Mid-Cap Stocks: Balancing Risk and Reward in Tech Sector

Amid a focus on mega-caps, mid-cap stocks present hidden growth potential. Notable mentions include Nebius Group and UiPath, both showing promising revenue growth despite current challenges. Investor interest could rapidly shift to these firms.

Date: 17-05-2025

AI Rating: 7

Mid-Cap Growth Potential
Investors often overlook mid-cap stocks, particularly in the tech sector dominated by mega-cap firms. However, mid-cap stocks like Nebius Group N.V. (NASDAQ: NBIS) and UiPath Inc. (NYSE: PATH) present unique opportunities for growth and stability.

Nebius Overview
Nebius has been experiencing impressive revenue growth, with a phenomenal 466% year-over-year (YOY) increase in Q4. This demonstrates strong demand for its AI services despite facing significant net losses of nearly $137 million in the last quarter, indicating that while the company is scaling, it may still require extensive capital for operations. The forecast of $750 million to $1 billion in annual recurring revenue by December 2025 is ambitious yet potentially achievable, especially given the recent investment from Jeff Bezos.

UiPath Performance
UiPath has shown resilience despite a turbulent market, with its annual recurring revenue climbing by 14% YOY and cloud revenue improving over 50%. The impressive 110% dollar-based net retention rate reflects strong customer loyalty. Analyst ratings remain cautious with an overall 'Hold', suggesting that while growth is steady, macro-level uncertainties could pose risks.

Varonis Systems Inc. Analysis
Another compelling player is Varonis Systems Inc. (NASDAQ: VRNS), which has raised its revenue guidance to reflect strong demand for its SaaS platform, recording nearly 20% YOY revenue gains. Effective cash flow management with operating cash flow at $68 million and free cash flow growing to $65.3 million is a positive indicator of financial stability.

In conclusion, while Nebius Group is currently overwhelmed by losses, its remarkable revenue growth paints a promising picture for future profitability. UiPath holds steady due to solid recurring revenue amid competition worries. Varonis Systems, with its strong cash flow and revenue guidance, looks to benefit further from market demand, making it an attractive option for investors seeking mid-cap exposure in tech.

Stocks: NBIS PATH VRNS