UiPath's Q2 2026 Earnings Call: Contradictions Emerge on Macroeconomic Outlook, Agentic Impact on ARR, and DBNR Stabilization

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

Date of Call: None provided

Financials Results

• Revenue: $362M, up 14% YOY (12% YOY ex ~$9M FX tailwind)
• Gross Margin: 84% overall; software gross margin 90%
• Operating Margin: 17% non-GAAP operating margin, up >1,500 bps YOY

Guidance:

• Q3 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 outlook $1.571–$1.576B (includes ~$7M FX tailwind).
• FY26 ARR outlook $1.834–$1.839B (includes ~$7M FX tailwind).
• FY26 non-GAAP operating income ~ $340M.
• FY26 non-GAAP adjusted FCF ~ $370M; non-GAAP gross margin ~ 85%.
• Expect minimal material top-line contribution from agentic in FY26; maintain prudent macro view; public sector normalizing.

Business Commentary:

• Revenue and ARR Growth:
• UiPath reported second quarter revenue of $362 million, an increase of 14% from the prior year period, and second quarter ARR grew 11% to $1.723 billion.

• The growth was driven by $31 million in net new ARR and the expansion of agentic automation, which is helping to increase deal sizes.

• Operational Efficiency and Margin Improvement:

• UiPath's 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 was due to operational leverage, disciplined execution, and the benefits of agentifying UiPath from within.

• Agentic Automation Adoption:

• UiPath has seen nearly 1 million agent runs and over 450 customers actively developing agents, with Maestro orchestrating over 170,000 process instances.

• The adoption of agentic automation is deepening engagement within the install base and facilitating increased commercial momentum.

• Public Sector Performance:

• The United States Navy expanded its IDP initiative and deployed over 200 automations, with recent wins in U.S. Coast Guard and Veterans Affairs.
• The public sector's normalization of buying behavior and increased engagement with UiPath's agentic capabilities are contributing to improved performance.

Sentiment Analysis:

• Management said they exceeded the high end of guidance across all key metrics. Revenue was $362M (+14% YOY) and ARR reached $1.723B (+11% YOY). Non-GAAP operating income was $62M (17% margin), improving >1,500 bps YOY. They raised Q3 and FY26 outlooks for revenue, ARR, and operating income, cited stabilization in U.S. public sector, and highlighted strong partner momentum.

Q&A:

• Question from Brian Bergin (TD Cowen): How are agentic solutions progressing from POCs/pilots to production, and how are they affecting deal sizes?
  Response: Agentic adoption is accelerating (≈450 customers building agents) and, as a monetized add-on tightly integrated with RPA/API, is increasing deal sizes.

• Question from Brian Bergin (TD Cowen): DBNR was stable Q1 to Q2; can it sustain through the second half?
  Response: DBNR is stabilizing; guidance embeds a prudent macro view with improving public sector buying.

• Question from Jake Roberge (William Blair): What is the key Maestro pitch and competitive positioning in agentic orchestration?
  Response: UiPath offers agnostic orchestration across systems tightly integrated with its automation platform, enabling agents, robots, and humans-in-the-loop—winning against major orchestrators.

• Question from Jake Roberge (William Blair): Are go-to-market motions now stable after recent changes?
  Response: Yes—GTM is stable, more customer-centric, and closely aligned with product; execution has improved.

• Question from Michael Turren (Wells Fargo): How did the U.S. federal/public sector perform and how are you managing the uncertainty?
  Response: Public sector showed strong momentum with budgets stabilized and recent wins (VA, Coast Guard), positioning well for 2H.

• Question from Michael Turren (Wells Fargo): What drove the big sequential step-up in subscription revenue—any one-time items?
  Response: Prior quarter had a leap-year timing effect; results are now normalized with no one-time items.

• Question from Raimo Lenschow (Barclays): You raised ARR and revenue more than the beat; what drives this confidence?
  Response: Improving pipeline and field momentum, agentic traction, and some FX tailwind informed the higher guide.

• Question from Raimo Lenschow (Barclays): How are customers balancing AI agents vs RPA—are they distinct or converging?
  Response: Most customers see orchestration + automation + agentic as complementary; agentic work uncovers many pure automation use cases.

• Question from Matthew Hedberg (RBC Capital Markets): How is the market receiving agentic pricing and have you adjusted it?
  Response: Consumption-based pricing is resonating; teams are working with customers to enhance predictability of costs.

• Question from Matthew Hedberg (RBC Capital Markets): Are there specialized sellers for agentic solutions?
  Response: No for horizontal agentic (covered by core GTM); specialist teams focus on select vertical agent offerings.

• Question from Sanjit Singh (Morgan Stanley): Are you seeing enough execution to support net new ARR inflecting positively?
  Response: Yes—GTM execution and pipeline are improving, YoY gaps are narrowing, FX helps, and public sector is stabilizing; guidance reflects this.

• Question from Sanjit Singh (Morgan Stanley): Which initial processes are you prioritizing for agentic deployments?
  Response: Healthcare RCM, financial services procure-to-pay and order-to-cash, and claims—leveraging UiPath’s incumbent automation footprint.

• Question from Brad Sills (Bank of America): Does the Deloitte announcement signal greater SI focus and implications for SAP partnership?
  Response: Both—expanding GSI alliances and a strong three-way alignment with SAP and Deloitte; UiPath is a core platform choice.

• Question from Scott Berg (Needham & Company): Does agentic enable new RPA workflows or mainly extend existing ones?
  Response: Both—it surfaces additional automation opportunities beyond prior years while enriching existing workflows.

• Question from Keith Bachman (BMO Capital Markets): Existing-customer ARR growth has been soft; when does it improve, and can agentic contribute next year?
  Response: Cohorts >$100k and >$1M are growing; macro and public sector weighed earlier but 2H stabilizes. Agentic is monetizing now and should contribute more over time (no specific FY27 guide).

• Question from Terry Tillman (Truist Securities): What macro patterns by geo/vertical persist and how do they inform outlook?
  Response: Strength in U.S. financials and healthcare; public sector momentum; European manufacturing pockets strong; macro stays variable, so guidance remains prudent.

• Question from Devin Awe (T Bank Capital Markets): Does ARR guidance include incremental U.S. public sector contribution?
  Response: Yes—guidance assumes more contribution amid stabilization, while maintaining prudence.