It's an exciting time to invest in the artificial intelligence industry. The market is forecasted to see huge growth over the next several years, expanding from $136 billion last year to $827 billion by 2030.
One promising AI company to consider is UiPath (PATH 0.09%). The firm automates routine business tasks using AI. Its software identifies processes that could be automated, such as checking loan documents for missing info and responding to customer inquiries by email, and then takes on that work.
UiPath is generating strong year-over-year revenue growth, but its stock is down from a 52-week high of $27.87 reached in February. Does this signal a buy opportunity? To answer that question, it's necessary to examine the company to assess whether it makes a good investment for the long haul.
UiPath's strategy for business growth
UiPath's AI automation software enjoyed success, as evidenced by the company's rising revenue. For its 2024 fiscal year ended January 31, UiPath's sales grew 24% to $1.3 billion.
Since the firm's AI automation software offers operational efficiencies, UiPath's strategy is to pursue clients in industries replete with administrative processes, such as financial services, healthcare, and the public sector. Its customers include the U.S. Department of Defense and the Internal Revenue Service.
The company also developed an ecosystem of partnerships that includes firms such as Deloitte and Microsoft. These partners are reselling UiPath's capabilities, or including them as part of their offerings, as in Microsoft's case. This partnership ecosystem is important to UiPath's success, since more than 70% of its business deals involve partners.
UiPath's financial strength
The company's year-over-year revenue growth, combined with cost reduction efforts implemented over the past year, gave UiPath an exceptional jump in free cash flow (FCF). Exiting fiscal 2024, the firm's FCF was $309.4 million, up from the prior year's $49 million.
UiPath also possesses an impressive balance sheet. The company ended fiscal 2024 with $3 billion in assets, compared to $938 million in liabilities. It held $1.1 billion in cash and equivalents.
Moreover, the company expects revenue to continue increasing. For its 2025 fiscal first quarter, UiPath estimates sales of at least $330 million, an improvement from the previous year's $290 million.
While the company had a net loss of $89.9 million in fiscal 2024, UiPath was profitable in the fourth quarter, a sign that it may have turned a corner. Net income in the fourth quarter was $33.9 million.
Its financial accomplishments suggest UiPath is a compelling investment, but one area is worth noting. Its customer growth slowed substantially. UiPath's customer base was increasing by double-digit rates year over year, but has dropped off more recently.
| Fiscal Year | Total Customers | Year-Over-Year Growth |
|---|---|---|
| 2024 | 10,830 | 0.3% |
| 2023 | 10,800 | 7% |
| 2022 | 10,100 | 28% |
| 2021 | 7,900 | 32% |
Data source: UiPAth. YOY = year-over-year.
The slowdown is a result of UiPath focusing its sales team toward acquiring large enterprise customers. This means the number of clients it adds will remain low, but revenue should continue to increase, since bigger businesses have the ability to spend more with UiPath.
Deciding on UiPath stock
UiPath's strong revenue and FCF growth, profitable fiscal Q4, excellent balance sheet, and strategy for continued expansion of its business are all qualities that suggest it has potential as a long-term investment in AI.
The company possesses a track record of growing its high-spending customers. This indicates UiPath is capable of succeeding in its strategy to focus on large clients.
In Q4, the firm had 2,054 customers with an annualized renewal run-rate (ARR) of at least $100,000, up from 1,785 clients in the prior year. ARR represents the amount paid by subscription clients over an annual period.
Another consideration is that Wall Street analysts believe the stock has upside. Their consensus is an overweight rating for UiPath, with a median share price of $28.
The company's fiscal Q1 earnings report on May 29 sets the stage for how it will do in fiscal 2025. Right now, UiPath possesses many qualities to make it a compelling AI business -- and with its stock price down from its 52-week high, now is a good time to buy shares.
