Cathie Wood of Ark Investment Management is well known for investing in high-growth, cutting-edge technology companies that she thinks are industry disruptors. Not surprisingly, artificial intelligence (AI) is one of the investment themes she is most excited about. However, the top AI holding in her flagship Ark Innovation ETF (NYSEMKT: ARKK) may surprise investors. It’s not Nvidia or Microsoft, but instead a lesser-known company called UiPath (NYSE: PATH). The stock is the fifth-largest position in the Ark Innovation ETF, representing about 5.8% of its holdings.
With Wood excited about the prospect of UiPath, the question is, does the stock deserve a place in your portfolio?
A leader in AI automation
UiPath is an AI-powered automation company that helps clients build tools to perform various business tasks. So what exactly does that mean? The company’s platform allows organizations to do several things. One is that it helps automate everyday mundane tasks. This could be something like data entry or filling out forms. It also provides low-code development tools to create apps, as well as tools to understand and process documents such as invoices.
In addition to providing tools to help clients automate tasks, UiPath’s platform also helps organizations identify areas where they can implement automation to help improve their businesses. The company’s platform will also track and share automation performance metrics as well as do quality assurance testing. The company also has tailored solutions for various industries and departments.
Overall, UiPath’s AI-powered automation platform is designed to help organizations become more efficient and save money. That’s important because these types of tech companies tend to be less economically sensitive and continue to solidly grow through various economic cycles.
Upselling and partnership opportunities
One area that UiPath has done well with is growing its revenue with large existing enterprise customers. The company has shown strong net dollar retention, which is a measure of the amount of revenue coming from existing customers after churn, upgrades, and downgrades. Its dollar-based net retention was 123% for its fiscal year 2023 ended in January and 119% in fiscal year 2024. This shows that once customers implement UiPath’s platform, they tend to expand it to other departments or add more licenses.
What UiPath hasn’t done much of recently is add a lot of new customers. It ended its fiscal 2024 with 10,830 customers, which was an increase of just 30 net customers compared to a year ago. What it has done, though, is increase its number of large enterprise customers. Customers spending $1 million a year or more with the company increased nearly 26% to 288 customers, while clients spending over $100,000 a year or more rose 15% to 2,054.
Adding new customers, however, will be an opportunity for UiPath. To help on this front, the company has recently entered into or expanded several distribution partnerships to help sell its solutions. It will look toward partnerships with SAP, Microsoft, Deloitte, and Ernst & Young to help it add new customers. Once UiPath is able to get into an organization, it has shown the ability to nicely grow, and these partnerships can help get it through more doors.
Building momentum
UiPath has been growing its revenue quickly, but even more impressively, its revenue growth accelerated throughout its fiscal 2024. The company grew its revenue by 31% in the fourth quarter compared to 24% growth in the third quarter, 19% in the second quarter, and 18% revenue growth in the first quarter. That shows a lot of movement in UiPath’s business and how customers are embracing its solutions as AI technology becomes more important.
UiPath trades at about 8x forward sales projections, but just 6.7x on an enterprise-value-to-revenue basis. The latter metric takes into account the company’s strong net cash position, which stood at $1.9 billion at the end of its fiscal year. UiPath’s strong revenue growth, balance sheet, and cash-flow generation ($309 million in adjusted free cash flow) suggest the stock remains inexpensive, especially given the opportunity ahead of it. It is also trading at a much lower multiple compared to other software companies (like Adobe and Intuit) that have been embracing AI.
As such, UiPath looks like a great name for growth investors to add to their portfolios.
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Geoffrey Seiler has positions in UiPath. The Motley Fool has positions in and recommends Adobe, Intuit, Microsoft, Nvidia, and UiPath. The Motley Fool 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.
UiPath Is Cathie Wood’s Largest AI Investment. Should the Stock Be in Your Portfolio? was originally published by The Motley Fool