Prediction: This artificial intelligence (AI) company will be acquired next year

that much S&P 500 and Nasdaq Composite So far in 2024, both have returned around 10%. One of the biggest catalysts driving these returns is artificial intelligence (AI).

This may make the technology sector particularly attractive, but smart investors know that not all opportunities are equal.

One of the stocks that came out ahead amid the AI ​​euphoria was Ui Pass (road -2.04%), a developer of robotic process automation (RPA) software that helps office workers with administrative tasks. At the beginning of the year, UiPath’s stock price was around $25. But now? The stock is down more than 50% this year, and shares trade for just $11.

Let’s take a look at what’s happening at UiPath and explain why the company will be acquired within the next year.

What’s happening at UiPath?

The chart below shows some important financial metrics for UiPath over the past five years. There are two low lights on the surface.

First, UiPath’s revenue and gross profit growth are slowing. Second, these dynamics can make a company less profitable or less profitable.

PATH Revenue (Quarterly) data from YCharts

During the first quarter of fiscal 2025, which ended April 30, UiPath generated net new annual recurring revenue (ARR) of just $44 million. By comparison, during the company’s 2024 fiscal year (ending January 31), UiPath added $260 million in net new ARR. This translates to an average of $65 million per quarter.

Where will UiPath go next?

Overall, enterprise software sales have been declining over the past few years. Stubborn inflation levels and a rising interest rate environment are forcing businesses of all sizes to curb spending and operate with tighter budgets.

I understand these dynamics, but I think the point about the challenging macroeconomic situation is valid for a long time. During UiPath’s earnings call, investors noticed that sales cycles were lengthening because potential customers were unwilling to put in the effort to buy the company’s tools.

Another shocking detail revealed in the UiPath earnings call was that CEO Rob Enslin is resigning and will be replaced by the company’s co-founder, Daniel Dines.

Image source: Getty Images.

Who is interested in acquiring UiPath?

Although Dines could have brought new energy to the company, the reason the board brought him back was to broker the sale.

UiPath’s products fit into the overall AI picture. However, the company faces stiff competition from megacap technologies. You can see Dines playing a big role here.

Potential acquirers of UiPath include: microsoft. Windows developers have invested billions of dollars in ChatGPT’s startup, OpenAI. Last year, Microsoft integrated ChatGPT across its ecosystem, specifically its Azure cloud computing platform and workplace productivity tools.

I believe UiPath’s RPA software can complement Microsoft’s existing business automation services. Plus, considering that Dines worked at Microsoft in the early 2000s, I think there’s a good chance the two companies could form a partnership.

Besides Microsoft, I think sales Could be a viable suitor for UiPath. Salesforce is a very acquisitive company, having spent tens of billions of dollars acquiring companies like MuleSoft, Tableau, and Slack. Each of these assets helped expand Salesforce’s capabilities beyond customer relationship management software. UiPath represents an exciting new layer for Salesforce and can enhance the company’s existing suite of AI-based productivity tools.

The final companies I think might be interested in UiPath are: Service Now, the leading IT workflow management platform. ServiceNow works on a variety of generative AI applications, one of which is RPA.

This gives the company clear overlap with UiPath, but ServiceNow is not as acquisitive as Microsoft or Salesforce. The company has grown mostly organically, making many smaller acquisitions compared to the larger tech groups above.

It is important to remember that the ideas discussed above are my own. UiPath’s transition could make it a much stronger company than it is today. Moreover, I do not recommend that investors buy UiPath stock due to speculation that the company could be acquired.

No matter what happens, one thing is certain. UiPath is at a really interesting point right now. I’m excited to see what lies ahead and learn more from management.