Is UiPath Stock a Buy as Revenue Accelerates?

UiPath's (NYSE: PATH) stock remains beaten down, trading more than 25% below its level at the start of the year. While the company has shown some signs of life, it has been caught in the software-as-a-service (SaaS) sell-off. UiPath is a company that specializes in automation using software bots and orchestration software for agentic AI.

The company recently reported solid fiscal first-quarter results, but the question is whether this can help the company get out of its doldrums. Let's take a closer look.

Momentum continues to build

UiPath saw some solid, albeit still muted, momentum in its first quarter. AI agentic orchestration remains a top priority, and AI products were included in 16 of its 20 largest deals in the quarter. Meanwhile, AI deals were six times larger, on average, than non-AI deals.

The company continues to do well within its existing customer base, with the company reporting a 109% dollar-based net retention rate over the past 12 months. That was an uptick from the 107% it reported in Q4. Any number over 100% indicates that existing customers are growing after a period of churn. New annual recurring revenue (ARR), meanwhile, came in at $49 million.

Overall revenue for the quarter climbed by 17% to $418.4 million, well above its guidance for revenue of $395 million to $400 million. Its ARR rose by 12% year over year to $1.9 billion. Adjusted earnings per share (EPS) jumped by 36% to $0.15.

Looking ahead, UiPath guided for second-quarter revenue in the range of $395 million to $400 million, representing 9% to 11% growth. It guided for ARR between $1.929 billion and $1.934 billion.

For the full year, it upped its revenue forecast to be between $1.776 billion and $1.781 billion and its ARR forecast to be between $2.058 billion and $2.063 billion. That's up from a prior outlook of revenue of $1.754 billion to $1.759 billion, with ARR of between $2.051 billion and $2.056 billion.

Image source: Getty Images.

Is the stock a buy?

While UiPath turned in a solid quarter, it issued conservative Q2 guidance, in part due to some currency headwinds. While the stock is cheap, trading at a forward price-to-sales ratio of 3.5 and a forward P/E of around 14.5, the company needs to see more meaningful ARR growth acceleration for the stock to really work from here.

Agentic AI is still in the very early stages of taking off, and, based on commentary from the AI infrastructure names, this is a real, emerging trend. UiPath's Maestro platform has a big opportunity to be an important AI orchestration tool, and it's already integrated with major platforms such as Alphabet's Google Cloud, Microsoft, and Salesforce. Meanwhile, it's also enabled its platform to handle coding agents, helping provide governance orchestration.

This is a big potential growth driver, but UiPath is not the only player chasing this opportunity, and there is no guarantee it will get its fair share of this emerging market. The stock is speculative, but its low valuation makes it an interesting investment.

Geoffrey Seiler has positions in Alphabet, Salesforce, and UiPath. The Motley Fool has positions in and recommends Alphabet, Microsoft, Salesforce, and UiPath. The Motley Fool has a disclosure policy.