UiPath After Q1 FY27: Is the Comeback for the AI Age Finally Underway?
UiPath has long been a disappointing software stock. However, after Q1, the story may slowly start to change.
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My last UiPath article was published after the Q4 results for fiscal year 2026 were announced:
At the time, I concluded that operations were improving and the valuation was low. However, the market did not yet truly believe that UiPath (PATH 0.00%↑) could become a leader in the AI era once again.
Following the Q1 results for fiscal year 2027, I feel that my positive assessment of the company has clearly been confirmed. The recent stock price performance is also encouraging.
Since buying in at under $12 in September 2025, UiPath stock price performance has been a rollercoaster ride. At one point, UiPath was rediscovered as a potential AI winner, and the stock rose to a 52-week high of just under $20 in December. However, the euphoria was priced out again in the spring of 2026. By early May, UiPath had fallen back below $10 before beginning a recent recovery to around $12.20. From the 52-week low of about $9.20, this represents a recovery of over 30% in just three weeks.
Until April/May 2026, UiPath clearly was a victim of SaaSageddon. Amid the AI hype, the market broadly punished many traditional software providers as investors feared that AI agents would replace traditional SaaS products, put pressure on usage-based models, and render classic automation products - such as that offered by UiPath - obsolete. Now, the opinion I’ve been advocating for months is slowly gaining traction: Established software providers like UiPath can avoid disruption in the AI era if they are flexible enough to adapt to the new opportunities in the AI age.
Q1 FY2027 -Very solid and GAAP profitable for the first time in Q1
In my view, the Q1 figures were significantly better than the market’s immediate reaction to them. UiPath generated $418 million in revenue in the first quarter of fiscal year 2027, a 17% year-over-year increase. This is a solid sign for a company that, just a few months ago, the market believed was barely capable of achieving double-digit growth. The conservative guidance had projected a maximum growth of 12%.
License revenue and subscriptions both grew by around 16% year-over-year. Professional services grew significantly more, from $11 million to $16 million (about 47%), but these services still account for only a few percentage points of total revenue.
Nevertheless, it’s worth noting that UiPath now relies not only on partners like Deloitte and Accenture for implementation but also on its own “Forward Deployed Engineers” (FDEs). These professional service employees work on customer projects to ensure quick success and help customers realize the added value of UiPath solutions. However, if such services were to grow faster than ARR on a sustained basis, that would not bode well for a software company.
Annual Recurring Revenue (ARR) rose to $1.901 billion, which represents a 12% increase. However, I find the net new ARR even more exciting. It stood at $49 million, up from $27 million in the same quarter of the previous year. That’s an increase of over 80%, which is exactly the metric you want to see if you believe the business is stabilizing or picking up speed again. The dollar-based net retention rate was 109%, up from 108% a year ago and 107% in the fourth quarter. While not yet a reason for euphoria, it is at least a clear sign of stabilization.
The RPO also looks solid. Remaining performance obligations (RPOs—contractually agreed-upon services not yet recognized as revenue) rose to $1.413 billion, a 15% increase. RPOs due in the next 12 months were $908 million, up 17% from last year. This speaks to the sustainability of the revenue acceleration.
As always, cash flow is the most important part of the investment case for me. In the first quarter, UiPath generated operating cash flow of $132 million and non-GAAP adjusted free cash flow of $130 million. While this represents “only” about 11% growth compared to the strong prior-year quarter, UiPath generated approximately $385 million in free cash flow on a trailing twelve-month (TTM) basis. This means that UiPath now really is a profitable software company with genuine cash generation capabilities.
Added to this is an important milestone: UiPath achieved GAAP profitability for the first time in a Q1. Its GAAP operating profit was $28 million, compared to an operating loss of $16 million in the same quarter last year. GAAP net profit was $22.5 million, compared to a loss of $22.6 million in the prior year.
So why didn’t the market react more enthusiastically?
Although the UiPath stock reacted positively immediately after the earnings release, the response was not as strong as one might expect given the 17% revenue growth, upward guidance revision, and GAAP profitability. In my view, there are two main reasons for this.
