UiPath Revenue Jumps 15% in Fiscal Q2

Key Points

• UiPath (NYSE:PATH) reported Q2 FY2026 revenue of $362 million, surpassing its guidance.

• Annualized renewal run-rate (ARR) reached $1.723 billion as of July 31, 2025, up 11 percent year-over-year.

• Non-GAAP operating income reached $62 million for Q2 FY2026.

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UiPath (NYSE:PATH), a leading enterprise automation software provider specializing in artificial intelligence (AI)-powered robotic process automation, It exceeded the high end of guidance for key metrics—reporting $362 million in GAAP revenue, $1.72 billion in annualized renewal run-rate (ARR), and $62 million in non-GAAP operating income for Q2 FY2026. These results outpaced both earlier forecasts and the prior year's levels. The quarter showed strong execution in top-line revenue and operational efficiency, with non-GAAP earnings and non-GAAP operating margin both making considerable gains. However, growth in net new business (net new ARR) slowed, raising questions about the pace of future expansion even as overall results were solid.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2026 earnings report.

UiPath’s Business and Strategic Focus

UiPath develops and sells automation software that helps businesses automate repetitive tasks using AI and robotic process automation (RPA). Its platform allows organizations to replace manual steps with software robots, which can work with digital information and business processes. UiPath’s core offering targets enterprises looking to increase efficiency, reduce costs, and improve productivity across departments like finance, operations, IT, and customer service.

In recent years, UiPath has focused on technological innovation by integrating advanced AI with its automation tools. The company has introduced features like agentic automation (orchestration of software agents, robots, and process mining), and expanded its platform capabilities through industry partnerships and acquisitions. Key to its strategy are continued investment in product leadership, scaling up deployments from pilots to full production, and expanding its reach through global partners and enterprise customers. Maintaining rapid innovation, high gross margins, and a robust customer base are crucial to its success in the competitive automation software industry.

Quarter Highlights and Notable Developments

The quarter saw UiPath outperform its forecasts, with GAAP revenue of $362 million, ahead of its $345–$350 million guidance range. Subscription services grew to $238.4 million year-over-year and now make up approximately two-thirds of total revenue, highlighting a steady shift to recurring, software-based sales. License revenue (GAAP) remained level year over year at $112.2 million, suggesting market demand is shifting towards subscription models typical for software-as-a-service.

Gross margins expanded, with GAAP gross margin at 82%, up from 80% in the prior-year quarter, supporting healthy ongoing profitability. Non-GAAP gross margin increased to 84%. Significant reductions in sales and marketing and lower general and administrative expenses contributed to the improved non-GAAP operating margin, which jumped to 17% from 2%. The company’s cost discipline played a key part here. Still, Stock-based compensation was $78 million.

UiPath continues to prioritize innovation, launching and rolling out its agentic automation product family—a type of AI-powered workflow platform that combines traditional robotic process automation, task orchestration, and process analysis in one system. The company reported that customer deployments of the new technology are moving beyond pilots to regular use in production. Industry recognition came as UiPath was once again named a leader in the 2025 Gartner Magic Quadrant for Robotic Process Automation tools.

Strategic partnerships expanded this quarter, with an agreement announced with HCLTech, a global technology consultancy, to accelerate agentic automation adoption for enterprise customers. Internally, UiPath completed a modernization of its core enterprise software system (SAP S/4HANA), working alongside Deloitte.

Not all metrics accelerated. Net new ARR, which measures the value of new subscription contracts, came in at $31 million. This is a slower pace than some prior quarters and highlights a potential deceleration in customer expansion. Similarly, the dollar-based net retention rate—a measure of the company’s ability to grow revenue from existing customers through upselling or renewals—was 108%. License revenue (GAAP) staying flat, while subscription services (GAAP) rise, reflects a broader industry shift but also signals that growth needs to be led by maintaining or expanding success in subscriptions.

Cash generation remained healthy, with $45 million in non-GAAP adjusted free cash flow. Total cash, cash equivalents, and marketable securities was $1.52 billion at quarter end, down from earlier in the year due to share buybacks and ongoing investments. This balance still represents a strong liquidity position to support strategic growth and operations.

Outlook and What to Watch Ahead

Management raised its guidance for both the next quarter and the full fiscal year. For Q3 FY2026, it projects revenue in the range of $390–$395 million (GAAP) and ARR between $1.771 billion and $1.776 billion. Non-GAAP operating income is expected to reach about $70 million. For FY2026, revenue guidance rises to $1.571–$1.576 billion (from $1.549–$1.554 billion previously), with ARR forecast to reach $1.834–$1.839 billion, and non-GAAP operating income targeted at roughly $340 million, up from $305 million in the prior forecast.

In the quarters ahead, investors should watch UiPath’s ability to accelerate net new ARR and improve its net retention rate. Both are crucial signals for the durability of the company’s growth trajectory as its subscription base grows and the market for automation software evolves. Trends in stock-based compensation and cash spending, the mix between subscription and license revenue, and the pace of adoption for new agentic automation solutions will also be key areas to monitor.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends UiPath. The Motley Fool has a disclosure policy.