Here’s why UiPath stock plummeted today.
Sales are struggling and the CEO resigns after only four months on the job.
When a company drastically cuts its annual financial guidance and a new CEO suddenly leaves the company, investors tend to react negatively. This is exactly what is happening at enterprise software companies. Ui Pass (road -35.25%) On Thursday. As of 9:45 a.m. ET, UiPath shares are down a painful 35% as investors process disappointing developments in its fiscal 2025 first quarter report.
What’s wrong with UiPath?
UiPath’s first quarter ended in April. The company provides businesses with software that automates repetitive tasks and is often recognized as an industry leader. Today we also announced that we have been recognized as a leader in document mining and analysis. Forrester Research. But despite being a leader, the business is still struggling.
UiPath’s first quarter report offers only the faintest hint of current problems. The company’s revenue reached a record high of $335 million, up 16% from the previous year. However, annual recurring subscription revenue, a forward-looking indicator, was lower than previous guidance.
Annual recurring revenue is trending at a slower pace, leading UiPath management to lower its annual target. CFO Ashim Gupta said customers had “stepped up their transaction scrutiny.” But this is just a really nice way to express that you’re having a hard time getting your customers to buy your product.
UiPath lowered its full-year revenue guidance by about $100 million and lowered its annual recurring revenue guidance by about $60 million. Compared to this, the decline in stock prices appears to be excessively large. But the stock price is down today because it was big enough for investors to question the business.
What’s happening to leadership?
To address financial concerns, UiPath CEO Robert Enslin will surprisingly leave the company permanently on June 1. There are only two days left. On the one hand, founder and former CEO Daniel Dines is regaining the CEO position, which is good for stability. But on the other hand, Enslin has only been sole CEO for four months (he was co-CEO with Dines for about two years), which raises more questions than it answers.
UiPath has several attractive characteristics, including a leading position in its field, good cash flow, and a strong balance sheet. But this sudden CEO departure makes the business more complex for now, and it’s understandable why investors are sitting on the sidelines.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has a position at UiPath and recommends UiPath. The Motley Fool has a disclosure policy.
