UiPath (NYSE: PATH) initially impressed investors when it went public in April 2021. The developer of robotic process automation (RPA) tools listed its IPO at $56, and its shares rose to a record $85.12 the following month.
At the time, investors were dazzled by the growth potential of its RPA tools, which can be plugged into a company’s applications to automate repetitive tasks like data entry, invoice processing, customer onboarding and mass emailing.
The growth of UiPath supported this optimistic thesis. Its revenue grew 81% in fiscal 2021 (which ended in January 2021) and rose 47% in fiscal 2022. The pandemic has also forced more companies to automate their office tasks.
But in fiscal 2023, UiPath’s revenue grew just 19% as inflation, rising interest rates and the war in Ukraine forced companies to rein in software spending. Its revenue rose 24% in fiscal 2024 as some of those headwinds eased, but its shares now trade nearly 60% below their IPO price at around $23. Bulls still ignore UiPath, so this $13 billion RPA leader could expand and grow into a tech titan like Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) in the next two decades?
UiPath is comparable to Google — from 20 years ago
In 2023, UiPath generated revenue of $1.3 billion. Alphabet, which went public in 2004 as Google, had revenues of $1.5 billion in 2003.
But from 2003 to 2023, Alphabet’s revenue grew at a compound annual growth rate (CAGR) of 30%, rising from $1.5 billion to $307.4 billion. That rapid expansion has been fueled by the growth of its market-leading search engine, YouTube’s video streaming platform (which it acquired in 2006), mobile OS and apps, and other cloud-based services.
It may be challenging for UiPath to grow at the same rate over the next 20 years. For now, analysts expect its revenue to see a CAGR of just 18% from fiscal 2024 to fiscal 2026 as the macroeconomic environment stabilizes.
The company could still use its dominance in the growing RPA market to achieve double-digit growth by the end of the decade. According to data, UiPath controlled about 36% of the global RPA market last year Gartner, while its closest competitors held shares of less than 10%. Fortune Business Insights believes that the RPA market could still show a CAGR of 20% from 2023 to 2030.
If UiPath keeps pace with that market, its annual revenue could reach $7.2 billion by 2030. If the company continues to have a more moderate CAGR of 15% from 2030 to 2044, its revenue could rise to $50 billion by the final year . That would be much lower than Alphabet’s $307 billion in revenue in 2023 — but that growth trajectory could still send UiPath stock up nearly 40 percent over the next 20 years if its valuations remain stable.
UiPath continues to face unpredictable challenges
UiPath’s long-term prospects look promising, but it faces stiff competition from tech companies like Salesforce and Microsoftboth of which are rolling out more RPA services for their cloud-based ecosystems.
Also, UiPath is facing pressure C3.ai, which embeds its AI algorithms into the company’s software infrastructure to speed up, automate and optimize certain tasks. There’s also a good chance that newer generative AI platforms like ChatGPT will make it easier for companies to automate their own tasks without UiPath’s standalone RPA tools.
UiPath insists it can handle the bumps by upgrading its RPA platform with more AI tools. He believes these tools will help him process tasks in an unstructured work environment by understanding data instead of just automating repetitive tasks.
But without the support of its own dedicated cloud infrastructure platform, UiPath could struggle to scale those AI services and keep pace with its larger competitors.
It probably won’t become the next Alphabet
UiPath’s business is stabilizing, but remains unprofitable on a generally accepted accounting principles (GAAP) basis and faces daunting long-term challenges. Its RPA niche market is growing, but nowhere near as big as Alphabet’s core markets of digital advertising and cloud computing.
So UiPath may still have room to grow as more companies accelerate their digital transformations, but it’s still too early to consider it the next Alphabet.
To seriously match that technology leader, UiPath will need to significantly grow its RPA business, expand its ecosystem into other markets, and perhaps build its own cloud infrastructure to support that growth. Most of those things probably won’t happen in the next few years.
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Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has no position in any of the mentioned shares. The Motley Fool has positions in and recommends Alphabet, Microsoft, Salesforce and UiPath. The Motley Fool recommends C3.ai and Gartner and recommends the following options: long $395 January 2026 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Could UiPath become the next alphabet? was originally published by The Motley Fool