UiPath Earnings: Cloud Subscriptions Drive Growth, but Profitability Leaves More to Be Desired

Narrow-moat UiPath reported solid second-quarter earnings that beat our top-line estimates but fell short in terms of profitability. Subscription revenue continues to be a top-line driver, with the firm’s software-as-a-service offering gaining traction among new and existing customers. However, higher stock-based compensation and restructuring expenses offset any GAAP operating margin gains from the growing software sales, yielding a net loss. The firm expects unstable macroeconomic conditions to persist and trimmed its full-year guidance, and we have adjusted our near-term estimates accordingly. Nevertheless, this is immaterial to our long-term outlook, and we maintain our $16.50 fair value estimate. Shares traded up 10% after hours toward our unchanged valuation, yet remain attractive.