UiPath: Weak Growth Could Overwhelm Improving Profitability

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Optimisation of business and business process workflow and automation. Development of sofware for automatization managment. Gears connected virtual screen.


UiPath's (NYSE:PATH) banal has had a difficult clip since listing successful 2021. This is chiefly connected nan backmost of an utmost valuation, but successful caller quarters UiPath's maturation has slowed dramatically. The institution has made ample strides towards achieving profitability, but without maturation nan banal is apt to stay nether pressure.


The Robotic Process Automation (RPA) marketplace is ample and increasing rapidly, owed successful ample portion to nan truth that RPA package tin free knowledge workers from low-value tasks. There are besides a number of tailwinds supporting maturation of nan RPA market:

  • Proliferation of software
  • Fragmented exertion landscape
  • Tight labour markets
  • Digital translator initiatives

The accepted usage lawsuit for RPA package has been automating debased worth individual tasks, but arsenic capabilities improve, RPA package is progressively being utilized for much analyzable tasks and to necktie together full processes. This means that RPA platforms cannot only attraction connected UI, but besides person to connection APIs, arsenic these are utilized to link SaaS systems. RPA vendors besides request to connection a suite of solutions which reside each usage cases and nan full RPA lifecycle.

The Automation Spectrum

Figure 1: The Automation Spectrum (source: UiPath)

Rather than conscionable utilizing RPA package haphazardly to automate tasks, organizations are now taking a much strategical approach. Enterprises tin execute accrued business worth by combining aggregate automation technologies and by adopting a holistic endeavor automation approach. This displacement is portion of nan logic that UiPath has quickly gained marketplace stock successful caller years.

Benefits of a Holistic Intelligent Automation Approach

Figure 2: Benefits of a Holistic Intelligent Automation Approach (source: UiPath)

UiPath estimates that their existent TAM is astir 61 cardinal USD, pinch nan imaginable to grow to 93 cardinal USD pinch nan preamble of caller features.

UiPath's Estimated TAM

Figure 3: UiPath's Estimated TAM (source: UiPath)

While nan RPA marketplace has tremendous semipermanent potential, for illustration astir package markets location person been important headwinds complete nan past 12 months. Job openings mentioning RPA successful nan occupation requirements declined importantly successful nan second portion of 2022. This whitethorn beryllium successful portion owed to a beardown description done 2020 and 2021, but besides reflects a region successful spending owed to economical uncertainty.

Job Openings Mentioning RPA successful nan Job Requirements

Figure 4: Job Openings Mentioning RPA successful nan Job Requirements (source:


UiPath launched their first automation merchandise successful 2013, and really began to summation traction astir 2017. Since then, nan institution has made important investments to grow into adjacent automation areas astir their halfway of UI. UiPath's level is now focused on:

  • Discovery - process mining, task mining and connection mining
  • Automate - low-code/no-code development, workflow automation and nan expertise to create apps
  • Operate - negociate automations
  • Test suite - connects automations to testing truthful that users tin standard automations quickly erstwhile things change

UiPath's Platform

Figure 5: UiPath's Platform (source: UiPath)

UiPath is updating their level pinch merchandise 22.10, which will deliver:

  • The expertise to build public-facing applications pinch UiPath Apps
  • Enhanced capabilities successful process and task mining
  • Platform intelligence to thief package robots understand some system and unstructured data
  • Enhanced capabilities for some Automation Suite and Automation Cloud

UiPath has historically recovered traction wrong finance departments arsenic their package is suited to activities for illustration managing accounts payable, accounts receivable, invoice matching, invoice splitting, connecting different systems, etc.

They are now trying to grow into caller areas though, and successful support of this are trying to waste higher into organizations, targeting C-level executives pinch automation arsenic a strategical initiative. UiPath is besides trying to onshore companies pinch a precocious propensity to put successful automation. Distributors will beryllium utilized to service nan debased extremity of nan market, which should amended nan productivity of nan salesforce.

UiPath precocious changed their pricing exemplary to effort and trim clash during nan income process. In nan past, pricing was fundamentally based connected statement items, meaning income reps had to understand nan pricing and it took a agelong clip to get customer bargain in. The caller packaging and pricing intends to simplify nan go-to-market mobility and accelerate take of nan broader platform.


UiPath has acquired a number of companies complete nan past fewer years to support nan capabilities of their level and nan preamble of caller features. StepShot was acquired successful 2019 for their process archiving software. This was expected to alteration customers to quickly and easy record, archive and stock processes arsenic good arsenic automate cardinal steps successful robot creation. UiPath besides acquired ProcessGold successful 2019 for their process mining software. This package helps customers to understand their processes and place opportunities for automation.

More recently, UiPath acquired Cloud Elements, an interconnectivity level to beforehand API-based automation capabilities. They besides acquired nan earthy connection processing institution Re:infer, which was subsequently renamed communications mining. Re:infer uses instrumentality learning to excavation discourse from communications and toggle shape them into actionable data. This type of exertion tin beryllium utilized for applications for illustration knowing and automatically responding to a customer email.


UiPath has been moving pinch GPT-3 for astir 18 months and sees ample connection models arsenic a important opportunity. While ChatGPT has created a ample magnitude of hype, nan wide effect for a institution for illustration UiPath is somewhat unclear. ChatGPT tin evidently beryllium utilized to heighten worker productivity and will thief pinch tasks for illustration archive understanding, which should beryllium beneficial to UiPath. On nan different hand, ample connection models are becoming progressively adept astatine programming. Increasing nan productivity of programmers pinch devices for illustration CoPilot, aliases enabling knowledge workers to execute basal coding tasks could undermine nan usage of RPA devices astatine nan edges.

The Platform Threat

While RPA is simply a ample class that has nan imaginable to support standalone platforms, it is besides nether threat from companies pursuing further strategical considerations.

For example, Microsoft (MSFT), Salesforce (CRM) and SAP (SAP) each person an liking successful RPA software, but to a ample grade this is conscionable successful support of their halfway businesses. Microsoft successful peculiar is successful a beardown position successful this marketplace owed to their distribution footprint. In July 2022 their Power level was a 2 cardinal USD business pinch complete 7 cardinal monthly progressive users. Revenue was increasing 72% YoY astatine nan time. 97% of nan Fortune 500 uses nan Power Platform and 92% of nan Fortune 500 uses Power Apps successful astatine slightest 1 department. Microsoft's Power Platform is simply a family of business intelligence, app development, and app connectivity solutions. Power BI is simply a business intelligence solution. Power Apps, is an app for creating low-code civilization business apps. Power Automate helps users create workflow apps and services. Power Virtual Agents is utilized to create interactive chatbots that tin way customer requests.

Microsoft and Automation Anywhere are 2 of UiPath's largest competitors, though UiPath has stated that they do not spot Automation Anywhere overmuch successful nan marketplace and that they are taking marketplace share. UiPath has besides been replacing Blue Prism, peculiarly wrong financial services. While Microsoft is performing strongly, UiPath believes that nan infinitesimal customers want to scale, they look to UiPath successful nan endeavor space. Process mining, task mining and connection mining are besides differentiators for UiPath.

Within RPA UiPath appears to person a beardown competitory position, but it remains to beryllium seen really they will beryllium impacted by larger vendors pinch much divers merchandise portfolios.

Financial Analysis

UiPath's ARR was 1.11 cardinal USD successful nan astir caller quarter, increasing 38% YoY excluding overseas speech headwinds. Revenue accrued 29% YoY excluding overseas speech headwinds. The healthcare and telecommunications verticals were areas of strength, arsenic was UiPath's national business.

For nan 4th fourth of FY2023, UiPath expects ARR to beryllium 1.174-1.176 cardinal USD. Revenue is expected to alteration by astir 4% YoY successful nan quarter. It has been estimated that UiPath's unreality business will coming astir a 5% headwind to gross growth.

UiPath Revenue Growth

Figure 6: UiPath Revenue Growth (source: Created by writer utilizing information from institution reports)

UiPath's unreality business is still comparatively small, but it is increasing rapidly. While this type of maturation is impressive, it is unclear really overmuch of it is conscionable from cannibalizing nan on-prem business. UiPath's header maturation has shown nary signs of acceleration, which would bespeak that nan unreality business is importantly additive. Once UiPath's existing customer guidelines has adopted nan unreality product, unreality gross maturation whitethorn stall.

UiPath Cloud ARR

Figure 7: UiPath Cloud ARR (source: UiPath)

UiPath has a reasonably patient operation of customers crossed extremity markets, which is simply a positive, but besides somewhat perplexing successful ray of their maturation slowdown. Given UiPath's comparatively debased vulnerability to customers successful areas for illustration technology, much robust maturation could reasonably person been expected. This could propose that UiPath's problems widen beyond conscionable a anemic request environment.

UiPath ARR by Customer Sector

Figure 8: UiPath ARR by Customer Sector (source: UiPath)

Job openings mentioning UiPath successful nan occupation requirements are down importantly complete nan past year. Search liking for "UiPath Pricing" has besides been comparatively anemic complete nan past fewer years, which could bespeak soft demand.

Job Openings Mentioning UiPath successful nan Job Requirements

Figure 9: Job Openings Mentioning UiPath successful nan Job Requirements (source:

"UiPath Pricing" Search Interest

Figure 10: "UiPath Pricing" Search Interest (source: Created by writer utilizing information from Google Trends)

UiPath switched attraction to costs power successful 2022 and has already demonstrated important improvements. Actions taken see restructuring, a hiring frost and tighter power of discretionary spending. UiPath still has activity to do though, arsenic operating expenses were rather precocious for a institution of their size.

UiPath Operating Profit Margins

Figure 11: UiPath Operating Profit Margins (source: Created by writer utilizing information from institution reports)

UiPath Operating Expenses

Figure 12: UiPath Operating Expenses (source: Created by writer utilizing information from UiPath)

UiPath admits to overinvesting successful headcount successful nan past, and arsenic a consequence occupation openings person been debased complete nan past six months. Job openings precocious bounced backmost rather sharply though, which could bespeak that nan institution was preparing for acold worse conditions than person eventuated.

UiPath Job Openings

Figure 13: UiPath Job Openings (source:

UiPath is targeting non-GAAP operating profit margins of greater than 20% successful nan long-run. This should beryllium easy achievable fixed nan company's precocious gross margins and debased churn rate, assuming their competitory position tin beryllium maintained.

UiPath Long-Term Target Margin Profile

Table 1: UiPath Long-Term Target Margin Profile (source: Created by writer utilizing information from UiPath)

UiPath LTV / CAC Ratio

Figure 14: UiPath LTV / CAC Ratio (source: Created by writer utilizing information from UiPath)


Over nan past 2 years, UiPath has gone from being highly overvalued to rather reasonably valued, depending connected really you position nan company's prospects. Based connected a discounted rate travel study I estimate that UiPath is worthy astir 16 USD per share.

While quickly improving profit margins should beryllium supportive of nan banal going forward, UiPath will request to show an expertise to make further growth, different investors are apt to suffer religion successful nan story. UiPath could person agelong tally potential, but it feels excessively akin to nan Slack business to liking me.

UiPath EV/S Multiple

Figure 15: UiPath EV/S Multiple (source: Seeking Alpha)

This article was written by

Richard Durant floor plan picture

I person been managing my ain finance portfolio for nan past 9 years pinch a attraction connected basal investigation and heavy worth investing complete agelong clip horizons. My superior liking is uncovering early shape innovations which will create semipermanent value. I person a Bachelors grade successful finance, an MBA and person completed nan CFA and CMT

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga

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