What Happened: Shares of automation software company UiPath (NYSE:PATH) jumped 7.16% in the morning session after the company reported second quarter results with ARR (annual recurring revenue) roughly in line with estimates and revenue narrowly exceeding analysts' expectations. However, non-GAAP operating profit beat by a large magnitude, showing that expense leverage came in strong. We were also glad that its full-year guidance was raised across the board and came in higher than Wall Street's estimates, especially on non-GAAP operating profit.
Overall, it was a solid quarter, showing that the company is staying on track.
As a reminder, the company has been going through a repositioning of its go-to-market strategy, and these results, especially the $1+ million customer net adds, show that there is strong progress being made. Lastly, the company announced a $500 million stock repurchase authorization. These tend to be positives, reserved for companies that are generating excess free cash flow and looking to return some to shareholders.
Is now the time to buy UiPath? Find out by reading the original article on StockStory.
What is the market telling us: UiPath's shares are very volatile and over the last year have had 47 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was four months ago, when the stock gained 6.55% on the news that the company reported first-quarter revenue and earnings per share (EPS) that surpassed analysts' expectations. Revenue benefited a bit from an accounting change, and hence, ARR was more inline. The key negative was that revenue guidance for the next quarter fell below Consensus, and this seems to be the market's focus. Full year revenue guidance was ahead, and free cash flow stayed positive, marking the second straight quarter of cash inflows. Additionally, profitability improved, with both gross margin and operating income margin ahead of expectations.
Overall, the quarter was fine, but the guidance left the market uneasy. Bigger picture, there is likely some skepticism around the overall market for process automation and UiPath's role within that market.
UiPath is up 44.1% since the beginning of the year, but at $17.69 per share it is still trading 9.12% below its 52-week high of $19.46 from June 2023. Investors who bought $1,000 worth of UiPath's shares at the IPO in April 2021 would now be looking at an investment worth $256.59.
