Artificial intelligence (AI) stocks have risen dramatically in recent years, but many now look expensive. As valuations climb, investors are seeking overlooked opportunities that still offer growth potential without the premium price tag. One company that stands out is UiPath (PATH). The stock is currently trading around $12, down 26% year-to-date (YTD) and 39% below its recent high of $19.84.
Despite its sharp pullback, its fourth quarter of fiscal 2026 earnings suggests the business may be stronger than the stock price implies.
Let's find out why this undervalued AI stock deserves a second look.
UiPath: A Different Kind of AI Bet
UiPath is not a flashy AI story. Instead, it is building a platform designed to manage, govern, and scale automation across complex business processes. As AI lowers the cost of developing software, the value may move to platforms capable of reliably executing and managing such software at scale. UiPath is positioning itself to meet this need. While this may not create immediate hype, it could prove more durable over time.
In the fourth quarter of fiscal 2026, UiPath reported total revenue of $481 million, a 14% increase year-on-year (YoY), while annual recurring revenue (ARR) increased by 11% to $1.853 billion. Notably, 90% of clients who generate more than $1 million in ARR are already using UiPath's AI products. Net retention remained solid at 107%, showing customers are steadily increasing their usage. The company’s biggest feat in fiscal 2026 was achieving full-year GAAP profitability. Net income stood at $0.52 per share compared to a loss of $0.13 per share in fiscal 2025. UiPath evolved from a high-growth, loss-making software company toward a more balanced model of growth and profitability. Gross margins remained strong as well at 86%, while software margins reached 92%.
Management emphasized that AI is not a replacement for traditional automation products. Instead, it expands and improves them, giving greater chances for automation in increasingly complicated workflows. UiPath expects an ARR of more than $2 billion in fiscal 2027, with a net new ARR of around $200 million. This shows sustained, if not explosive, growth.
In fiscal 2026, UiPath generated $372 million in adjusted free cash flow (FCF), and it projects to generate $425 million in fiscal 2027. This level of free cash balance allows the company to reinvest in innovation, return capital to shareholders, and make smart acquisitions. Notably, the company ended the year with $1.7 billion in cash and no debt, strengthening its balance sheet.
A Rare Discount in the AI Space
Analysts expect UiPath’s earnings to grow steadily, with a 10.9% increase estimated in fiscal 2027 and 12.6% growth in fiscal 2028. Trading at 14 times forward earnings, PATH’s valuation looks relatively modest. Despite improving fundamentals, UiPath’s stock continues to trade at a significant discount compared to many AI peers. The main reason, as BMO Capital cited, is uncertainty around its future.
The firm commended the company's better execution and “durable growth profile,” noting that UiPath's $200 million AI ARR suggests that its AI strategy is gaining momentum. At the same time, the firm is concerned about UiPath's ability to sustain and scale AI monetization over time.
The Right Path for PATH Stock
UiPath is delivering steady growth, expanding margins, and improving cash flow, all while building a credible AI-driven expansion story. Yet, the stock continues to trade at a discount, reflecting ongoing skepticism rather than fundamental weakness. For investors willing to look beyond the hype, UiPath offers a compelling balance of growth, profitability, and value.
Overall, PATH stock is a “Hold” on Wall Street. Of the 19 analysts that cover PATH stock, one rates it a “Strong Buy,” one a “Moderate Buy,” 16 suggest a “Hold,” and one rates it a “Moderate Sell.” Based on the average target price of $13.57, the stock has an upside potential of 13.3% from current levels. Its Street-high estimate of $17 further implies the stock can go as high as 42% in the next 12 months.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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