An interesting note on C3.ai — they are expensing their software development costs instead of capitalizing them. From my basic understanding, typical accounting practices involve capitalizing software development expenses — spreading them as amortized costs over the software’s useful life — C3.ai is expensing these costs immediately on their financial statement as Selling, General & Administrative (SG&A) and Research & Development (R&D) expenses. This front-loading of expenses impacts their current profitability but is expected to enhance future financial performance by eliminating ongoing amortization costs. Consequently, once development costs are complete, C3.ai’s profit and loss and cash flow should show significant improvement. This strategic move offers insight into the company’s financial planning: they are willing to take an immediate hit to profitability for potential long-term gains.
