PATH: AI Software Setup And Index Adds Will Support Automation Outlook

Narrative update

Analysts have nudged their fair value view for UiPath slightly higher, reflecting price target moves such as Barclays lifting its target to US$18 from US$16 and RBC Capital moving to US$14 from US$12, citing a more constructive setup for software and AI exposed names.

Analyst Commentary

Recent research is broadly constructive, but it also highlights that expectations around AI and software can still be a source of swings in sentiment for UiPath.

Bullish Takeaways

Bullish analysts are lifting price targets, pointing to what they see as a more appealing setup for software names tied to AI themes through 2026.
They describe macro conditions and IT spending as stable, which they view as a supportive backdrop for UiPath to execute on its automation and AI roadmap.
Some see stock valuations across software as relatively low and the sector as out of favor, which they argue could leave room for sentiment to improve if execution stays on track.
Recent checks around software earnings in October are described as better than prior quarters for parts of the group, which bullish analysts take as a sign that demand is not weakening across the board.

Bearish Takeaways

Despite higher price targets, several firms are keeping neutral style ratings, suggesting they still see a balance between potential upside and execution or valuation risks.
Bearish analysts emphasize that volatility around AI exposed software remains elevated, given crowding in a small group of perceived AI winners.
They note that investor attention has been concentrated on companies seen as best placed to accelerate growth from AI trends, which can leave less room for error for names like UiPath.
The sector being out of favor is a two sided point, as it can also signal that sentiment could stay cautious if AI spending patterns or automation demand do not match current expectations.

What's in the News

UiPath is being added to multiple S&P indices, including the S&P 1000, S&P Composite 1500, S&P 400, and S&P 400 Information Technology, which can affect how index funds and ETFs gain exposure to the stock (Key Developments).
The company outlined expectations for fourth quarter fiscal 2026 revenue in a range of US$462 million to US$467 million, giving investors a reference point for upcoming results (Corporate guidance, Key Developments).
Management reiterated that UiPath is open to tuck-in acquisitions, highlighting prior M&A such as the Peak transaction and mentioning the potential use of free cash flow for both M&A and opportunistic share repurchases (CFO comments, Key Developments).
UiPath announced an integration with Talkdesk to bring automation and AI into contact center workflows, including complex use cases like prior patient authorization in healthcare (Client announcement, Key Developments).
The company joined the Veeva AI Partner Program and became a founding technical contributor to the AIUC 1 security framework for enterprise AI agents, tying its automation platform more closely to regulated and compliance-heavy workflows (Client announcements, Key Developments).

Valuation Changes

Fair Value: nudged higher from US$16.27 to US$16.40, indicating a small upward adjustment in the model output.
Discount Rate: effectively unchanged at about 8.46%, with only a minimal refinement in the calculation.
Revenue Growth: held steady at about 8.90%, showing no material change in the assumed growth profile.
Net Profit Margin: remains close to 3.09%, reflecting a stable view on long term profitability assumptions.
Future P/E: edged up slightly from 163.00x to 164.34x, suggesting a modestly higher multiple in the updated framework.

Strategic partnerships and innovation in automation aim to boost growth through deeper customer relationships and expanded market opportunities.
Go-to-market restructuring and focus on AI-driven cloud products seek to enhance efficiency, customer engagement, and revenue growth.
Geopolitical and macroeconomic challenges are impacting UiPath's revenue growth, with FX headwinds and SaaS transition affecting financial targets and margins.

Catalysts

About UiPath

Provides an end-to-end automation platform that offers a range of robotic process automation (RPA) solutions primarily in the United States, Romania, the United Kingdom, the Netherlands, and internationally.What are the underlying business or industry changes driving this perspective?

UiPath's focus on accelerating innovation across the agentic automation road map is expected to grow deeper customer relationships and strategic partnerships, likely driving future revenue growth.
Increased adoption of UiPath's platform among existing customers, supported by strategic changes in the go-to-market structure, is aimed at enhancing customer engagement and boosting ARR growth.
The completion of go-to-market restructuring is anticipated to improve alignment and operational efficiency, which could lead to better net margins over time.
New product launches such as Agent Builder and Agentic Orchestration, along with strategic partnerships like with Microsoft and Deloitte, are positioned to expand market opportunities, potentially increasing earnings through higher-value deals.
UiPath's commitment to cloud offerings, with over $975 million in cloud ARR, positions the company to capitalize on AI-driven products and services, which could contribute to revenue growth and improved gross margins.

UiPath Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming UiPath's revenue will grow by 8.6% annually over the next 3 years.
Analysts are not forecasting that UiPath will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate UiPath's profit margin will increase from -4.7% to the average US Software industry of 13.1% in 3 years.
If UiPath's profit margin were to converge on the industry average, you could expect earnings to reach $243.6 million (and earnings per share of $0.5) by about September 2028, up from $-67.5 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 36.4x on those 2028 earnings, up from -86.2x today. This future PE is lower than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to decline by 2.71% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.44%, as per the Simply Wall St company report.

UiPath Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The ongoing geopolitical climate and government transitions have caused delays in deal closures, impacting UiPath's ARR expectations and potentially affecting short-term revenue growth.
Increased macroeconomic volatility has introduced uncertainty around customer budgets, leading to a more cautious financial guidance for fiscal 2026, which could impact future earnings and revenue predictability.
Currency fluctuations (FX headwinds) have negatively affected revenue and ARR figures, creating additional challenges in meeting financial targets and impacting net margins.
The move towards a SaaS model has been identified as a 2% revenue growth headwind for the full year, implying potential pressures on net margins during the transition period.
While there is strong innovation in agentic products, these advancements may not significantly contribute to fiscal 2026 revenue, suggesting potential risks to short-term revenue projections despite long-term growth potential.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $14.147 for UiPath based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $11.71.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.9 billion, earnings will come to $243.6 million, and it would be trading on a PE ratio of 36.4x, assuming you use a discount rate of 8.4%.
Given the current share price of $10.88, the analyst price target of $14.15 is 23.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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