Automation software company UiPath (NYSE:PATH) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 4.5% year on year to $423.6 million. On the other hand, next quarter’s revenue guidance of $332.5 million was less impressive, coming in 10% below analysts’ estimates. Its non-GAAP profit of $0.26 per share was 34.1% above analysts’ consensus estimates.
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UiPath (PATH) Q4 CY2024 Highlights:
- Revenue: $423.6 million vs analyst estimates of $425.1 million (4.5% year-on-year growth, in line)
- Adjusted EPS: $0.26 vs analyst estimates of $0.19 (34.1% beat)
- Adjusted Operating Income: $134 million vs analyst estimates of $100.1 million (31.6% margin, 34% beat)
- Management’s revenue guidance for the upcoming financial year 2026 is $1.53 billion at the midpoint, missing analyst estimates by 3.6% and implying 6.8% growth (vs 9.8% in FY2025)
- Operating Margin: 7.9%, up from 3.7% in the same quarter last year
- Free Cash Flow Margin: 32.7%, up from 9.3% in the previous quarter
- Annual Recurring Revenue: $1.67 billion at quarter end, up 13.8% year on year
- Market Capitalization: $6.45 billion
Company Overview
Started in 2005 in Romania as a tech outsourcing company, UiPath (NYSE:PATH) makes software that helps companies automate repetitive computer tasks.
Automation Software
The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, UiPath grew its sales at a 17% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, UiPath grew its revenue by 4.5% year on year, and its $423.6 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for flat sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 10.9% over the next 12 months, a deceleration versus the last three years. Still, this projection is above average for the sector and indicates the market sees some success for its newer products and services.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
UiPath’s ARR punched in at $1.67 billion in Q4, and over the last four quarters, its growth was solid as it averaged 17.4% year-on-year increases. This alternate topline metric grew faster than total sales, which likely means that the recurring portions of the business are growing faster than less predictable, choppier ones such as implementation fees. That could be a good sign for future revenue growth. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
UiPath’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.
Key Takeaways from UiPath’s Q4 Results
Although UiPath beat analysts' EPS and adjusted operating income estimates, its full-year revenue guidance missed significantly, disappointing investors. Overall, this was a weaker quarter. The stock traded down 17.4% to $9.80 immediately after reporting.
UiPath underperformed this quarter, but does that create an opportunity to invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.