AlTiNCO coatings were deposited by the reactive cathodic arc evaporation. In addition, TiNC coatings with different carbon contents were deposited to compare the influence of carbon addition on the oxidation depth between TiNC and AlTiNCO coatings. Variations in microstructure, morphology, and chemical composition were correlated with mechanical properties. High-resolution transmission electron microscopy revealed that nanocrystalline phases are present. Higher carbon contents lead to the precipitation of free carbon resulting in a nanocomposite structure of AlTiNCO/C. Raman spectroscopy of the nanocomposite structure showed spectra typical of nanocrystalline carbon. It was shown that the additional carbon had a positive influence on the cutting performance in dry cutting.