UiPath Vs. ServiceNow: Which Agentic AI Stock Is the Better Buy?
Key Points
ServiceNow has higher revenue growth rates and can secure more lucrative deals than UiPath.
UiPath recently became profitable and has a better shot at boosting margins and winding up with a lower P/E ratio.
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Agentic AI could lead to major breakthroughs in productivity and drive the next wave of growth for many companies. Grand View Research forecasts that the enterprise agentic AI market will maintain a 46.2% compound annual growth rate through 2030, reflecting the technology's vast potential.
Two companies are uniquely positioned to capitalize on this opportunity. UiPath (NYSE: PATH) and ServiceNow (NYSE: NOW) both have tools that let companies create and manage AI agents, and both have solid foundations of growing annual recurring revenues.
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While both companies have similar opportunities in front of them, if you want to choose just one of them to invest in, here are a few details to consider.
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ServiceNow has higher annual recurring revenue growth rates
Annual recurring revenue is a critical metric for both companies. It indicates baseline growth and suggests how growth may change in the future.
ServiceNow is the larger company and is also growing faster. The company has $12.64 billion in current remaining performance obligations compared to UiPath's $1.9 billion in annual recurring revenue at the end of its fiscal 2027 first quarter.
ServiceNow is also growing its recurring revenue stream faster. It achieved a 22% year-over-year growth rate for subscription revenue in the first quarter. UiPath only managed a 12% year-over-year growth rate for its subscriptions, but its overall revenue was up by 17%.
Almost 9,000 global customers trust ServiceNow, and that includes 85% of the Fortune 500. Those businesses have more financial flexibility to pay more for ServiceNow plans in the future. UiPath has over 10,000 customers, but ServiceNow can charge a premium for its platform.
For instance, ServiceNow has 630 customers that are spending more than $5 million per year with it, while UiPath only has 374 customers paying more than $1 million per year for its platform.
UiPath has a better shot at boosting margins and improving its valuation
Although ServiceNow has a higher revenue growth rate, UiPath is well positioned to boost its margins. When discussing UiPath's fiscal 2027 first-quarter results, CFO Ashim Gupta noted that it was the first time the company had achieved GAAP profitability in a Q1.
UiPath is now in a position to continue scaling without soaring operating expenses. While costs should continue to rise over time, the company's revenue growth could outpace spending growth in future quarters.
ServiceNow has been profitable for much longer and commands double-digit net profit margins. In its latest quarter, UiPath had a net profit margin just above 5%.
UiPath would have to more than double its profit margin to reach ServiceNow's level. Since these agentic AI platforms have similar client lists and serve similar markets, it is feasible for UiPath to achieve that net profit margin in the future.
ServiceNow has still been growing its top line, but its net income growth has been a bit disappointing in recent quarters. Lower net income growth limits how much more attractive ServiceNow's price-to-earnings (P/E) ratio can become, while UiPath is better positioned to improve its valuation.
The final verdict
ServiceNow is growing revenues faster and has customers who are willing to pay more for its offerings. However, UiPath recently hit a profitability milestone and is in a good position to expand its margins. Both companies trade at similar P/E ratios, but UiPath has a better shot at making its valuation more attractive for long-term investors.
If ServiceNow can raise prices higher and get some of its costs under control, it can return to delivering double-digit, year-over-year net income growth. If that happens, the thesis will change significantly and favor ServiceNow.
Investors who are more focused on value may want to take a closer look at UiPath, but both companies are well positioned for the upcoming agentic AI boom.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ServiceNow and UiPath. The Motley Fool has a disclosure policy.
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