C3.ai (AI) may be facing more turbulent waters after losing about a fifth of its market cap following disappointing earnings results last week.

The AI software firm’s long-running partnership with oil and gas giant Baker Hughes (BKR) — one that accounts for over a third of C3.ai’s revenue — is set to expire in April 2025. Yahoo Finance has learned that the executive who oversaw the partnership has departed the company.

“It’s the canary in the coal mine,” said one former executive who asked not to be identified out of fear of retribution. “If Baker Hughes goes away, it’s game over.”

Baker Hughes has been a part of C3.ai’s story since its IPO. When the company debuted at the NYSE, Baker Hughes accounted for 10% of its revenue. Two years later, it accounted for as much as 45% of its total revenue. It’s a partnership that has gone through several extensions, revisions, and various iterations.

In June 2019, the two announced a joint venture agreement: Baker Hughes would sell C3.ai's solutions across the oil and gas industry. Since then, their agreement has been amended numerous times, with Baker Hughes negotiating lower annual revenue commitments in recent years.

C3.ai’s relationship with Baker Hughes has also been the subject of controversy. Last year, I reported for CNBC on the turmoil facing CEO Tom Siebel following statements he made about the sales force. Over the course of several months, my CNBC colleagues and I spoke to more than two dozen former employees of C3.ai and Baker Hughes about their time at the company and the details of its most important partnership.

At the time, some C3.ai investors accused Siebel of misrepresenting the size of its sales organization tied to the partnership. According to CNBC reporting, Siebel had stated that the company had access to a 12,000-person sales force with Baker Hughes. However, former employees said 12,000 people were not trained to sell the C3.ai product.

Since then, C3.ai has been hit with more lawsuits from investors who claim they were misled about the company’s relationship with Baker Hughes. A recent derivative lawsuit filed by a C3.ai shareholder, Michele Pankow, alleges Siebel and members of his board of directors “knew perfectly well that the myriad public statements claiming 12,000+ Baker Hughes employees were selling C3’s products were false.”

Pankow is suing several C3.ai executives and board members, including Siebel, for breaches of fiduciary duty and unjust enrichment in relation to its Baker Hughes partnership. Internal company documents, unsealed last month, reveal that on May 25, 2021, C3.ai’s board of directors held a meeting where sales objectives were discussed in detail.

“The materials presented to the Board members in connection with this meeting contained a detailed Powerpoint slide presentation which contains ‘Sales Objectives’ for the Oil & Gas division, wherein the second ‘goal’ is described as ‘Drive BH to onboard 10 qualified sales executives in direct quota carrying roles by July 31,’” according to the complaint.

“A reasonable director would of course understand that onboarding just ten qualified sales executives at Baker Hughes would be wholly unnecessary if the entirety of Baker Hughes’ salesforce 12,000+ sales employees were already selling C3’s products.”

C3.ai did not respond to Yahoo Finance's request for comment.

Dan Brennan, former senior vice president of the joint venture BakerHughesC3.ai, was seen as a critical leader in the partnership. According to his LinkedIn, Brennan has left the company. His departure raises questions about the partnership's future.

“Tom used the relationship with Baker Hughes to basically demonstrate that C3 was legit and would become the standard for enterprise AI,” said the former executive. “Yet my understanding is that the efforts between C3 and Baker Hughes are riddled with issues. They might re-up the partnership but it’ll be watered down in a way that Baker Hughes’s commitment is less.”

Brennan did not respond to a request for comment.

On Wednesday, C3.ai reported its fiscal first quarter 2025 results that were slightly ahead of expectations. Revenue was $87.2 million — in line with estimates. EPS outperformed with a loss of $0.05 per share. However, subscription revenue fell short of analyst expectations at $73.5 million.

Four firms — Canaccord, Piper Sandler, Morgan Stanley, and Deutsche Bank — lowered their price targets on C3.ai following earnings. "Net/net, while the top line y/y growth continues to stabilize, the subscription revenue performance this quarter highlights the volatility in the model," wrote JPMorgan.

Siebel pushed back last week on Yahoo Finance's Morning Brief. “There was nothing that wasn’t good about the quarter,” he said, adding the markets are “overreacting to the fact that professional services were a little bit larger than they thought.”

Siebel was also asked about Brennan’s quiet departure and what it means for the Baker Hughes partnership.

"Dan Brennan was a close friend and a great professional,” Siebel said. “I enjoyed working with him. There are thousands of professionals at Baker Hughes; we work with their entire senior management team. I'm certain that we're coordinating with them on a daily basis. They're a great customer, they're a great partner, and we continue to enjoy a close and productive relationship.”

Siebel said "there's no plans for [the partnership] to expire early.” However, Siebel didn’t address whether it will be renewed.

Yasmin Khorram is a Senior Reporter at Yahoo Finance. Follow Yasmin on Twitter/X @YasminKhorram and on LinkedIn. Send newsworthy tips to Yasmin: yasmin.khorram@yahooinc.com

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