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On Thursday, KeyBanc Capital Markets maintained a Sector Weight rating on UiPath Inc. (NYSE:PATH), following the company’s report of lower-than-expected financial results. Despite maintaining impressive gross profit margins of 83.38% and achieving 16.5% revenue growth in the last twelve months, UiPath disclosed its F4Q Annual Recurring Revenue (ARR) and provided guidance for its FY26 ARR, which showed a 9.2% year-over-year growth, falling short of the consensus expectation of 12.4%.
The company has attributed the shortfall to geopolitical challenges, especially within its U.S. federal business, where recent disruptions have led to increased uncertainty and adversely affected the timing of deal closures. According to InvestingPro analysis, UiPath maintains a strong financial position with a healthy current ratio of 3.13 and has received a "GOOD" overall financial health rating. KeyBanc’s analyst pointed out that UiPath could be one of the first software companies to specifically highlight a weakness related to U.S. federal exposure.
While the situation is seen as a concern with potential negative implications for the broader software sector, KeyBanc suggested that the issues might be more specific to the company or a particular sub-segment. Despite these challenges, KeyBanc has chosen to maintain its Sector Weight rating on the stock, citing the current macroeconomic environment and growth challenges in the near term. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, part of the coverage of 1,400+ US equities.
UiPath’s situation is notable as it may indicate early signs of impact from geopolitical issues on the software industry, particularly in dealings with the U.S. federal government. However, the firm has not adjusted its rating, implying a cautious but not necessarily pessimistic outlook on UiPath’s stock performance. InvestingPro data reveals that net income is expected to grow this year, with analysts predicting profitability - just two of the many insights available among ten additional ProTips for this stock.
In other recent news, UiPath Inc. reported its fourth-quarter earnings for fiscal year 2025, revealing an earnings per share (EPS) of $0.26, which surpassed the forecasted $0.20. However, the company’s revenue for the quarter was $424 million, slightly missing the consensus forecast of $425.27 million. Despite the EPS beat, UiPath’s fiscal year 2026 revenue guidance of 7% growth fell short of the 11% consensus estimate, partly due to macroeconomic uncertainties affecting the public sector. Analysts from Scotiabank (TSX:BNS), Evercore ISI, and Mizuho (NYSE:MFG) have all adjusted their price targets for UiPath to $12.00, citing concerns over the company’s guidance and challenges in the public sector. Evercore ISI noted that while UiPath’s operating margins exceeded expectations at 32%, the company faces challenges with delayed public sector deals. Meanwhile, Needham analysts maintained a Hold rating on UiPath, highlighting the company’s underperformance due to delayed deals in the U.S. Federal segment. Despite these challenges, there is positive momentum in the adoption of UiPath’s cloud model and new AI products, which are expected to drive future growth.
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