It's been a long, slow, painful decline for software automation company UiPath (PATH 0.09%). Shares are down 85% from their all-time high reached in the spring of 2021. The good news is the business itself is still growing, but the bad news is that growth rate is slowing -- and profitability remains elusive. That's not exactly the right combination of factors shareholders want to see. 

Nevertheless, UiPath is still a promising stock long-term. So is it time to sell?

Software automation is alive and well

It was notable that UiPath crossed the mark of $1 billion in annualized recurring revenue (or ARR, which annualizes the value of recurring subscription sales) in Q2 of its 2023 fiscal year. Specifically, ARR was $1.04 billion, or up 44% from last year. However, quarterly revenue of $242 million was up at a far slower 24% pace, and down from the 32% quarterly revenue growth rate in Q1 2023.

Like all other multinational companies, UiPath is dealing with turbulence in the global economy. Software that helps organizations automate processes so they can save money or reallocate spending elsewhere remains in high demand. That shows up in UiPath's financials -- including a 132% dollar-based net retention rate that implies existing customers are choosing to spend 32% more with UiPath than they were last year. 

But clearly economic uncertainty is causing many businesses to act conservatively and delay spending on new tech projects. Additionally, a record run for the U.S. dollar (a side effect of the U.S. Federal Reserve's interest rate hikes) is also biting into UiPath's results. When backing out currency exchange rate effects, quarterly revenue would have been $20 million higher than it was, and would have grown 35% year-over-year.

Overall, the key takeaway from the Q2 report is that software automation is alive and well even in difficult times, and UiPath is in a leadership role with its software-based robotics

A few areas of concern

But here's the thing that will dictate UiPath stock's immediate-term trajectory. First, there's the issue of financial outlook. As strong a quarter as the company just had, revenue growth rates are still cooling. UiPath downgraded its full-year fiscal 2023 outlook (for the period that will end in January 2023). ARR is now expected to be $1.153 billion to $1.158 billion, up 25% from where it was in the fourth quarter of last year. Full-year expected revenue of just over $1 billion implies growth of about 12% to 13% (or up 22% when excluding currency exchange rate headwinds).

Plus, while UiPath's long-term goal is to generate adjusted operating profit margins of at least 20%, that milepost is a long way off. For now, the company is still generating negative free cash flow (negative $93 million through the first half of this year), and positive free cash flow isn't anticipated until next fiscal year. With investors punishing businesses that operate in the red right now, it isn't a great look for UiPath at the moment.

It is worth mentioning, though, that the $1.7 billion in cash and investments and no debt are largely being overlooked. Nearly 22% of UiPath's current market cap of $8 billion is cash on balance. Suffice to say UiPath can afford to spend on marketing and innovative new uses for its automation platform. 

Nevertheless, the immediate-term outlook isn't promising for any sort of big rally back toward all-time highs. Investors are hyper focused on profitability right now, not on a company's longer-term potential. That's keeping me from adding to my small position in UiPath right this moment, even though shares now trade for about six times enterprise value to current-year expected sales. But after falling so far and with so much cash on hand, now doesn't seem like a good time to sell either. 

I have no plan on selling now, though. UiPath operates in a large and growing segment of the software universe, and automation -- that is to say, initiatives that help businesses save money -- is sure to remain a top priority in today's inflationary environment. However, as we approach a new fiscal year, some more insight on what lies ahead for UiPath might coax me off the sidelines if it can rekindle revenue growth and edge closer to profitability next year.