C3 AI CEO details how his company is using predictive analytics to ‘lower cost’

C3 AI CEO and Chairman Thomas M. Siebel joins Yahoo Finance Live to discuss company earnings, partnerships with brands like UPS, and the outlook for artificial intelligence.

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BRIAN CHEUNG: The world of predictive analytics continues to grow. And artificial intelligence firm C3.AI helps companies incorporate that technology into their business models. The company recently reported earnings showing a 38% bump in sales year over year, thanks to some key contracts with the likes of the Department of Defense.

Let's bring in CEO Tom Siebel for more on this. Tom, great to have you on the program this Friday. I just want to start off by asking you to kind of walk us through the stock movements in your company. A pretty big drop, about 17% initially yesterday, but we've seen basically a rebound all the way back up. I mean, is what your company doing here, is the messaging getting across to investors? What do you think happened there?

TOM SIEBEL: Well, I think the markets are pretty twitchy right now. And there's a great deal of volatility out there. And I think there, the market is reacting to kind of overall macro issues that are a little bit disturbing, OK, in Europe and in America. That being said, at C3, we have a very rapidly growing business. We're addressing an enterprise AI, a $600 billion addressable market. We're the world's leading provider of enterprise AI software.

We're running at today roughly a quarter of a billion dollar business, growing at roughly a 40% compound annual growth rate. We have a billion dollars cash in the bank. And we're focused on establishing a market leadership position in the market. So, at C3.AI, things are looking pretty good. The markets, you know-- the markets will take care of themselves. That's really not my primary focus.

BRIAN CHEUNG: And why markets do anything on any given day is always the harder thing to back into. But what you've been saying is underscored by the fact that you had a 48% year over year increase in the amount of customers that you had. So it seems like SaaS, right, Software as a Service, is very much in a different type of macroeconomic story than perhaps retailers and other types of consumer-facing companies that we're familiar with. What do you see on your side as the demand for your services, which, at C3.AI, is really predictive analytics in AI?

TOM SIEBEL: Well, we're using predictive analytics at kind of massive commercial, industrial, and government scale to lower cost-- supply network risk, supply chain optimization, demand forecasting, AI-enabled CRM, fraud detection. At companies like Shell, the economic benefit this year from the use of C3 is $2 billion. LyondellBasell, $1 billion. When we get into the Department of the Air Force, it probably exceeds a billion dollars.

So this is about delivering products at lower cost into the hands of more satisfied consumers. We're dealing with very, very-- we're solving these very, very troubling supply network risk problems, dealing with very large clean energy systems, and allowing large oil and gas companies to reinvent themselves as renewable energy companies.

So, this is all about cost savings. It's about a cleaner environment. It's about safer, cleaner, more reliable energy. It's about a more effective military. So this is-- I think no matter what happens in the macro markets in the next two or three years, it looks like we're looking at tailwinds.

BRIAN CHEUNG: I want to ask about capital expenditures because you probably have a very good vantage point on this because you're teaming up with these companies that want to maybe go into these ambitious projects, want to use AI to kind of assess how things go. And that does, indeed, cost money.

In this rising rate environment, we've heard large tech companies specifically say, they're going to start to cut back on some of that CapEx to kind of bunker down if there is a recession around the corner. Are you seeing the impact of that? Do you get that feeling, based off of the conversations you've had with some of your clients? I know defense is going to be a little bit different than private.

TOM SIEBEL: Well, we're very active in a number of growing market segments. About 50% of our business is helping the large oil and gas companies and chemical companies reinvent themselves. And with oil in excess of $100 a barrel, you could imagine the investments in that market are quite large. What we're doing in the defense and intelligence communities, that's growing. I think these issues associated with supply network risk are existential issues.

So I think that if-- should we hit a recession in Europe and in the United States, I think all spending will be cut. We're seeing it in ad dollars being cut. See kind of Snapchat for details. But I think these investments in predictive analytics are likely to continue to increase.

BRIAN CHEUNG: All right, no slowing for right now. C3.AI CEO Tom Siebel, thanks for stopping by the show. Really appreciate it.