What happened

Shares of automation-software company UiPath (PATH -1.52%) were up 18.3% in March, according to data provided by S&P Global Market Intelligence. Most of the gains came when the company reported financial results for its fiscal 2023 on March 15. Indeed, Wall Street turned cautiously optimistic after reading the report.

So what

Over the short term, stocks can be disproportionately affected by investors' expectations. Falling short of expectations leads to drops in stock price but surpassing expectations can lead to big gains. For UiPath, expectations were low and the company surprised investors with strong results.

Back in December, UiPath's management had said that it would generate $279 million in revenue in the fourth quarter of its fiscal 2023. That would have actually been a year-over-year drop in revenue from the $290 million it generated in the prior-year period. Therefore, investors naturally had low expectations.

On March 15, however, UiPath reported Q4 revenue of $309 million, up 7% year over year. Now, 7% growth isn't necessarily impressive. But it shattered expectations and led to UiPath's 18% gain during the month.

UiPath's co-CEO Robert Enslin talked about how the company shifted its sales strategy recently, which allowed "sales teams to focus on higher-value opportunities." And this sales-strategy shift was cited by several analysts when they upgraded their outlooks for UiPath stock.

That said, Wall Street does still appear cautious with UiPath stock. For example, Mizuho analyst Siti Panigrahi raised his price target for UiPath stock, according to The Fly, signaling optimism. But he raised it only to $16 per share, which is lower than where the stock trades right now.

Now what

Over the long term, business results win out over expectations when it comes to stock performance. And I must say, I'm optimistic about UiPath's business headed into this coming year.

For fiscal 2024 (which started in February), UiPath expects to grow revenue around 18% to 19% compared to fiscal 2023. That's comparable to the company's 19% growth in fiscal 2023. The rebound in its growth rate is encouraging and signals the new sales strategy is paying off.

On Feb. 28, third-party research company Forrester named UiPath a leader in its software for robotic process automation. Moreover, the company has $1.8 billion in cash, cash equivalents, and marketable securities, and it has no debt. 

In summary, UiPath is a recognized leader in its space, is extremely well capitalized, and is reinvigorating revenue growth with a sharpened sales focus. That's a great combination, and it's why March probably won't be the only good month for UiPath stock in 2023.