of S&P 500 and Nasdaq Composite Index Both companies are forecasting returns of around 10% through 2024. One of the biggest factors driving these returns is artificial intelligence (AI).
This may make the technology sector especially attractive, but smart investors know that not all opportunities are equal.
Stocks that got ahead in the AI craze UI Pass (NYSE: PATH)is a developer of robotic process automation (RPA) software that helps office workers with administrative tasks. At the beginning of the year, UiPath shares were trading at around $25. But where are they now? The stock has fallen by more than 50% so far this year, with shares trading at just $11.
We explore what's happening at UiPath and why the company is likely to be acquired within the next 12 months.
What’s happening at UiPath?
The chart below shows UiPath's key financial metrics over the past five years: On the surface, there are two downturns.
First, UiPath's revenue and gross margin growth is slowing, and second, this trend is worsening, negatively impacting the company's profitability, or lack thereof.
In the first quarter of fiscal 2025, which ended April 30, UiPath increased net new annual recurring revenue (ARR) by just $44 million. By comparison, in the company's fiscal 2024, which ended Jan. 31, UiPath increased net new ARR by $260 million, averaging $65 million per quarter.
Where is UiPath heading next?
Broadly speaking, enterprise software sales have been cooling for the past few years, as persistent inflation and a rising interest rate environment have led businesses of all sizes to rein in spending and operate on tighter budgets.
I understand these trends, but I don't think pointing to tough macroeconomic conditions will hold up for long: Investors learned during UiPath's earnings call that the company's sales cycle is lengthening as potential customers are less keen to buy its tools.
Another shocking revelation from UiPath's earnings call was that CEO Rob Ensslin will be stepping down and being replaced by co-founder Daniel Dines.
Who would be interested in acquiring UiPath?
Daines could well bring new energy to the company, but I suspect the board brought him back for one reason: to broker a sale.
UiPath's products fit perfectly into the AI picture, but the company faces stiff competition from larger tech companies, and I think Dines will play a big role in this regard.
Potential acquisition candidates for UiPath include: MicrosoftThe Windows developer has invested billions of dollars into OpenAI, the startup behind ChatGPT, and over the past year, Microsoft has been integrating ChatGPT across its ecosystem, particularly around its Azure cloud computing platform and workplace productivity tools.
UiPath's RPA software could complement Microsoft's existing workplace automation offerings, and given that Dines worked for Microsoft in the early 2000s, it seems like a good chance the two companies could partner.
Besides Microsoft Salesforce It could be a strong acquisition target for UiPath. Salesforce has been an acquisitive company, spending tens of billions of dollars to acquire companies like MuleSoft, Tableau, and Slack. All of these assets have helped Salesforce expand its capabilities beyond customer relationship management software. UiPath could be an interesting new layer for Salesforce to enhance its existing line of AI-powered productivity tools.
The final company that might be interested in UiPath is Service Nowis a leading IT workflow management platform. ServiceNow runs a wide range of generative AI applications, including RPA.
This gives the company some clear overlap with UiPath, but it's important to note that ServiceNow hasn't been as acquisitive as Microsoft or Salesforce — it has grown primarily organically and has made a number of smaller acquisitions compared to the larger tech companies listed above.
It's important to note that the ideas discussed above are my own: UiPath may well turn things around and emerge as a much stronger company than it is today, and I would not encourage investors to buy UiPath shares solely on the basis that they might be acquired.
Whatever happens, one thing is for sure: UiPath is at an exciting point right now, and I look forward to learning more from management about what's to come in the coming quarters.
Should I invest $1,000 in UiPath right now?
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Adam Spatacco invests in Microsoft. The Motley Fool invests in and recommends Microsoft, Salesforce, ServiceNow, and UiPath. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Prediction: This artificial intelligence (AI) company will be acquired by next year. This was originally published by The Motley Fool.
