UiPath's Q2 2026 Earnings Call: Contradictions Emerge on Agentic Adoption, Margins, and U.S. Public Sector Stabilization

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 4, 2025

Financials Results

• Revenue: $362M, up 14% YOY (12% YOY normalized for ~$9M FX tailwind)
• Gross Margin: 84% overall gross margin; software gross margin 90% (no prior-year comparison provided)
• Operating Margin: Non-GAAP operating margin 17%, improving by >1,500 bps YOY

Guidance:

• Q3 FY26 revenue expected at $390–$395M (includes ~$2M FX tailwind vs prior guide).
• Q3 ARR expected at $1.771–$1.776B (includes ~$2M FX tailwind).
• Q3 non-GAAP operating income ~ $70M; basic shares ~532M.
• FY26 revenue expected at $1.571–$1.576B (includes ~$7M FX tailwind).
• FY26 ARR expected at $1.834–$1.839B (includes ~$7M FX tailwind).
• FY26 non-GAAP operating income ~ $340M; adjusted FCF ~ $370M; non-GAAP gross margin ~85%.
• Agentic adoption early; not expected to materially impact FY26 top line.
• Outlook remains prudent; U.S. public sector normalizing.

Business Commentary:

• Revenue and ARR Growth:
• UiPath reported revenue of $362 million for Q2 2026, an increase of 14% from the prior year period, and ARR grew 11% to $1.723 billion, driven by $31 million in net new ARR.

• The growth was fueled by increased adoption of its AI and Agentic solutions, which are helping to win deals and increase deal sizes faster than traditional automation engagements.

• Operational Efficiency and Profitability:

• Non-GAAP operating income increased to $62 million, representing a 17% margin and an improvement of more than 1,500 basis points year-over-year.

• This improvement reflects the operating leverage and discipline achieved in the business, along with cost efficiencies from agentify UiPath from within.

• Agentic Automation and Market Expansion:

• Agentic Automation capabilities are gaining traction, with 170,000 process instances orchestrated and 450 customers actively developing agents.

• Partnerships and customer relations are deepening, with major wins like a 7-figure deal with a Fortune 15 global technology company. The company's unified end-to-end platform, combining API, automation, and AI, is driving customer adoption.

• Cloud and Subscription Revenue:

• Cloud ARR grew more than 25%, reaching over $1.08 billion, as customers increasingly move to cloud-based solutions.
• This growth is driven by customers like KLM Royal Dutch Airlines migrating to the cloud and exploring Agentic Automation initiatives, reflecting a trend towards cloud adoption for automation and AI processes.

Sentiment Analysis:

• Management exceeded the high end of guidance across key metrics; revenue rose 14% YOY; ARR grew 11%. Non-GAAP operating margin reached 17%, improving by >1,500 bps YOY. Raised Q3 and FY26 guidance (revenue, ARR, operating income). Public sector buying normalizing; strengthened partner momentum (Microsoft, Deloitte) and enterprise adoption of Agentic and IDP. Continued discipline with costs and buybacks; targeting GAAP profitability near term.

Q&A:

• Question from Bryan Bergin (TD Cowen): How is demand pacing for agentic solutions from POC to production, and how are deal sizes trending? Also, can DBNRR hold in the second half?
  Response: Agentic traction is strong with ~450 customers building agents, uncovering more automation and lifting deal sizes; DBNRR is stabilizing, with prudence embedded in guidance.

• Question from Jacob Roberge (William Blair & Company L.L.C.): What’s Maestro’s key pitch versus others, and who do you see in deals?
  Response: Maestro’s vendor-agnostic orchestration tightly integrates with UiPath automation and agents, appealing to customers wary of lock-in; breadth of platform is winning against major orchestrators.

• Question from Jacob Roberge (William Blair & Company L.L.C.): Are go-to-market motions now stable after recent changes?
  Response: Yes—GTM is more customer-centric and closely aligned with product, delivering stable execution.

• Question from Austin Williams (Wells Fargo Securities): How did U.S. federal perform and how are you managing uncertainty?
  Response: Public sector showed strong momentum with recent wins and stabilizing budgets; positioned well for H2.

• Question from Austin Williams (Wells Fargo Securities): Any onetime factors in the sequential subscription revenue step-up?
  Response: Leap-year effects from last quarter normalized; revenue is now stable.

• Question from Raimo Lenschow (Barclays Bank PLC): You raised ARR and revenue by more than the beat—what drives confidence?
  Response: Improved field execution and agentic momentum supported raising guidance while maintaining prudence.

• Question from Raimo Lenschow (Barclays Bank PLC): Is demand split between traditional automation and agentic, or merging?
  Response: Customers span the spectrum, but most see orchestration + automation + agentic as essential; agentic engagements often reveal new automation use cases.

• Question from Michael Steven Richards (RBC Capital Markets): How is Agentic pricing received; any changes?
  Response: Consumption-based pricing aligns with customers; predictability is a shared industry challenge, but reception is positive.

• Question from Michael Steven Richards (RBC Capital Markets): Are you adding specialized sellers for Agentic?
  Response: Horizontal agentic is sold by the core GTM; specialized sellers focus on select vertical agent solutions.

• Question from Sanjit Singh (Morgan Stanley): Does guidance imply net new ARR inflects positive by Q4, and is GTM stability durable?
  Response: Signals are improving with narrowing YOY gaps and better execution; guidance reflects both operational progress and FX.

• Question from Sanjit Singh (Morgan Stanley): Which initial processes are you prioritizing for agentic deployments?
  Response: Targeting healthcare RCM, financial services P2P/O2C, and claims; leveraging UiPath’s incumbent automation to extend into agentic orchestration.

• Question from Bradley Sills (BofA Securities): Does the Deloitte partnership signal a bigger SI focus and what about SAP?
  Response: Both—expanding GSI collaborations and deepening three-way alignment with SAP and Deloitte as SIs select orchestration/agentic platforms.

• Question from Ian Black (Needham & Company): Does Agentic open new RPA workflows or mainly augment existing ones?
  Response: Both—Agentic expands and accelerates automation discovery, increasing opportunities versus prior years.

• Question from Keith Bachman (BMO Capital Markets): Existing-customer ARR growth has been weak—what changes that? And when does Agentic contribute meaningfully?
  Response: H2 improvement tied to macro/public sector stabilization and cohort strength; agentic is contributing now but not materially in FY26.

• Question from Dominique Manansala (Truist Securities): What macro patterns by geo/vertical are you seeing?
  Response: Strength in U.S. financials and healthcare, improving public sector, and select European manufacturing; broader environment remains variable.

• Question from Devin Au (KeyBanc Capital Markets): Does ARR guidance assume incremental U.S. public sector contribution in H2?
  Response: Yes, with normalized buying behavior; guidance remains prudent and reflects tangible federal pipeline.