We're at the dawn of the artificial intelligence era, and the sector has massive growth ahead of it. AI is forecast to become a $1.8 trillion market by 2030, expanding from $142.3 billion in 2022. The rise of AI creates an opportunity to invest in firms delivering this breakthrough technology.
One compelling tech company among the many offering AI services is UiPath (PATH +1.44%). This firm is tackling an intriguing issue that, on the surface, can seem inconsequential. Yet the company's sales success shows it's addressing a key problem for many businesses today.
This success and its prospects for the long haul make UiPath a particularly attractive investment. Details can be challenging to unpack, however, because the firm's IPO happened in 2021, giving it scant history as a public company. But a deeper look into UiPath can help assess its merits as a long-term investment.
NYSE: PATH
Key Data Points
UiPath's use of AI
UiPath's technology addresses a problem created by today's proliferation of business software tools. A company might adopt these tools, using one to generate invoices, another to track customer service inquiries, a third for accounting tasks, and so on. Suddenly the software intended to boost efficiency has injected new complexity into business operations, resulting in tools not being fully utilized.
UiPath seeks to solve this challenge through its AI-powered business automation platform. The platform's AI connects to the digital tools used by an organization, analyzes the workflows, and provides ways to automate many of the tasks.
For instance, UiPath's platform can examine actions taken by a customer service team, such as addressing client inquiries, and take over some of those tasks, including responding to emails. UiPath's AI can even understand what a customer may be feeling based on the language used in their email.
UiPath's financial performance
The attractiveness of UiPath's platform to businesses is illustrated by the company's rapidly rising customer count. UiPath had less than 3,000 customers in 2019, and that total has now reached nearly 11,000. This has led to equally rapid revenue growth.
Data by YCharts.
UiPath hit sales of $287 million, a 19% year-over-year increase, in its fiscal second quarter, ended July 31, and it anticipates sales growth to continue.
The company forecasts a minimum of $313 million in revenue for fiscal Q3, a 19% jump from the prior year's $263 million. For its full 2024 fiscal year, UiPath expects to achieve at least $1.3 billion in revenue, up from $1.1 billion in fiscal 2023.
Like many high-growth tech companies, UiPath is not profitable, prioritizing business expansion over profits. But its net loss of $92 million in fiscal Q2 is a substantial decline from the $243 million it lost the previous year. This means the company is moving in the right direction to achieve profitability.
Moreover, UiPath's free cash flow (FCF) improved greatly in 2023. The company's FCF reached $119.3 million through the first half of UiPath's fiscal year compared to negative FCF of $77.1 million in 2022.
To buy or not to buy UiPath stock
UiPath's innovative AI platform is gaining traction in the market, as illustrated by its customer growth, and fueling the company's revenue expansion right now. But what about over the long term? UiPath's current success is likely to continue for years.
That's because the company's largest customer segments are in the financial and healthcare industries, which makes sense given the number of processes, administrative tasks, and regulatory requirements associated with these sectors. Since both industries are among the five largest contributors to U.S. gross domestic product, UiPath has a sizable market to capture, providing the potential for years of revenue growth.
UiPath's strengthening free cash flow and march toward profitability are key elements contributing to its ability to deliver success over the long haul.
Given these factors and its successful AI platform, UiPath has the characteristics of a company that can last, making it a compelling investment in artificial intelligence to hold over the long term.
