News

UiPath (NYSE: PATH) is a tiny company compared to Microsoft. The stock of the maker of robotic process automation (RPA) software is only worth $7.2 billion, while the diversified tech titan is worth a whopping $3.37 trillion.

But back in May 1990, Microsoft had market cap of only $7.2 billion. Yet from fiscal 1990 (which ended in June 1990) to fiscal 2023, its revenue grew at a compound annual growth rate (CAGR) of 17%, from $1.2 billion to $211.9 billion. Could UiPath follow a similar growth trajectory and become worth more than today's Microsoft by 2050?

How fast is UiPath growing?

UiPath's RPA tools can be plugged into a company's existing infrastructure to automate repetitive tasks like onboarding customers, entering data, processing invoices, and sending out mass emails. It controls more than third of this niche market, according to Gartner, while its closest competitors all hold single-digit shares.

UiPath went public in 2021. From fiscal 2020 to fiscal 2024 (which ended in Jan. 2024), its revenue grew at an impressive CAGR of 40%. It experienced a major growth spurt in fiscal 2021 as the pandemic drove more companies to automate repetitive tasks, but it suffered a slowdown in fiscal 2022 and fiscal 2023 as the macro headwinds drove many companies to rein in their software spending.

Data source: UiPath. FY = Fiscal Year.

UiPath's revenue growth stabilized in fiscal 2023 and fiscal 2024, and its adjusted operating margins expanded as it undertook layoffs and other cost-cutting measures. At the end of fiscal 2024, UiPath impressed the bulls by predicting its revenue would rise 19% in fiscal 2025 with a midpoint adjusted operating margin of 19%.

But in the first quarter, the company unexpectedly cut that forecast to just 7% to 8% revenue growth with a midpoint adjusted operating margin of 10%. It mainly blamed that deceleration on macro headwinds again, but it coincided with the rise of generative AI tools, which could potentially replace UiPath's RPA services in the future.

UiPath insists that generative AI technologies can complement and strengthen its own RPA tools, but its abrupt CEO changes this year are worrisome. UiPath was initially led by two co-CEOs, its founder Daniel Dines and Rob Enslin.

Dines stepped down in February 2024, transitioned to a newly created chief innovation officer position, and left Enslin as its only CEO. But less than four months later, Enslin stepped down and Dines hastily returned to the CEO position. UiPath's insiders have also been net sellers over the past 12 months, even as its stock declined nearly 30%, though people sell stock for all kinds of mundane reasons.

Can UiPath keep expanding through 2050?

The global RPA market could expand at a CAGR of 40% from 2023 to 2030, according to Grand View Research. If UiPath matches that growth rate, its revenue could rise from $1.3 billion in fiscal 2024 to $14 billion in fiscal 2031. If it hits that target and continues to grow at a CAGR of 15% from fiscal 2031 to fiscal 2050, it could generate $200 billion in revenue by the final year. That would be comparable to Microsoft's $198 billion in revenue in fiscal 2022.

If UiPath still trades at 10 times its trailing sales, it could become a $2 trillion company by 2050 -- but even if that all turns out to be true, it would still be worth less than what Microsoft is worth today. That said, that would still represent a massive gain of nearly 27,700% from UiPath's current price. However, that's a best-case scenario that assumes UiPath can overcome its near-term macro challenges, stay relevant in the evolving AI market, and fend off formidable challengers like Microsoft and Salesforce in the RPA market.

Analysts don't seem optimistic about its chances -- they expect UiPath's revenue to only grow at a CAGR of 10% from fiscal 2024 to fiscal 2027. They also expect it to stay unprofitable on a generally accepted accounting principles (GAAP) basis.

As for Microsoft, it could grow even larger over the next 26 years. Analysts expect it to grow its revenue and earnings at a CAGR of 15% and 17%, respectively, over the next three fiscal years as it expands its cloud, AI, and gaming businesses. If its price-to-sales ratio holds steady and it and grows its revenue at a CAGR of just 10% from an estimated $245 billion in fiscal 2024 to $3 trillion in fiscal 2050, it could be worth more than $40 trillion by the final year of this time frame. That seems like a jaw-dropping valuation, but Microsoft's current market cap of $3.7 trillion seemed like a distant dream just 20-30 years ago.

UiPath won't be more valuable than Microsoft by 2050

UiPath might stabilize its business and overcome its growing pains over the next few decades, but it's doubtful that it will expand and evolve into the next Microsoft. So instead of focusing too much on its market cap, investors should see if UiPath can overcome its macro, competitive, and existential challenges over the next few years.

Should you invest $1,000 in UiPath right now?

Before you buy stock in UiPath, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and UiPath wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $787,026!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of July 15, 2024

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Salesforce, and UiPath. The Motley Fool recommends Gartner and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.