UiPath, Inc. (PATH) Stock Has AI Potential, But Slowing Growth Keeps Investors Cautious

UiPath, Inc. (NYSE:PATH) has underperformed the broader market year to date, with shares materially down for the year. Nevertheless, Wall Street sentiment has shown signs of improvement as investors assess the company’s artificial intelligence opportunity. On September 4, DA Davidson analyst Lucky Schreiner reiterated a Neutral rating on the stock and increased the price target to $16 from $12.

Revenue Growth

The price target hike is in response to the company delivering a robust second quarter fiscal 2027 across key financial metrics. The company is increasingly positioning its platform around AI agents, robots, and systems capable of executing end-to-end business processes.

Source: pexels

As the company continued to evolve in its next phase of growth, revenue in the quarter was up 13% year over year to $410 million, while annual recurring revenue improved 12% to $1.938 billion. Net new recurring revenue totaled $37 million.

For the third quarter of fiscal 2027, UiPath expects revenue to range between $440 million and $445 million, with recurring revenue of between $1.992 billion and $1.997 billion as of October 31. Full-year revenue is expected to be between $1.789 billion and $1.794 billion.

Growth Concerns

However, DA Davidson remains cautious about the company’s outlook, as growth remains stable rather than accelerating as expected. That’s because the company’s new artificial intelligence products are still in the early stages of growth. Therefore, meaningful further upside may depend on UiPath demonstrating a clearer acceleration in growth and stronger monetization of its newer AI products.

Artificial intelligence remains a competitive threat to the company’s long-term prospects. As generative and agentic AI allow companies and enterprises to automate workflows, traditional RPA could face pressure if enterprises increasingly shift toward AI-native agents and competing automation platforms. Therefore, there is great concern about whether AI will be a growth driver for the company or continue putting pressure on the core business.

The company’s push to become the orchestration layer connecting AI agents, robots, applications and people is also under threat. Hyperscalers and enterprise software companies could increasingly provide those orchestration capabilities themselves, limiting pricing power and market opportunity.

Hedge Fund Holdings

Amid concerns about AI’s impact, institutional positioning around UiPath, Inc. (NYSE:PATH) has been building up. As of the end of the second quarter, 48 hedge funds held stakes in the company, up from 40 at the end of the first quarter, according to the Insider Monkey database. Several prominent investors also increased their exposure. Rima Senvest Management boosted its UiPath stake by 56% during the quarter to approximately $131.36 million, while DE Shaw increased its position by 304% to roughly $51.30 million.

However, significant bearish positioning remains. UiPath had short interest of approximately 29% as of August 14, representing about 117.88 million shares sold short. The elevated short interest suggests that a substantial portion of the market remains skeptical about the company’s ability to sustain growth and successfully transition toward an AI-driven automation model.

The Verdict

UiPath, Inc. (NYSE:PATH) presents a high-risk, potentially high-reward AI transformation story. The company’s resilient ARR growth, expanding AI capabilities, and rising institutional interest provide reasons for optimism. However, the relatively modest pace of growth and uncertainty surrounding the monetization of its AI products remain significant concerns.

The biggest long-term risk is that AI becomes more of a disruptive force than a growth catalyst. If enterprises increasingly adopt AI agents and competing orchestration platforms, traditional RPA demand could weaken while competition intensifies.

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