UiPath's AI Pivot Is Underway. Time to Buy the Stock?

With the advent of artificial intelligence (AI), UiPath (NYSE: PATH) has had to make a significant technological pivot. But this isn't the first time the company has undertaken a major technological shift.

It began by outsourcing software services and transitioned into a leading robotic process automation (RPA) company. RPA uses software bots to handle repetitive human tasks, and thus is used to help automate processes such as invoice and payroll processing and data entry.

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Today, the company is looking to become an end-to-end automation platform that integrates AI agents and robots into a single unified platform.

Looking to reignite growth

It wasn't long ago that UiPath was growing rapidly, posting a 31% revenue increase for the quarter that ended Jan. 31, 2024. Today, the company is still growing, just at a much more modest pace, with revenue rising 6% in its fiscal 2026 first quarter to $357 million.

Its annual recurring revenue (ARR) climbed 12% year over year to $1.7 billion. ARR measures yearly billed amounts from subscription licenses as well as maintenance and support obligations, and it's an important metric for predicting revenue growth. It doesn't include perpetual licenses or professional services. It saw new net ARR of $27 million in the quarter.

The company has seen strength in the public sector, particularly with the federal government. This included a significant win with the Air Force to support its digital transformation efforts.

Dollar-based net retention was 108% on a trailing-12-month basis, down slightly from 110% last quarter. Numbers above 100% show spending growth by existing clients after churn. Customers with $100,000 or more in ARR increased 13% to 2,365, and those with $1 million or more rose 10% to 316.

UiPath finished the quarter with $1.6 billion in cash and marketable securities and no debt. It generated $116 million in operating cash flow and bought back 21.9 million shares in the quarter.

On its earnings call, management called its agentic automation platform the most successful product introduction in its history. While still early, both its agentic orchestration platform, called Maestro, and its Agent Builder, which helps users develop and deploy AI agents, have seen strong early adoption. It plans to implement a new consumption-based pricing model for its agentic solutions.

It said its first deal since its AI products became generally available was with a Fortune 15 global health company that signed a multi-year, multimillion-dollar expansion for UiPath's Maestro and Agent Builder.

Despite the early success, the company does not expect its AI solutions to be material contributors to revenue this fiscal year. However, it is looking for them to set the stage for meaningful new revenue streams in fiscal 2027 and beyond. The company has forecast fiscal second-quarter revenue in the range of $345 million to $350 million. It guided for ARR to be between $1.715 billion and $1.72 billion.

For its full fiscal year, management forecasts revenue to be between $1.549 billion and $1.554 billion, up from a prior outlook of $1.525 billion to $1.53 billion. It projects ARR to be between $1.82 billion and $1.825 billion, up from its previous outlook for $1.816 billion to $1.821 billion.

Image source: Getty Images

Is UiPath stock a buy?

Shares trade at a forward price-to-sales ratio of 4.3 based on this year's analyst estimates, but after taking out its $1.6 billion in net cash, it trades at a ratio of enterprise value to forward sales of only 3.3. That's very cheap for a profitable software company with a high gross margin (85% last quarter) and solid cash flow.

That said, tech investors tend to be all about growth, so value names in tech often struggle to gain traction. UiPath's new AI solutions will really need to reinvigorate revenue growth for the stock to work from here.

Agentic AI -- systems capable of autonomous decision-making and actions -- is a big opportunity, and the company's ability to use both RPA and AI agents depending on the situation could be a differentiator. Still, a lot of companies are currently pursuing agentic AI, so this is likely to be a competitive field.

Given UiPath's valuation and the company's proven ability to transform its business previously, I think the stock looks attractive at current levels. However, I would still consider it a bit more speculative in nature, given that its AI strategy has yet to be proven, and a lot is riding on it.

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Geoffrey Seiler has positions in UiPath. The Motley Fool has positions in and recommends UiPath. The Motley Fool has a disclosure policy.