UiPath Inc (NYSE:PATH) has been downgraded by Bank of America analysts who see few catalysts ahead for the software robots company following the release of its fourth quarter fiscal 2025 earnings report this week.
UiPath’s report was mixed with revenue of $423.65 million short of the $425.34 million expected as earnings per share of $0.26 beat estimates of $0.19.
It forecast revenue between $330 million and $335 million for the first quarter, far below the consensus of $367.4 million.
For the full year, UiPath’s guidance of $1.525 billion to $1.53 billion was below the Wall Street consensus of $1.59 billion.
Citing the company’s disappointing outlook, Bank of America analysts downgraded the company to ‘Underperform’ from ‘Neutral’ and lowered their price target to $10.
Shares of UiPath traded down 14% at about $10 in the early afternoon on Thursday.
Growth metrics decelerating
UiPath’s fourth quarter weakness was driven by a slower procurement cycle from the public sector vertical due to government efficiency efforts like the new Department of Government Efficiency (DOGE), analysts highlighted.
The public sector is UiPath's third largest vertical, they noted.
“Commentary also suggests increasing macro volatility has created uncertainty in customers' budgets in other verticals,” Bank of America wrote.
“The initial fiscal year 2026 guide factored in this, as the headwinds are not likely to abate in the near-term. In addition to disappointing revenue, other underlying growth metrics were weak as well. Total customer count continued to decline.”
They see growing AI budgets encroaching on UiPath’s Robotic Process Automation (RPA) end market.
“The RPA category is fairly limited to financial/accounting use cases to begin with (payables and receivables processing for example) and with CIOs/CFOs prioritizing agents over bots for AI, we see this as an ongoing issue and one that a tougher macro is likely to exacerbate,” they wrote.
‘Disappointing’ rule of 25
Analysts noted that UiPath’s operating margin of 31.6% was ahead of their estimate of 23.6%, driven by a 10% headcount reduction announced in July 2024.
The implied fiscal 2026 margin guide of 17.7% was above their estimate of 17% which together suggests UiPath will be operating at a “rule of 25” in fiscal 2026.
“We believe it will be challenging for the company to achieve reacceleration with simultaneous margin expansion, especially in a category with an increasingly questionable total addressable market,” they wrote.