Shares of UiPath sink despite solid earnings and revenue beat

Business automation software company UiPath Inc. delivered third-quarter earnings and revenue that beat analysts’ expectations, but its stock was heading south in the extended trading session after it offered lukewarm guidance for the current quarter.

The company reported earnings before certain costs such as stock compensation of 11 cents per share, coming in ahead of the seven-cent-per-share estimate. Revenue for the quarter increased 9%, to $355 million, beating the analysts’ consensus of $348.1 million.

All told, UiPath delivered a net loss in the quarter of $10.65 million, down from a loss of $31.5 million in the same period a year ago.

Even more impressive was UiPath’s annual recurring revenue, which rose 17% from a year earlier, to $1.607 billion, after adding $56 million in net new ARR. It also reported a dollar-based net revenue retention rate of 113%, which shows that its squeezing more revenue out of its existing customer base.

UiPath is a leader in the robotic process automation industry, selling tools that help businesses to lower costs and reduce operational errors by automating repetitive tasks such as data entry. Its core technology is powered by artificial intelligence models that study how employees perform common tasks, such as data entry, so they can replicate that work with no mistakes.

Given its background in AI, it’s no surprise that UiPath is now pushing to become more relevant in the fast-growing market for generative AI, especially in the area of AI agents, which are algorithms that can automate more complicated tasks on behalf of humans with minimal supervision.

During the quarter, the company hosted its annual user conference, UiPath Forward 2024, where it outlined its vision for AI agents, centered around the idea of “agentic automation.” The company believes AI agents actually represent the next evolution of RPA, and it aims to combine its existing robots with generative AI models to transform the way enterprises work by taking on more complex and differentiated tasks on behalf of organizations.

In an interview with SiliconANGLE Media’s theCUBE Research team at UiPath Forward in October, UiPath founder and Chief Executive Daniel Dines (pictured) explained that the company’s legacy robots are only able to automate repetitive business actions based on structured data. By combining them with generative AI agents, he said, they’ll be able to leverage unstructured data too, and therefore expand the range of use cases they can perform.

“That was really limiting, because if you look into enterprise processes, many of them will have a mix of rule-based tasks and the unstructured type,” he said. “Sometimes, they are intermingled, so it’s not so easy to separate them.”

To expand its capabilities, the company debuted a new tool called Agent Builder, currently in preview, which gives developers everything they need to build, evaluate and deploy enterprise agents that can work cooperatively with its traditional robots.

Dines told analysts on a call today that the customer response to its agentic automation vision has been “energizing,” reinforcing its status as a leader in AI-powered automation.

“We have conviction that UiPath provides a differentiated approach to agentic automation that will expand our market opportunity by enabling customers to automate more complex and variable workflows,” he said.

Holger Mueller of Constellation Research Inc. said Dines and his team did very well in the quarter, reducing the company’s loss per share by two cents, even though the company’s revenue growth dipped under double-digits. However, investors will be looking very closely at next quarter’s numbers to see if the company can finally deliver a profit, which would represent a big turnaround.

“The next quarter will also be a key indicator of whether or not UiPath is able to monetize the agentic AI trend, or if it still has work to do to convince customers of the benefits of the new technology,” the analyst said.

It may well be that the company needs more time, since its guidance for the next quarter was somewhat disappointing.

Looking to the fourth quarter, the company is anticipating sales of between $422 million and $427 million, with the midpoint of that range only just edging out Wall Street’s forecast of $424.1 million.

Investors made their disappointment clear, with an after-hours selloff causing UiPath’s stock to fall more than 6% in extended trading, adding to a decline of 2% during the regular trading session.

Photo: SiliconANGLE