C3.ai Founder & CEO Tom Siebel joins Yahoo Finance Live to discuss company earnings, the buzz around ChatGPT, the ongoing AI hype cycle, and the outlook for the computer software company as tech grapples with AI adoption.
Video Transcript
JULIE HYMAN: C3.AI has been riding the huge buzz around artificial intelligence this year. The shares have gone up a lot and they're still going up spurred by ChatGPT and the buzz around that. But the company does have a longer history.
It had its IPO back in 2020. It's headed by a software industry veteran, Tom Siebel. C3 reported its latest numbers after the bell yesterday and Siebel struck an optimistic tone on the call. He's joining us right now. It's good to see you, Tom. Thanks for being here.
First of all, for people who don't understand what C3.AI does and how it fits into this new and rapidly developing ecosystem, can you just set the stage for us, first of all, as to where you guys fit in?
TOM SIEBEL: C3.AI is a computer software company. And we spent over a decade and about a $1.5 billion building a software stack that allows us to take enterprise applications like ERP, manufacturing, supply chain, CRM, AML, what have you and make them use predictive analytics to make them predictive in nature, to tell us not what our inventory levels were, but what our inventory levels need to, be not what our customer churn was, but which customers are going to leave us, not what our anti-matter-- what the number of anti-money laundering events were, but we can stop AML in real time.
So we're typically serving, say, Fortune 1000 accounts-- Shell, Koch Industries, the United States Air Force, what have you-- with very large-scale predictive analytics applications applying AI to the enterprise to allow organizations to deliver products at lower cost with lower environmental impact into the hands of more satisfied customers.
BRAD SMITH: Perhaps for our own edification and perhaps some of that of our viewers, what, then, is the difference, then, between the predictive analytics, AI, applications that are currently already available to your customers and some of the more new generative AI conversation that we've seen in the kind of language learning models that seem to be really coming into the fray?
TOM SIEBEL: Great question, Brad. So what we've done in the last 13 years, we've built 42 turnkey enterprise applications for oil and gas, utilities, aerospace, defense, manufacturing, banking, what have you that we use to serve some of the largest customers in the world. Now, with the advent of generative AI, this represents a very interesting opportunity.
We've been working with this since about 2020. And we have an architecture that allows us to take advantage of these innovations. And this generative AI, it's difficult to overestimate the impact of this. Now, we're not using it for chat, OK?
We're using it for a fundamental different purpose. We're combining enterprise search-- think the Google user interface, with natural language processing, generative AI, and reinforcement learning to fundamentally change the nature of the human computer interface for enterprise applications. So rather than look like these complex things with lots of menu structures and that kind of [INAUDIBLE] complex supply chain applications, the user interface is just the Google search bar for HR, for manufacturing, for whatever it might be.
And it's available on our website for anybody who wants to see it. There's a demo of the product. It's quite innovative. We filed patents on the technology, I think, 21 countries. But it's not-- most people think about chat. This is not about chat.
JULIE HYMAN: Right. Not about chat in this type of application. And yet when you noted a dramatic change in business sentiment when you were talking around your earnings, does it have to do with the enthusiasm around ChatGPT and then the sparking of interest that has created? Or is it that the fundamental backdrop for the businesses you serve has been improving?
TOM SIEBEL: I think there's two things. Great question, Julie. I think there's two things that happened simultaneously. One, last summer in July and August, we just saw a significant downturn in buying behavior in Fortune 1000 accounts.
Everybody was hunkering down preparing for a recession. They were scared. They were cutting costs. And we called that pretty early.
And since then, we've seen a massive tech recession with all the layoffs and what have you. And that affected us. Now, we're seeing in the market at large something fundamentally has changed in terms of the people who are running these organizations are optimistic, they're moving forward. At the same time, there's been a realization that these organizations can use enterprise AI to fundamentally lower costs, serve customers better, deliver their ESG objectives, and deliver products with lower environmental impact into the hands of more satisfied customers.
And this generative AI definitely accelerated the interest in AI. So AI now is at a peak. And that seems to work very well for C3.AI, because I think we're the largest application player in that space.
JULIE HYMAN: When I was looking through the analyst commentary in reaction to your numbers, to your tone on the call, et cetera, one question I did see was that while you sound very optimistic, that that's not necessarily showing up in your numbers as of yet. And I know you guys raised your forecast a bit for the full year, or I should say narrowed the range but raised the lower end of it to some extent. When do you think you're really going to start to see an acceleration in the growth and in the numbers?
TOM SIEBEL: So I think in the coming year, we'll see a dramatic acceleration. Understand about two quarters ago, Julie, we changed our pricing model from a subscription-based pricing model, where an initial contract might be $10, $20, $30, $40, $50, to a consumption-based pricing model where an initial contract is you just take the application, you install it, you pay $0.55 per VCP [INAUDIBLE] to operate it.
So it's much easier to buy. Our pipeline of applications, of opportunities increased dramatically. The short-term effect of that puts downward pressure on revenue. The medium and long-term effect of that is something of a hockey stick in revenue. And we expect to see that kick in sometime in the next fiscal year.
BRAD SMITH: Tom, you've been in the industry and executive at a tech company and one capacity or another. And especially given C3.AI's advancements, you've seen how this industry has changed. You've seen how management styles have changed as well. And it's almost being kind of hypersped into this next era when you've got CEOs like Marc Benioff, CEOs like Elon Musk, even, who are far different than the tradition of what we've seen in the past. Do you believe that CEOs right now in the tech industry are looking at people like Elon Musk and saying that that's something or a management style that we should be unleashing within ourselves?
TOM SIEBEL: I think Elon Musk serves as a role model for a lot of CEOs. And he's enormously independent, enormously politically incorrect, and it's a little bit refreshing-- and very entertaining. He's obviously a very talented guy and a great genius. And he's accomplishing a lot.
JULIE HYMAN: And maybe some others couldn't tread that politically incorrect thing quite as-- I don't know if I would say successfully, but without consequence, shall we say, as he has. Tom, finally, I want to zero in on the AI industry a little bit more too.
Surely, you're aware of what your stock has done this year, but also, like anything else having anything to do with AI, right, whether it's in the name, whether somebody drops the term in a press release, stocks have gone crazy. As Brad mentioned, you've been around for a while in this industry. You've seen other shakeouts, right? What do you think the AI shakeout, if you think there's going to be one, is going to look like?
TOM SIEBEL: I mean, the analogs would be the ethernet, the internet, client server computing, the personal computing, the smartphone. I mean, AI is-- this soon will be a $600 billion addressable software market. Excuse me. Everyone will be using enterprise AI applications, just like they use PCs, just like they use relational databases, just like we used CRM.
When we started Oracle, there was no market for relational database systems and we established a market leadership position there. When we started Siebel Systems, there was no market for CRM. We created that market. Today, it's a $120 billion business. So we established and maintain market leadership positions in both of those markets.
The game we're playing at C3.AI is seeing if we can establish and maintain a market leadership position in what will be-- globally-- in what will be a $600 billion addressable market. Now, I think there's some probability we will attain that. Worst case is we might be in second place, in which case it's still a pretty good company.
BRAD SMITH: C3.AI Founder Tom Siebel, thanks so much for joining us here today. Really appreciate the time and the conversation. Look forward to checking back in the future too.