Agent Builder And Agentic Orchestration Will Expand Market Opportunities

Key Takeaways

• 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

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.

• 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

• 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

• 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

• 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.