team of analysts led by Sanjit Singh.

The analysts stated that there was strong momentum in signed agreements, pilots and partner contribution, but with substandard revenue growth plus operating margins, they have stuck to an Underweight rating.

What Singh and his team liked were — Fiscal first quarter total revenue accelerating again; first quarter operating margin topping estimates; fiscal 2025 revenue guidance of $370M to $395M reiterated despite the softness seen in subscription revenue; deal velocity and pilot momentum.

However, the analysts are monitoring first quarter subscription revenue missing estimate. Subscription revenue for the quarter came in at $73.5M, compared to Morgan Stanley’s estimate of $76.7M and consensus estimate of $77.7M.

In addition, the analysts are watching the guidance. The fiscal second quarter’s total revenue outlook of $88.6M to $93.6M was in-line with Morgan Stanley/consensus at $90M/$90.6M. Meanwhile, the operating loss guidance of $34.7M to $26.7M was below expectations.

C3.ai (AI) has a Hold rating at Seeking Alpha’s Quant Rating system, which consistently beats the market. The Seeking Alpha authors’ average rating is more positive with a Buy but the average Wall Street analysts’ rating is Hold.