What happened

Shares of workplace automation software company UiPath (PATH -1.56%) plunged 23.3% in September, according to data provided by S&P Global Market Intelligence. Early in the month, the company reported financial results for the second quarter of its fiscal 2023, which was met by a plethora of downgrades from Wall Street. And while the company did announce new partnerships and host an investor-day event, it wasn't enough to overcome the negative reaction to its second-quarter results.

So what

In Q2, UiPath generated revenue of $242 million, exceeding the high end of management's guidance of $231 million. Annualized renewal run rate (ARR) -- contracted subscription and maintenance obligations -- surpassed $1 billion for the first time and was within management's guidance. And its non-GAAP (adjusted) operating loss of $11.2 million was better than management's guidance for a non-GAAP loss of $55 million to $60 million.

That all sounds good. But analysts seemed concerned with UiPath's commentary about the economy and many consequently lowered their expectations. According to The Fly, analysts with Morgan Stanley, KeyBanc, Canaccord, and more all downgraded UiPath stock shortly after the company reported Q2 financial results. 

Investors often rely on analysts to know whether they should buy or sell a stock. After seeing near unanimous downgrades from analysts, investors likely chose to sell their UiPath positions, leading to a big drop in the price per share. However, there was one investor who wasn't scared out of their UiPath stock: Cathie Wood.

Wood's Ark Invest runs several exchange-traded funds (ETFs) and several of them were buyers of UiPath stock during September. One of these ETFs is the Ark Innovation ETF, in which UiPath stock presently occupies the seventh-largest position at a 4.54% allocation. Clearly, Wood loves UiPath even though it's declined 85% from its all-time high.

To be clear, most of UiPath's drop in September came with the analyst downgrades in response to its Q2 results. It received no measurable benefit from Ark Invest's purchases. From there, the market suffered a substantial 9% decline for the month and dragged UiPath down even further.

Now what

UiPath's management acknowledged hesitancy from its customers to sign new deals in light of current economic conditions. But management believes that businesses will ultimately see the potential return on investment created by the workplace efficiencies UiPath's software can provide. And once they see that, they'll sign contracts. It might just take a little longer right now.

For fiscal 2023, UiPath expects revenue over $1 billion -- up about 12% year over year -- and ongoing losses. And at its investor day, management said it expects almost $1.2 billion in revenue in fiscal 2024 while also improving its operating margin for the year. That would be good news for the stock if it comes to fruition.

However, this guidance from UiPath's management implies that its customer hesitancy won't linger. Therefore, that's something for shareholders to watch in future quarters.