C3.ai (AI -1.11%) was among the losers last month, as shares of the artificial intelligence (AI)-focused software-as-a-service (SaaS) company fell on a weakening macroeconomic environment and an earnings report that didn't seem to live up to investor expectations.

By the end of the month, C3.ai had lost 25%, according to S&P Global Market Intelligence. As you can see from the chart, the stock fell sharply in the second half of the month.

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C3.ai pulls back

C3.ai emerged as an early winner in the AI boom, in part because of its titular association with AI and management's framing of it as the AI-for-the-enterprise company.

However, the company has not yet turned a profit, and after that initial jump in 2023, the stock has been largely range-bound, as its valuation seems to have put a ceiling on the stock.

In February, it began to pull back like a lot of other high-priced unprofitable growth stocks, as macro-level data showed consumer confidence rapidly weakening, and investors seemed to grow wary of a brewing trade war.

After declining in five of the last six sessions, C3.ai then fell 10% on Feb. 27 even as it beat analyst estimates in its report. Revenue in the fiscal third quarter rose 26% to $98.7 million, which was ahead of the consensus at $98.1 million. The company also touted expanded partnerships with Microsoft, Amazon Web Services, and McKinsey. It closed 66 agreements in the quarter, which was a 72% increase from a year ago.

On the bottom line, the company continues to be deeply unprofitable on a generally accepted accounting principles (GAAP) basis, with an operating loss of $87.6 million, but it does spend heavily on share-based compensation. After adjustments, it reported a per-share loss of $0.12, a slight improvement from $0.13 in the quarter a year ago and better than the consensus at a per-share loss of $0.25.

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What's next for C3.ai?

The company's fourth-quarter guidance called for continued growth, with management forecasting $103.6 million-$113.6 million, or 25.5% growth at the midpoint, essentially the same pace as it reported in the fourth quarter.

C3.ai's revenue growth has been encouraging, but its reliance on stock-based compensation, which is diluting shareholders by nearly 10% on a year-over-year basis, is concerning.

While that strategy might make sense for an unprofitable growth stock, investors still seem rightfully skeptical that C3.ai has a path to profitability as its GAAP losses are widening.