UiPath's 2025–2026 Q3 Earnings Call: Contradictions Emerge on Agentic Automation Traction, Federal Shutdown Impact, and ARR Growth Sustainability

Date of Call: None provided

Financials Results

• Revenue: $411.0M, up 16% YOY (14% on constant currency, ~$5M FX tailwind)
• Gross Margin: Overall gross margin 85%; software gross margin 91%
• Operating Margin: Non-GAAP operating income $88M, 21% margin, up >700 bps YOY; GAAP operating income $13M (first GAAP-profitable Q3)

Guidance:

• Q4 FY2026 revenue expected $462M–$467M (≈$3M FX headwind since prior guide)
• Q4 ARR expected $1.844B–$1.849B (≈$3M FX headwind)
• Q4 non-GAAP operating income approx $140M; basic shares ~536M
• FY2026 non-GAAP adjusted free cash flow approx $370M; non-GAAP gross margin ~85%

Business Commentary:

* Revenue Growth and ARR Increase: - UiPath reported revenue of $411 million for Q3 2026, representing a 16% increase year-over-year. - The company's ARR totaled $1.782 billion, an increase of 11% year-over-year. - Growth was driven by strong execution, operational efficiency, and new customer acquisitions, particularly in enterprise accounts.

• Agentic Automation Adoption and Scale:
• UiPath mentioned that more than 950 companies are developing agents, and over 365,000 processes have been orchestrated with Maestro across their platform.
• The adoption of agentic automation is helping enterprises shift from pilots to production, supporting significant customer energy and innovation.

• This trend is attributed to the value UiPath's innovation brings to customers by addressing manual labor tasks and complex workflows.

• Operational Profitability and Efficiency:

• UiPath achieved its first GAAP profitable third quarter, with non-GAAP operating income of $88 million or a 21% margin.
• The company reported non-GAAP adjusted free cash flow of $28 million.
• Operational efficiency improvements and a focus on disciplined execution contributed to the financial performance.

• Federal Sector Performance:
• Despite the federal shutdown, UiPath saw positive commentary for its federal business, with growth attributed to long-term strategic projects.
• Key projects include working with the U.S. Coast Guard, Department of Veterans Affairs, and the Social Security Administration.

• Stability and strategic focus in this sector contributed to the performance, despite a challenging macroeconomic environment.

• Partnerships and Technology Collaborations:

• UiPath announced collaborations with technology leaders like Microsoft, OpenAI, NVIDIA, and Snowflake to enhance platform capabilities.
• These partnerships expand UiPath's integrations and offerings, broadening its reach and capabilities in AI-powered automation.
• The partnerships are driven by customer needs and aim to provide reliable AI solutions with trust and governance.

Sentiment Analysis:

Overall Tone: Positive

• Management said they "beat the high end of our guidance across all metrics," reported ARR $1.782B (+11%), revenue $411M (+16%), "first GAAP profitable third quarter," and non-GAAP operating income $88M (21% margin) while raising Q4 guidance despite FX headwinds.

Q&A:

• Question from Bryan Bergin (TD Cowen): On agentic solution traction — is the 950-plus clients number comparable to the ~450 last quarter using Agent Builder or broader? And for cases scaling past POCs, is it driven by client capabilities or use-case types?
  Response: Agentic adoption is accelerating across the platform with movement from POCs to pilots to production; high-ROI use cases are customer-specific rather than a single cross-industry pattern.

• Question from Bryan Bergin (TD Cowen): Any impact from the government shutdown in October/November on the federal business?
  Response: No direct impact; many federal projects are funded and in critical operations so we saw no material disruption.

• Question from Jacob Roberge (William Blair): Q4 guide implies net new ARR could start growing on a constant currency basis — what’s driving that return to growth and is it sustainable?
  Response: Improved execution (notably in Americas), product launches and strengthened sales execution are driving stabilization and expected net new ARR growth; no single silver-bullet driver.

• Question from Jacob Roberge (William Blair): For go-lives of agentic deployments, what pricing uplift or monetization are you seeing once they hit production?
  Response: Monetization is occurring via platform pull-through and increased customer stickiness (IXP, robots, orchestration), not via direct pricing uplift for agentic alone.

• Question from Austin Williams (Wells Fargo): How did federal results in 3Q compare to expectations, and what could the OpenAI collaboration drive for UiPath?
  Response: Federal is returning to a 'new normal' with strategic long-term projects; OpenAI integration (GPT5) powers ScreenPlay to combine LLM adaptability with reliable UI automation, a key product differentiator.

• Question from Michael Steven Richards (RBC Capital Markets): Are the new partnerships (OpenAI, Microsoft, Google, NVIDIA, Snowflake) joint go-to-market or mostly technology integrations and have they driven pipeline?
  Response: Partnerships are primarily technology-enabling (data, LLMs, security layers) built to meet customer needs; they form a foundation for reliable, governed AI with GTM elements emerging from customer demand.

• Question from Michael Steven Richards (RBC Capital Markets): Have you seen a shift to third-party agents or are you mostly orchestrating UiPath-built agents?
  Response: Currently a mix of low-code and coded agents (some built with partners like LangChain, CrewAI, LlamaIndex); fully external third-party agents are not yet prevalent.

• Question from Unknown Analyst (on behalf of Sanjit Singh, Morgan Stanley): How much incremental pipeline is now partner-sourced vs a year ago, and can partners drive additional AI product deployments next year?
  Response: Partner-sourced pipeline has grown in quality (not just quantity), pulling UiPath into larger transformation programs (e.g., S/4HANA) and enabling broader AI-related deployments.

• Question from Unknown Analyst (on behalf of Sanjit Singh, Morgan Stanley): How are you thinking about OpEx investment next year to support AI product rollout and monetization?
  Response: We will maintain disciplined OpEx while selectively investing—hiring in engineering, expanding sales capacity and Forward Deployed Engineers to support product rollout and customer success.

• Question from Scott Berg (Needham & Company): From pilots to production, any learnings or levers that help convert pilots to sales?
  Response: Patterns vary by industry/use case; early signals in verticals exist but it's too early to point to a single replicable use case driving conversions broadly.

• Question from Scott Berg (Needham & Company): The Q4 guidance implies net new ARR is up YOY — is that due to improved execution, slipped deals, AI bookings, or other factors?
  Response: No material slipped deals; the implied improvement is driven by improved execution, FX effects normalizing, and momentum after organizational stabilization.

• Question from Arsenije Matovic (Wolfe Research): What drove the downtick in NRR — just weakness at the low end — and any color for Q4?
  Response: NRR pressure was concentrated at the lower-end cohort; net dollar expansion for $100k–$1M customers was 113%, showing mid-tier strength while small accounts caused some pressure.

• Question from Arsenije Matovic (Wolfe Research): You doubled customers developing agents quarter-over-quarter — what uplift are those customers seeing and will that help NRR?
  Response: Agentic activity yields indirect pull-through and greater platform stickiness; direct, scalable monetization from agentic remains immaterial in the near term.

• Question from William Kingsley Crane (Canaccord Genuity): Have perceptions shifted with model-provider competition, and how is heterogeneity of integrations trending?
  Response: No major perceptual shift; UiPath uses a heterogeneous mix of frontier LLMs (e.g., GPT5, Gemini) selectively per use case to leverage best-in-class capabilities.

• Question from William Kingsley Crane (Canaccord Genuity): Has co-developing solutions earlier translated into improved Q3 results and will it predict success next year?
  Response: Co-development is a leading indicator that increases ROI and platform pull-through; agentic hasn't materially impacted near-term results but strengthens long-term customer engagement.

• Question from Chirag Ved (Evercore): Which verticals are adopting prebuilt agentic solutions fastest and are you moving more aggressively into industry-specific packaged automation?
  Response: Top traction is in healthcare (revenue-cycle/prior auth) and financial services (financial-crimes/KYC/AML); UiPath is prioritizing verticalized, prebuilt solutions.

• Question from Chirag Ved (Evercore): Thoughts on balance between deterministic automation and LLM-based agentic automation — will this shift materially?
  Response: They are complementary: deterministic for well-defined tasks; LLMs for complex, document-rich or conversational work; orchestration combines both to deliver secure, governed enterprise solutions.

• Question from Dominique Manansala (Truist Securities): Have early deployments given you usage patterns to help customers forecast AI spend and how are you addressing spend-predictability concerns?
  Response: We're still in early innings; pricing remains flexible (component- or outcome-based) and consumption patterns are being monitored to evolve predictability models.

• Question from Dominique Manansala (Truist Securities): Has POC-to-production cycle time shortened and what’s driving that compression?
  Response: Yes — building solution accelerators and prepackaged offerings is shortening time-to-value; management expects this acceleration to continue next year.

Contradiction Point 1

Agentic Automation Traction and Movement

It involves statements regarding the traction and movement of Agentic Automation solutions from pilots to production, which are crucial for understanding the company's growth strategy and customer adoption.

Can you clarify if the 950+ clients are specific to Agent Builder or broader? How is scaling beyond proof of concepts progressing? - Bryan Bergin (TD Cowen)

20251204-2026 Q3: We're seeing consistent buying patterns from POC to pilots to production, indicating positive traction. Agentic solutions are adapting to high ROI use cases specific to customers. - Daniel Dines(CEO)

What traction has been seen with Agentic Automation solutions, and how are they transitioning from POCs to production? - Bryan Bergin (TD Cowen)

2026Q3: We're seeing good momentum in agentic offerings, driving a pull-through across the platform. Customers are moving from pilots to production based on high ROI use cases. - Daniel Dines(CEO)

Contradiction Point 2

Impact of Federal Government Shutdown

It involves statements regarding the impact of a federal government shutdown on the company's business, which can impact financial performance and stability.

What impact did the federal shutdown have on the results, particularly for U.S. federal business? - Bryan Bergin (TD Cowen)

20251204-2026 Q3: No direct impact from the shutdown, as many projects are funded through bills and are considered critical operations, especially in areas like the Department of Defense. - Ashim Gupta(CFO)

How did the federal business perform during the recent government shutdown? - Bryan Bergin (TD Cowen)

2026Q3: There was no impact from the shutdown. The federal business operates largely through funded bills, and critical operations like defense are exempt. - Ashim Gupta(CFO)

Contradiction Point 3

Net New ARR Growth and Sustainability

It involves statements regarding the sustainability and drivers of net new ARR growth, which are crucial for understanding the company's financial health and future growth prospects.

What drives the return to net new ARR growth on a constant currency basis? - Jacob Roberge (William Blair)

20251204-2026 Q3: Improved execution, team performance, especially in Americas, and stabilization across the business. The combination of these factors is contributing to the stabilization and growth in net new ARR. - Daniel Dines(CEO) and Ashim Gupta(CFO)

What are the drivers behind the return to net new ARR growth on a constant currency basis and how sustainable is it? - Jacob Roberge (William Blair)

2026Q3: We are seeing consistent execution across the board, especially in the Americas. The team's execution has improved, and our business is stabilizing. - Daniel Dines(CEO)

Contradiction Point 4

Agentic Solution Traction and Adoption Patterns

It involves the adoption patterns and traction of Agentic solutions, which are critical for understanding the company's strategic direction and revenue growth potential.

Can you clarify if the 950+ clients are using the agentic solution broadly or specifically through Agent Builder? How is scaling beyond proof of concepts progressing? - Bryan Bergin (TD Cowen)

20251204-2026 Q3: We're seeing consistent buying patterns from POC to pilots to production, indicating positive traction. - Daniel Dines(CEO)

How has client demand for agentic solutions evolved, and what impact is it having on deal sizes compared to traditional RPA work? - Bryan Bergin (TD Cowen)

2026Q2: First quarter of Agentic sales, over 450 customers are actively engaged in building agents for production deployments. - Daniel Dines(CEO)

Contradiction Point 5

U.S. Federal Business Performance

It concerns the performance and stability of the U.S. federal business, which is significant for UiPath's revenue and strategic positioning.

What are the drivers of the return to net new ARR growth on a constant currency basis? - Jacob Roberge (William Blair)

20251204-2026 Q3: No direct impact from the shutdown, as many projects are funded through bills and are considered critical operations, especially in areas like the Department of Defense. - Ashim Gupta(CFO)

Can you share details on the U.S. federal business performance and how you're handling the uncertainty? - Austin Williams (Wells Fargo)

2026Q2: Our public sector had a good quarter, with momentum in selling Agentic solutions. We see signs of stabilization in federal budget finalization and are encouraged by new wins with the Veterans Affairs and Coast Guard. - Ashim Gupta(CFO)