UiPath: a small bet on a big automation payoff

The real debate on UiPath is simple.

Is this just an ex-hype robotic process automation name that will grind along at single-digit growth, or is it a high-margin automation platform that can re-accelerate as “agentic AI” moves from slides into production?

Palantir and UiPath often get mentioned in the same AI breath, but they sit at different layers of the stack. Palantir’s edge is deep data processing and modelling inside a smaller number of very sticky customers, while its distribution is still developing. UiPath is the opposite shape; its data and modelling layer is thinner, but it has far broader distribution across enterprises through partners and installed robots.

Right now the market is pricing UiPath somewhere in the middle. At roughly 5 times sales, it is not being treated like a busted stock, but it is also not priced as a core AI winner. That gap is where the opportunity sits, if you are willing to hold for years and live with volatility.

In short, this is a high risk, high reward name that asks for patience, not trading.

What the company actually does

UiPath sells an automation platform to big organisations.

In practical terms, they help banks, insurers, hospitals, manufacturers and governments replace repetitive human workflows with software robots and AI agents.

A customer might use UiPath to read invoices, move data between legacy systems, trigger approvals, test software, and involve humans only when needed. The platform covers process discovery, building the automation, running it across robots and agents, and monitoring compliance.

The money comes mainly from term subscription licenses, not one-off deals. Customers pay for platform access and for different types of robots and users, usually on one year contracts paid up front. Cloud plans start around $25 per user per month for simple tiers, with larger enterprises on custom pricing. Professional services and training sit on top but do not drive the story.

The customer base is firmly enterprise. As at 31 January 2025, UiPath had 2,292 customers with annual recurring revenue, ARR, of at least $100,000 and 317 customers above $1 million in ARR, representing 87% and 51% of revenue. ARR is the annualised value of subscription contracts, assuming no upsell or churn.

In short, UiPath is an enterprise automation platform that gets paid recurring fees to orchestrate software robots, AI agents and people across complex business processes.

What changed, right now

Three things matter today.

First, growth has slowed but stabilised. ARR was $1.666 billion as at 31 January 2025, then $1.693 billion in Q1 FY26 and $1.723 billion in Q2 FY26, growing roughly 11% to 12% year over year. Dollar based net retention rate, DBNRR, has held at 108%. DBNRR measures how much existing customers spend after a year, including upsells and churn. Above 100% means the cohort is expanding.

Second, the margin story is finally becoming real. Gross margin sits around 82% to 83%. Despite GAAP operating losses, free cash flow has been consistently strong, around 20% of revenue over the last three fiscal years. For FY26, management is guiding to around $1.57 billion in revenue and roughly $340 million of non-GAAP operating income, which implies non-GAAP operating margins in the low twenties.

Third, the product story has shifted from “RPA” to “agentic automation”. The company has relaunched its platform around AI agents that can handle more complex workflows, and it is leaning on partnerships with Deloitte, HCLTech and major cloud and software vendors to get those deployments into the field.

The share price has already de-rated hard from the early years. Price to sales has compressed from more than 10 times in 2023 to roughly 5 times today, with the stock at about $14.

In short, UiPath has moved from pure growth story to a slower growing, high margin automation platform, at a lower multiple, with a new AI-driven product cycle to prove.

The engine

The economic engine is clean. UiPath spends heavily to win and support large customers, then collects high margin subscription revenue for years if it executes.

On roughly $1.43 billion of revenue in fiscal 2025, gross profit was about $1.18 billion, or nearly 83% gross margin. The variable cost to serve each extra dollar of license revenue is small. The heavy spend is in sales and marketing, plus research and development, most of which is effectively discretionary.

GAAP operating margin was around minus 15% in 2025, hurt by high stock based compensation of about $466 million. On a cash basis, the picture is better. Operating cash flow was roughly $339 million and free cash flow about $287 million, a margin around 20%. That cash comes from upfront billings, high gross margin and non-cash expenses.

If UiPath can keep ARR growing at low double digits and hold free cash flow margins in the low to mid twenties, the business will generate meaningful cash against an enterprise value around $6.1 billion and net cash over $1 billion.

In short, this is a high gross margin, subscription engine that already converts about 20% of revenue into free cash flow, even before it shows much operating leverage in the P&L.

Edge and moat direction

UiPath’s moat sits in three places.

First, product and brand. It has been recognised as a Leader in Gartner’s Magic Quadrant for robotic process automation for seven years in a row, ranked highest for ability to execute. That is a strong signal of feature depth and real-world deployments.

Second, embedded enterprise relationships. The majority of revenue comes from customers already paying at least $100,000 a year, and many paying over $1 million. Once an automation platform is embedded in dozens of critical processes, ripping it out is painful. A DBNRR of 108% in a mixed macro environment suggests UiPath is still expanding within its base.

Third, ecosystem. The company leans on a global partner network, including Deloitte and HCLTech, and runs a large developer and certification community via UiPath Academy and its marketplace. That matters because the bottleneck in automation is qualified people who know how to design and deploy it, not just software features.

On top of that, Microsoft and UiPath just expanded their relationship, with UiPath named the preferred enterprise automation platform on Azure and Azure AI agents routed through UiPath Maestro for workflow execution. That is exactly the kind of signal you want to see in a contested category, a major cloud provider leaning in as a partner at the automation layer instead of immediately trying to rip you out

The moat is not unassailable. Microsoft, ServiceNow, Salesforce and others are pushing their own automation and workflow tools. UiPath does not own the underlying cloud infrastructure and depends on major cloud providers for hosting.

In short, UiPath has a real but contested moat, strongest in enterprise RPA and automation today, and its direction depends on whether agentic automation gains traction before large platforms erase the differentiation.

Where I differ from consensus

The Street currently treats UiPath as a decent, mid-growth software name with a good cash profile but limited upside. Consensus view is roughly high single to low double digit revenue growth, DBNRR stuck around 108%, and non-GAAP operating margins in the low twenties. On that view, a 5 times sales multiple is fair and maybe even generous.

My take is slightly more optimistic, but still disciplined.

I think there is a credible path to mid teens ARR growth if agentic automation deployments ramp over the next three to five years, while free cash flow margins hold around 20% to 25%. At the current enterprise value, that would justify a higher equity value over time without needing bubble multiples. The stock does not need 30% growth to work, it needs 10% to 15% growth plus disciplined capital allocation.

This view is wrong if ARR growth drops below about 8% and DBNRR slides under 103% for more than a couple of quarters. At that point UiPath becomes a mature, low growth tool with limited pricing power, and the multiple should compress further.

In short, I see UiPath as a potential mid teens grower with strong cash flow, not a broken growth story, but the burden of proof is on upcoming ARR and DBNRR prints.

Catalysts and proof points

Here is what matters next.

• Q3 FY26 earnings on 3 December 2025.

Watch ARR, net new ARR and DBNRR, plus any update to full year guidance.

• Q4 FY26 and FY27 outlook around March 2026.

Evidence that revenue and ARR are tracking the guide, and that non-GAAP operating margin is moving toward the low twenties.

• Product and customer proof on agentic automation.

Case studies, wins with Deloitte and HCLTech, and any numbers on AI modules attached per customer will show whether the new platform is more than marketing.

If, by early 2027, ARR growth is back at or above 13% with DBNRR above 110% for several quarters and free cash flow margins are still near 20% to 25%, the bull case becomes much stronger.

In short, this is a “show me” story where the next 18 to 24 months of ARR, DBNRR and margin execution will decide whether the market re-rates the stock.

Valuation, quick reality check

At around $14 per share, UiPath’s market value is roughly $7.5 billion, with enterprise value about $6.1 billion after net cash. On trailing numbers, that is about 5 times revenue and roughly in line with what a mid-growth, high margin software business should trade on.

For context, Simply Wall St’s DCF-based model currently pegs “fair value” around $17.73 per share versus a spot price near $12.50, implying roughly 30% upside. I treat this as one external cross-check, not a hard target, but it lines up with the view that UiPath is modestly undervalued if it can deliver low-teens growth and mid-twenties cash margins.

A simple steady state lens helps.

If the business can reach about $2.0 billion of revenue with a 25% free cash flow margin, it would generate roughly $500 million of free cash flow. With an 11% required return and 3% terminal growth, that supports an enterprise value in the region of today’s level. Any growth beyond that or higher margins justify upside.

On a basic scenario grid, a base case of 10% to 12% revenue growth and 22% to 25% free cash flow margin supports mid-teens share prices over the next few years. A bull case of mid teens growth and higher margins pulls the stock into the high teens or low twenties. A bear case of growth sliding below 8% and multiple compression toward 3 to 4 times sales puts the stock back in the high single digits or low teens.

In short, the current price bakes in a modest future and leaves room for upside if UiPath proves it can be a durable, mid teens growth cash compounder.

Risks that actually matter

• Structural slowdown in growth

Early warning: ARR growth drops below 8% and DBNRR falls under 103% for more than two quarters.

Action: Treat this as a thesis break and reduce or exit, since the business would then be a low growth tool at risk of further de-rating.

• Competition from large platforms

Early warning: major cloud or enterprise software vendors standardise on their own automation tools and de-emphasise UiPath in public partnerships and integrations.

Action: If win rates and reference deals visibly shift away from UiPath, assume pricing pressure and lower long term margins, and cut the position.

• AI and regulatory hits

Early warning: meaningful restrictions from AI regulation or a high profile failure that forces UiPath to cripple key capabilities.

Action: Re-underwrite the investment case with lower growth and higher costs, and be willing to exit if product competitiveness is structurally impaired.

In short, the real risks are sustained demand slowdown, being out-run by bigger platforms, or an AI related shock, not quarter to quarter volatility.

Verdict

Verdict: Buy, building conviction, tuck-in position.

UiPath is not a safe compounder yet. It is a leveraged bet on automation and AI agents becoming a standard layer in enterprise software, with a clear path to strong cash generation but an open question on growth.

At today’s valuation, you are not paying for perfection, but you are also not getting it for free. This belongs as a small starter position that you are prepared to hold for at least five years, with a plan to add only if ARR growth and DBNRR move in the right direction and margins track the guide.

In short, for investors comfortable with volatility and a multi year horizon, UiPath looks like a high risk, high reward buy, sized carefully, with the thesis riding on ARR growth and cash margins, not on narrative alone.