Artificial intelligence is one of the hot sectors for investors in 2023, and aside from big-name tech firms like Microsoft, there are plenty of lesser-known AI gems worth investing in. Two compelling AI-centric businesses are UiPath (PATH 1.20%) and Symbotic (SYM +1.90%).
Many companies boast AI capabilities, but given that we're at the dawn of the AI era, it can be challenging to know which have the ability to last over the long haul. UiPath and Symbotic may be among those that endure despite both being newer public companies; UiPath's initial public offering happened in 2021 while Symbotic went public in 2022.
Both have promising potential for long-term success because of their business models. Let's dig into each company in more detail to get a better sense for which could make a good investment in AI technology.
NYSE: PATH
Key Data Points
UiPath's AI offerings
UiPath addresses a problem that arose from today's proliferation of business software tools. Many companies adopt these tools to improve operational efficiency only to struggle with incorporating them into business operations. UiPath seeks to solve this challenge via its AI platform.
The company's AI connects to the digital tools used by a business, analyzes workflows, then provides ways to automate tasks. For instance, UiPath's platform can examine actions taken by a customer service team and take over some of their work, such as responding to customer inquiries with emails tailored specifically to each customer's request.
UiPath's AI solution is proving popular with businesses. Its customer base grew rapidly from less than 3,000 clients in 2019 to nearly 11,000 this year. And company revenue grew along with the rise in customers.
Data by YCharts.
In its fiscal second quarter, ended July 31, UiPath's revenue reached $287 million, a 19% year-over-year increase. The company anticipates revenue growth to continue. It expects at least $313 million in sales for fiscal Q3, an increase from the prior year's $263 million. For its full 2024 fiscal year, UiPath estimates a minimum of $1.3 billion in revenue, up from $1.1 billion in fiscal 2023.
Symbotic's use of AI
What makes Symbotic a compelling investment is its pragmatic use of AI technology. The company provides automated systems to businesses with distribution centers for moving freight.
This automation relies on AI to serve as the brains for Symbotic's army of robots, which perform the tasks needed to process packages at a customer's warehouse. The company provides its technology to businesses such as Walmart, which owns a stake in Symbotic.
Walmart's investment in Symbotic makes sense. Processing packages 24 hours a day has become increasingly important for retailers that want to remain competitive with e-commerce giant Amazon, which has its own horde of over 700,000 AI-powered robots helping it meet demanding shipping speeds, such as same-day delivery. This means Symbotic's tech is desirable, and it shows in the company's sales.
NASDAQ: SYM
Key Data Points
Symbotic posted $312 million in revenue for its fiscal third quarter, ended June 24, a whopping 78% year-over-year increase. Its Q3 results added to a strong fiscal 2023, where revenue through nine months totaled $785 million, more than a 100% increase from the prior year's $349 million.
All of its revenue comes from clients in North America, so it has plenty of room to expand globally. To help fund this international expansion, the company entered into a partnership with SoftBank, which Symbotic estimates can lead to an additional $500 million in annual revenue.
The choice between UiPath and Symbotic
Symbotic is just getting started, so nearly all of its fiscal Q3 revenue, over 95% in fact, comes from just three customers. Moreover, the company isn't profitable, and its net loss is growing. Through three quarters in the current fiscal year, Symbotic's net loss totaled $163 million, nearly double the prior year's loss of $86 million.
Meanwhile, although UiPath also isn't profitable, its net loss is headed in a positive direction, dropping to $92 million in fiscal Q2 from $243 million last year. The fact that UiPath and Symbotic are not profitable isn't of concern at this stage since it's common for high-growth tech companies to operate at a loss for years, prioritizing business expansion over profits.
However, the question is whether Symbotic can successfully grow its customer base. At this time, it's preferable to keep Symbotic on your watch list until you can see it establish a track record of customer growth.
UiPath, meanwhile, is not only growing revenue, it's moving toward profitability, as illustrated by its shrinking net loss. These factors and its ability to grow its customer base make it likely to maintain success over time, and give it the edge as the better AI investment over Symbotic.
