UiPath (NYSE: PATH) share price issues are behind it now that the Q2 results are in. The pullback shaved more than 50% off of the stock price as expectations were reset, setting up the opportunity today. That opportunity is an outperformance and upgrade cycle in a high-quality small-cap tech stock. 

The critical details from the report are that its AI-assisted enterprise-level automation products are gaining traction, the company is growing, outperforming consensus figures, profiting, and building value for shareholders. It is expected to continue growing as the year progresses, and next year, it may accelerate.

The outlook for AI applications is robust, with spending on AI-assisted IT and business services forecasted to more than double by 2028.

UiPath's Beat-and-Raise Quarter Points to Acceleration

UiPath growth slowed in fiscal 2025 but continues to exceed expectations, including the guidance. The company’s $316 million in Q2 net revenue is up 10% compared to last year’s 19% growth but still outpaced consensus by 400 basis points, which is a significant margin. Weakness in the Licenses segment was offset by a 21% gain in Subscription services, the core growth element, compounded by a 16% gain in Professional Services. Other revenue details include a 19% increase in annual recurring revenue and a 115% net retention rate, showing an expanding client base and deepening penetration of services to fuel growth over the next year.

One-offs, including non-cash impairments, stock-based compensation, and restructuring costs, cut into the GAAP results, increasing the GAAP losses compared to last year. The adjusted earnings are also down, but a penny or 2500 basis points above the consensus reported by MarketBeat, and cash flow has improved.

The cash flow and free cash flow are up 450 and 420 basis points, respectively, helping sustain the fortress-quality balance sheet and allowing the board to approve an extension to the repurchase authorization. Worth $500 million, it increases available funding to $554 million, ensuring dilution offsetting repurchases will likely continue for the next twelve months. 

Guidance is good. The company set Q3 guidance in a range bracketing the consensus but raised the full-year revenue and earnings forecast. The new range puts consensus below the mid-point, leading analysts to increase their stock price targets. The round of price target increases is a telling detail because it marks a shift in the group; they lowered targets earlier this year but are now raising them to align with the broad consensus of targets issued over the last twelve months. That target is $18.35 and implies more than 40% upside for this stock, a multi-month when reached. 

UiPath Is on the Right Path for Investors

UiPath’s cash flow and balance sheet are good news to investors. The company had another negative cash flow quarter due to investments and R&D but has the balance sheet to continue on its path. It includes ample capitalization, about $1.7 billion compared to the $1.2 million in quarterly burn, and fortress-quality leverage ratios. Total liability is only 0.32 assets, less than 1x cash and 0.5x cash and equivalents. The shareholder equity is down compared to last year but almost fully offset by increased treasury shares. Treasury shares are up significantly, reducing the total share count by 0.25% on a fully diluted basis. 

UiPath stock surged nearly 10% in premarket trading, showing significant support above recent lows and potential for a complete price reversal. The critical resistance point is near $15.50 and the 150-day EMA. It may provide resistance to cap gains but, if broken, will be a launch pad to the $20 level.