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Friday, UiPath Inc. (NYSE:PATH), a software company with impressive gross profit margins of 83% and healthy revenue growth of 9.3%, maintained its Hold rating from Needham, despite reporting revenue and operating income that surpassed expectations. The firm’s analysis pointed to robust license revenue, which exceeded their estimate by 24%. Nonetheless, the net new annual recurring revenue (ARR) of $27 million fell short, showing a 39% decrease year-over-year, against a consensus projection of a $22.6 million increase. This shortfall was attributed to lingering effects from go-to-market (GTM) changes and execution improvements implemented in the fiscal year 2025.
The company achieved a record non-GAAP operating margin of 19.5% for a non-fourth-quarter period, reflecting the positive impact of streamlining and restructuring efforts undertaken in the second half of the fiscal year 2025, which also led to a 29.8% free cash flow (FCF) margin. With a strong current ratio of 2.93 and more cash than debt on its balance sheet, UiPath maintains solid financial health. However, the current guidance suggests a more challenging second half, with 76% of net new ARR expected to be generated in that period, compared to 57% in the previous fiscal year.According to InvestingPro, UiPath shows promising signs with analysts predicting profitability this year. Get access to 8 more exclusive ProTips and comprehensive financial analysis with InvestingPro.
Despite these financial improvements, a decline in key metrics such as the net retention rate (NRR), which dropped to 108% in the quarter, has led Needham to maintain a cautious stance. The firm has decided to remain on the sidelines until it observes stabilization in UiPath’s growth. Based on InvestingPro’s Fair Value analysis, the stock currently appears slightly undervalued, suggesting potential upside for patient investors.
In other recent news, UiPath Inc. reported its first-quarter fiscal 2026 earnings, exceeding analyst expectations with an earnings per share of $0.11, surpassing the forecast of $0.10. The company’s revenue increased by 6% year-over-year to $357 million, beating the anticipated $332.83 million. The Annual Recurring Revenue (ARR) also saw a 12% rise, reaching $1.693 billion. Following these results, BMO Capital Markets raised its price target for UiPath to $15.50, maintaining a Market Perform rating, while DA Davidson increased its price target to $14.00, keeping a Neutral rating. Evercore ISI also lifted its price target to $15.00, maintaining an In Line rating. Analysts highlighted UiPath’s strong first-quarter performance and successful product launches, particularly in agentic automation, as key factors in these adjustments. Despite positive developments, some analysts noted ongoing competitive challenges and variability in the macroeconomic environment. Additionally, UiPath executed one of the largest stock buybacks in the current reporting season, repurchasing approximately 4% of the company’s stock, reflecting confidence in its growth trajectory.
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