When a company sharply lowers its full-year financial expectations and the new CEO abruptly leaves the company, investors tend to react negatively. And that’s exactly what happens at an enterprise software company UiPath (NYSE: PAD) on Thursday. At 9:45 a.m. ET, UiPath stock fell a painful 35% as investors digested the discouraging developments from the fiscal first quarter 2025 report.
What’s the problem with UiPath?
UiPath’s first quarter ended in April. The company provides businesses with software that automates repetitive tasks and is often recognized as a leader in its industry. Even today, the company announced that it had just been recognized as a leader in document mining and analysis Forrester research. But despite being a leader, the company still has problems.
There is only a vague hint of the problem in UiPath’s first quarter report. The company’s revenue of $335 million was at the high end of expectations and increased 16% year over year. However, annual recurring subscription revenue – a forward-looking measure – was at the lower end of previous expectations.
Annual recurring revenue is trending toward slower growth, and UiPath management has therefore lowered its full-year guidance. CFO Ashim Gupta said his clients have “increased control over deals”. But this is just a really nice way of saying that it’s having a harder time getting its customers to buy its stuff.
UiPath lowered its full-year revenue guidance by “only” about $100 million and its annual recurring revenue guidance by about $60 million. The share price decline seems disproportionately large in comparison. But it was certainly big enough to make investors question this company, which is why shares are down today.
What’s going on with leadership?
To address the financial issues, UiPath’s CEO Robert Enslin is surprisingly leaving the company entirely on June 1 – in just two days. On the one hand, founder and former CEO Daniel Dines is taking back the CEO position, which is good for stability. But then again, Enslin has only been the sole CEO for four months (he was co-CEO of Dines for about two years), which raises more questions than answers.
UiPath has a number of attractive features, such as a leading position in its sector, good cash flow and a strong balance sheet. But this abrupt CEO departure adds another layer of complexity to this business for the time being, and it’s understandable why investors are staying on the sidelines.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in UiPath. The Motley Fool has a disclosure policy.
This is why UiPath Stock Absolutely Crashed Today was originally published by The Motley Fool
