UiPath Faces Struggles But AI Agents May Lead Recovery

UiPath's stock has seen declines due to fears over generative AI. However, the company plans to launch AI Agents, which could be pivotal for recovery. Investors should proceed cautiously, as the road ahead is uncertain.

Date: 10-01-2025

AI Rating: 5

Challenges Faced by UiPath

UiPath (NYSE: PATH) has struggled to maintain its market position, with its stock down nearly 50% last year. Investors are increasingly concerned that generative AI could undermine the company's software for robotic process automation (RPA).

In Q3 of its fiscal 2025, UiPath's revenue increased by just 9% year over year, a significant drop from 24% growth in the same quarter of the previous year. Additionally, its net retention rate fell to 113% from 121%. This decline showcases the company’s challenges in retaining existing customers and attracting new ones amidst a competitive environment that is increasingly favoring generative AI over traditional automation solutions.

Despite these setbacks, there are signs of potential recovery through the introduction of AI agents - a new technology that acts as a digital assistant. Although not yet available, over 1,000 organizations have already signed up for the software, indicating strong initial interest.

This feedback could positively impact future performance if the software meets market expectations and turns around revenue growth.

Investors Should be Cautious

Considering the significant drop in both revenue growth and net retention rates and the looming competition in the AI space, investors need to tread carefully. The report indicates a cheap valuation for the stock at 5.3 times sales, yet this reflects considerable market skepticism. Existing shareholders may want to wait for concrete improvements before further investing.

Stocks: PATH