What Happened?
Shares of automation software company UiPath (NYSE:PATH) fell 22.5% in the pre-market session after the company reported underwhelming fourth-quarter (fiscal 2025) results: its full-year revenue guidance missed significantly, disappointing investors. Revenue growth slowed to just 5% year-over-year, a clear sign that demand challenges aren't going away. Annualized recurring revenue (ARR) rose 14%, meaning existing customers are still expanding their usage, just not enough to offset weak new customer acquisition. EPS did beat expectations, but that was more about cost control than strong sales, which only reinforces worries about sluggish growth.
And looking ahead, fiscal 2026 revenue guidance called for just 7% growth, not exactly the acceleration the market was hoping for. Overall, this was a weaker quarter: profits improved, but growth continued to be a challenge.
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What The Market Is Telling Us
UiPath’s shares are quite volatile and have had 16 moves greater than 5% over the last year. But moves this big are rare even for UiPath and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 35.1% on the news that the company reported weak first quarter earnings results and lowered its full-year revenue guidance, falling significantly short of Wall Street's expectations. The company noted it saw, "increased deal scrutiny and lengthening sales cycles for large multi-year deals."
In addition, it observed growth deceleration in the second half of March and into April due to a challenging macroeconomic environment and a change in customer behavior, which likely drove the weak guidance.
Lastly, the company said that the investments made to reaccelerate growth fell short of expectations, making it less nimble when responding to customer needs, and created short-term pressure on operating margins.
Furthermore, CEO Rob Enslin unexpectedly resigned; Founder and current Chief Innovation Officer Daniel Dines was to reassume the CEO role on June 1, 2024.
Following the disappointing results, multiple Wall Street analysts downgraded the stock's rating. For example, Bank of America downgraded the stock from Buy to Neutral and lowered the price target from $30 to $16, highlighting the weakening conviction in the near term given the execution and growth challenges.
Overall, this was a weak quarter for the company.
UiPath is down 21.9% since the beginning of the year, and at $10.10 per share, it is trading 58.7% below its 52-week high of $24.43 from March 2024. Investors who bought $1,000 worth of UiPath’s shares at the IPO in April 2021 would now be looking at an investment worth $146.39.
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