Last Update 28 Aug 26
The AI Opportunity Is Still There, but the Upside Looks More Limited
My original thesis for UiPath was that it could become one of the major beneficiaries of the second phase of the AI boom, where AI moves beyond generating answers and starts actually doing work.
That thesis hasn’t disappeared. UiPath continues to build out its agentic automation platform, combining AI agents with its existing automation and orchestration capabilities. The business is also becoming more profitable, which gives it a solid foundation for the years ahead.
The issue for me is growth.
I had expected the adoption of AI and agentic automation to eventually push UiPath into a meaningfully higher growth trajectory. Instead, the business appears to be settling into roughly low double-digit recurring revenue growth. While recent quarterly revenue growth has been stronger, ARR growth has remained around 11–12%. (Filings)
That isn’t necessarily a bad outcome. UiPath could continue growing steadily while expanding margins, and management now sees a path toward a 30% long-term non-GAAP operating margin. (Transcript)
But for me, the investment case has changed.
Even if the stock remains somewhat undervalued, I no longer see enough upside to justify holding it over other opportunities with stronger growth potential. At around 10% long-term revenue growth, much of the return would need to come from margin expansion and the valuation multiple rather than exceptional business growth.
I exited my position a few months ago for that reason.
I still think UiPath can become a larger and more profitable company, and agentic automation could eventually accelerate its growth again. But investing is also about opportunity cost. I would rather allocate that capital to businesses where I see a clearer path to significantly higher long-term returns.
For now, UiPath moves from an investment I own to one I’ll continue watching.
Catalyst
- UiPath is built fully around AI, and it sits right between the first and second stages of the AI boom. The first stage focused on building the hardware that makes AI possible. Companies like Nvidia and Micron supplied the chips, memory and data centres that power modern models. That phase created huge profits for those who spotted it early. Now we are entering the second stage where AI becomes part of everyday work. This is where UiPath fits in.
- UiPath’s platform helps businesses automate routine digital tasks such as processing invoices, entering data and connecting systems that do not normally work together. What makes it special is that it can work across almost any software, even legacy programs, using its AI computer vision. The system can see what is on a screen and take action, just like a person would. These challenging integration processes can create strong moat for them as one of the early leader in the space.
- Its latest features like Autopilot let users describe what they want in plain English, and the software builds the automation automatically. This means AI is no longer just answering questions but actually doing the work.
- UiPath already serves more than half of the Fortune 500, has strong recurring revenue and is expanding its partnerships with major cloud providers. The company recently launched collaborations with OpenAI and NVIDIA to enhance agentic automation in enterprise workflows. If it continues to execute well, it could become a key platform for how businesses use AI to get real work done.
Valuation
- At under $10B valuation, I see this stock has a long runway ahead of them.
- Conservative valuation: 10% revenue growth over 5 years with 20% profit margin and a 30x multiple still show significant undervalued.
Risks
- UiPath faces heavy competition from large tech companies like Microsoft and ServiceNow that are adding similar automation tools into their products. If customers choose those built-in options, UiPath could lose some market share.
- The company also needs to keep improving quickly. Turning simple automation into fully intelligent digital workers takes time and may not generate immediate revenue.
- Finally, the stock price already reflects high expectations. If growth slows or new AI products do not gain traction as fast as expected, the market could react negatively.
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QuanD is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. QuanD holds no position in NYSE:PATH. Simply Wall St has no position in any companies 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. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does 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 the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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