UiPath Q2 2027 Earnings Call Transcript

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Provided by Quartr
September 3, 2026

Key Takeaways

  • Positive Sentiment: UiPath exceeded second-quarter guidance, with revenue of $410 million, up 13%, ARR of $1.938 billion, up 12%, and non-GAAP operating margin expanding to 22%. The company also delivered its fourth consecutive quarter of GAAP profitability.
  • Positive Sentiment: AI is becoming central to larger customer engagements: 18 of the top 20 deals included AI, while customers increasingly consolidate automation, orchestration, testing, and AI workloads on UiPath’s platform. Dollar-based net retention improved to 109%, and customers with at least $1 million in ARR grew 21% to 387.
  • Positive Sentiment: Management highlighted early results from coding agents that reduce forward-deployed engineering effort by nearly 60%, potentially accelerating customer time to value and lowering total cost of ownership. The company is also expanding vertical offerings in areas such as financial crime, revenue-cycle management, invoice processing, and software testing.
  • Neutral Sentiment: UiPath forecast third-quarter revenue of $440 million to $445 million and full-year revenue of $1.789 billion to $1.794 billion, while maintaining full-year adjusted free cash flow guidance of approximately $425 million. Guidance includes foreign-exchange headwinds, and second-quarter adjusted free cash flow declined to $31 million from $45 million due primarily to the timing of tax payments.
  • Neutral Sentiment: Ashim Gupta will move exclusively into the COO role, with Hitesh Ramani succeeding him as CFO. Management characterized the transition as planned and low-risk, citing Ramani’s long tenure and existing role as deputy CFO.
AI Generated. May Contain Errors.
Earnings Conference Call
UiPath Q2 2027
00:00 / 00:00

Transcript Sections

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Operator

Good day everyone. My name is Megan and I will be your conference operator today. At this time, I would like to welcome you to UiPath's second quarter 2027 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, and if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. If you have joined via the phone line, please dial star five to raise your hand. In the interest of time, please limit yourself to one question and one follow-up today. Please note that participants will be limited to that.

Operator

At this time, I would like to turn the call over to Allise Furlani, Vice President of Investor Relations.

Allise Furlani
Allise Furlani
VP of Investor Relations at UiPath

Good afternoon, and thank you for joining us today to review UiPath's second quarter fiscal 2027 financial results, which we announced in our earnings press release issued after the close of the market today. On the call with me are Daniel Dines, founder and Chief Executive Officer, Ashim Gupta, Chief Operating Officer, and Hitesh Ramani, Chief Financial Officer, to deliver our prepared comments and answer questions. Our earnings press release and financial supplemental materials are posted on the UiPath investor relations website. These materials include GAAP to non-GAAP reconciliations. We will be discussing non-GAAP measures on today's call. This afternoon's call includes forward-looking statements regarding our financial guidance for the third quarter and full fiscal year 2027 and our ability to drive and accelerate future growth and operational efficiency and grow our platform, product offerings, and market opportunity.

Allise Furlani
Allise Furlani
VP of Investor Relations at UiPath

Actual results may differ materially from these expressed in the forward-looking statements due to many factors, and therefore, investors should not place undue reliance on these statements. For a discussion of material risks and uncertainties that could affect our actual results, please refer to our annual report on Form 10-K for the year ended January 31st, 2026 and our subsequent reports filed with the SEC. Forward-looking statements made on this call reflect our views as of today, and we undertake no obligation to update them. I would like to highlight that this webcast is being accompanied by slides. We will post the slides and a copy of our prepared remarks to our investor relations website immediately following the conclusion of this call. In addition, please note, all comparisons are YoY unless otherwise indicated. Now, I'd like to turn the call over to Daniel.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Thank you, Allise, and thank you for joining us. We delivered another strong quarter with continued execution. ARR grew 12%. Non-GAAP operating margin expanded to 22%, and we delivered our fourth consecutive quarter of GAAP profitability. Over the past two years, we've been transforming UiPath for the next phase of our growth. We've evolved our platform around business orchestration, agentic, and software testing, significantly improved our go-to-market execution and operating discipline, and re-accelerated the pace of innovation within the company. We're a stronger company today, and increasingly, customers are looking to UiPath not just to automate individual tasks, but to orchestrate complex, long-running, and exception-heavy business processes and be a critical partner in their AI transformation. We've talked a lot about how AI is changing software. The bigger question now is how enterprises turn AI into real business value. Customers aren't choosing between AI and deterministic automation.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

They are choosing the best way to achieve an outcome. AI is exceptional at reasoning, but it's probabilistic and can be expensive at scale. Many enterprise processes don't need reasoning at every step. They need exactness, the same result every time, securely, reliably, and at the lowest possible cost. That's why we give customers the choice of deterministic or tokenless automation alongside AI. Our approach is simple. Use AI where intelligence creates value and deterministic automation where exactness matters. That gives customers the benefits of AI without paying for AI reasoning at every step, and ultimately, better economics and better ROI at scale. That's where UiPath is differentiated. We deliver business outcomes by orchestrating end-to-end processes across agents, robots, API systems, and people, using the right technology for each step to deliver the best combination of intelligence, reliability, and cost.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

We are also model agnostic, giving customers the freedom to use the AI models and technologies that are best for the work rather than locking them into a single ecosystem. As AI expands what enterprises can automate, we believe that combination of choice, orchestration, and governance becomes even more valuable. So the opportunity now is to scale what we've built, expanding adoption across our customer base, extending our reach into the business, and continuing to translate our innovation into durable growth. As we scale, strong execution and connectivity across the company become even more important. That's why Ashim will now focus exclusively on his role as Chief Operating Officer. Ashim has been one of my closest partners and one of the leaders most responsible for the financial and operational discipline we've built over the past several years.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

As COO, he will focus exclusively on the day-to-day operations of the company, driving greater discipline and consistency across our go-to-market organization, strengthening execution across functions, and leading key strategic priorities across the business. With Ashim focusing fully on the operations of the company, we are making a planned leadership transition in finance, with Hitesh Ramani succeeding him as Chief Financial Officer. This is a logical next step and reflects the strength and depth of the leadership team we've built. Hitesh joined us in 2021 as Chief Accounting Officer and has served as Deputy CFO for the past two years, working closely alongside Ashim across the finance organization. He has been a critical partner through every major milestone, including our IPO, and has helped build the financial rigor and discipline we have today.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Given Hitesh's existing responsibilities and deep knowledge of the business, we expect a very smooth transition and significant continuity across the finance organization. With Ashim remaining as COO, he and Hitesh will continue to work closely together in their respective roles. Together, these changes give us greater focus across operations and finance, with two proven leaders in critical roles as we scale. I am excited to continue working closely with Ashim and Hitesh, and I am confident in the leadership team we have in place and our ability to execute against the opportunity ahead. Now, turning to our quarterly results. We delivered a strong second quarter, once again beating guidance across the top and bottom line. ARR reached $1.938 billion, up 12% YoY, driven by $37 million of net new ARR and revenue of $410 million, up 13% YoY.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

We grew second quarter non-GAAP operating income to $89 million, a 22% margin, and up over 400 basis points YoY, driven by improved operational efficiency and disciplined execution across the business. Behind these results, we are seeing the strategy I just described play out with customers. 18 of our top 20 deals this quarter included AI, demonstrating how increasingly central AI has become to our largest customer engagements. Customers are expanding from individual automation use cases into broader end-to-end processes, adopting more of the UiPath platform, and in a number of cases, consolidating automation and AI workloads onto UiPath. We are seeing this result in larger expansions where AI is attached to the deal. A global insurance provider is a strong example. In a seven-figure expansion, they are modernizing beneficiary claims, expanding their use of IXP, Maestro agents, and robots.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

With UiPath FORWARD deployed engineers supporting implementation, Maestro connects document intake, beneficiary analysis, orchestration, exceptions, and human in the loop work into one governed end-to-end process. Because UiPath was already embedded in their ecosystem, they could move quickly on this use case and build on the same foundation as they modernize additional processes across the organization. In the public sector, the Department of War expanded its partnership with UiPath to support its clean audit initiative across the military services. Building on its deterministic foundation, the department is adding UiPath Autopilot, our IDP solutions, and test automation to automate critical audit and reconciliation work. We are also seeing governance and reliability become real competitive differentiators. A leading financial institution chose UiPath over other orchestration providers as its single platform for end-to-end processes.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Maestro was the only solution able to orchestrate across their homegrown applications while meeting the governance and compliance requirements at scale. It is already in production on a critical revenue channel process, combining deterministic automation with human in the loop safeguards. These are not isolated examples. Across both new logos and expansions, we are seeing customers standardize on UiPath and consolidate point solutions onto our platform. A leading U.S. regional bank is consolidating its entire automation program onto UiPath using Test Cloud for conversion testing and agentic processes across fraud and compliance to help manage risk through a significant module. One of Canada's largest financial services companies is working with Ashling Partners to migrate its entire automation footprint to UiPath, and plans to use coding agents to power that migration with the goal of lowering maintenance costs and accelerating time to value.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

On the expansion side, a Fortune 200 financial services firm is moving all their automation needs onto UiPath in a multimillion-dollar CIO-driven initiative while expanding their use of UiPath Test Cloud to test the investment management software they deploy to customers. The common thread across these wins is consolidation. As customers think about automation and AI together, we are increasingly seeing them look for one platform that can build, orchestrate, test, and govern the entire process. I am excited about the results we are seeing from coding agents pilots and implementation. Our initial results from our forward-deployed engineers are that coding agents reduce effort by nearly 60%. As we build on this, it has transformational impacts on our customers' time to value and overall TCO. We are seeing the same potential with customers like a leading US Energy Company.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

They are using Cursor with UiPath across the entire automation lifecycle, from architecture and development, from testing, code review, and production deployment. The coding agent directly creates UiPath workflows, while our platform keeps the development process governed and standardized. This isn't just about AI writing code faster, it's about making the entire automation lifecycle faster. That's an important part of why we believe AI expands the automation market. It doesn't just create new use cases, it lowers the cost and effort required to build them. Moreover, to speed up the implementation even further, we announced a new developer-friendly workflow automation tool in public preview. It lets developers use coding agents they already work with, like Raw Code, Codex, Cursor, and GitHub Copilot, to both orchestrate business processes and automate manual tasks via API and agents, combining the speed of AI-native development with the governance enterprises need.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Our horizontal platform remains a core strength, giving customers one platform to automate and orchestrate processes across functions, systems, and technologies. Increasingly, we are pairing that horizontal strength with vertical and outcome-oriented solutions that bring us directly to line of businesses buyers around specific business outcomes, while creating a natural entry point for broader platform adoption. This quarter, we saw strong traction with customers, including a Fortune Global 500 manufacturer, where we are modernizing their accounts payable operations with our Office of the CFO invoice solution, automating roughly 700,000 invoices annually. What won them over is exactly what our approach is built to deliver: 96% document processing accuracy in the proof of concept, automated supplier communications, rich operational dashboards, an unexpected 50% reduction in both invoice handling time and support.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

In healthcare, a leading U.S. health system chose our denials resolution solution to automate medical claim denials with their revenue cycle management process. The solution will help automate appeal creation and submission across inpatient and outpatient operations, allowing them to pursue millions of dollars in claims that previously fell below the threshold for manual review, and potentially recover meaningful additional revenue. WorkFusion extends that approach further into financial services. The integration is progressing in line with plan, and we are encouraged by the customer response and the pipeline that is building. Its purpose-built AI agents for financial crimes and compliance give customers a more complete outcome-oriented offering out of the box. Testing is another area where we continue to expand our reach, particularly through our partner ecosystem.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

We recently expanded our partnership with Cognizant, which will embed UiPath Test Cloud into its testing-as-a-service and many services offerings, helping customers move from manual script-based testing towards agentic testing. Cognizant will also help scale Test Cloud onboarding and adoption through its global delivery model. Before I close, I am also pleased to welcome Yazdi Bagli to our board of directors. Yazdi brings deep technology operations and enterprise transformation experience from Kaiser Permanente, Walmart, and Procter & Gamble, and I am excited for the perspective he will bring to UiPath. Finally, we are looking forward to seeing many of you in Las Vegas next month. We will kick off with our Investor Day on September 22, where we will share more on our long-term strategy and product roadmap, followed by FUSION, our annual user conference from September 23 through 25.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

We have a lot to share, and I hope to see many of you there. Please reach out to our investor relations team for more information on our Investor Day. With that, I will turn the call over to Ashim.

Ashim Gupta
Ashim Gupta
COO at UiPath

Thank you, Daniel, and good afternoon, everyone. I am incredibly proud of what our finance team has accomplished, and I also want to congratulate Hitesh, who has been an incredible partner and leader in our organization. Hitesh and I have worked side by side for many years, and there is no one better prepared to lead our finance organization. As I fully focus on my role as Chief Operating Officer, I am excited to work closely across the company to drive consistent execution and help scale the business. A big part of that is continuing to strengthen our go-to-market execution. We are spending a lot of time with our sales leaders on account segmentation, making sure we have the right resources and strategy against the right opportunities while working across the leadership team to bring greater connectivity to how we take the breadth of our platform to market.

Ashim Gupta
Ashim Gupta
COO at UiPath

The same focus extends to how we drive adoption and utilization across our customer base and how we work with our partners. These have been important priorities for us, and we are continuing to strengthen the connection across our field, partners, and customers to drive expansion and make it easier for customers to adopt more of the platform. We have a strong leadership team, tremendous innovation across the platform, and a significant market opportunity ahead of us. I am excited about what we can accomplish together. In a few minutes, Hitesh will take you through our guidance for the third quarter and the remainder of the year. First, I will walk through our results for the second quarter. Turning to the quarter, unless otherwise indicated, I will be discussing results on a non-GAAP basis, and all growth rates are YoY.

Ashim Gupta
Ashim Gupta
COO at UiPath

I also want to note that since we price and sell in local currency, fluctuation in FX rates impacts results. As we go forward, we will provide the impact of FX for both the incremental impact since our prior guidance and the YoY impact. Second quarter revenue grew to $410 million, an increase of 13%. Normalizing for the YoY FX headwind of approximately $8 million, revenue grew 16%. This included an incremental $1 million FX headwind since the time of guidance and our first quarter earnings call. The YoY FX headwind was driven by the Japanese yen, the Romanian leu, and the Indian rupee. ARR totaled $1.938 billion, an increase of 12%. This included a $1 million YoY FX tailwind and no incremental impact since we guided our first quarter earnings call.

Ashim Gupta
Ashim Gupta
COO at UiPath

Net new ARR was $37 million, up from $31 million in the prior quarter. The YoY FX tailwind was driven by the euro. We ended the quarter with approximately $1.3 billion in cloud ARR, which includes both hybrid and SaaS, and an increase of more than 19%. We ended the quarter with approximately 10,350 customers, with attrition continuing to be concentrated among our smallest customers. While customers with more than $30,000 in ARR increased 6% YoY. This quarter, we signed one of our largest new logos in company history, a top Canadian bank looking for a platform that could support their evolution to agentic workflows. We demonstrated that with an agentic proof of concept for their third-party demands process, bringing together agents, robots, people, and systems, all orchestrated by Maestro with the governance and compliance required at scale.

Ashim Gupta
Ashim Gupta
COO at UiPath

This win reflects our customer strategy of adding new enterprise customers with significant expansion potential. This quarter, we also added logos including Flexsteel, Azul, and Purdue Federal Credit Union. Our strategy is increasingly focused on winning and expanding within the world's largest enterprises, and we're seeing that strategy work. Customers with $100,000 or more in ARR increased 10% to $2,666, while customers with $1 million or more in ARR increased 21% to $387. Our retention metrics also remained strong. Our dollar-based gross retention remained best in class at 97%, and our dollar-based net retention rate was 109%, a 2-point increase year-to-date, demonstrating stabilization across the business. Adjusting for FX, dollar-based net retention rate was 108%. Turning back to the quarter. Remaining performance obligations increased to $1.378 billion, up 14%. Normalizing for the FX headwind, which was approximately $19 million, RPO grew 16%.

Ashim Gupta
Ashim Gupta
COO at UiPath

Current RPO increased to $901 million, up 14%. Turning to expenses. We delivered second quarter overall gross margin of 82%, and software gross margin was 90%. Second quarter operating expenses were $247 million. GAAP operating income was $32 million, our fourth consecutive quarter of GAAP profitability, up from the prior year GAAP operating loss of $20 million. GAAP operating income included $45 million of stock-based compensation expense, compared to $78 million in the prior year, a decrease of 42%. As a percentage of revenue, stock-based compensation was 11%, down over 1,000 basis points from the prior year. Second quarter non-GAAP operating income was $89 million, representing a 22% margin, up over 400 basis points YoY, and driven by our continued focus on operational efficiency.

Ashim Gupta
Ashim Gupta
COO at UiPath

Second quarter non-GAAP adjusted free cash flow was $31 million, compared to $45 million in the prior year quarter, driven primarily by the timing of tax-related payments. We ended the quarter with a healthy balance sheet of $1.4 billion in cash equivalents, and marketable securities, and no debt. During the second quarter, we repurchased 2.4 million shares at an average price of $9.63. Now, I would like to hand it over to Hitesh to go through guidance.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Thank you, Ashim, for your partnership and mentorship over the years. I am excited to step into this role and to build on the strong foundation you have put in place. Turning to guidance, our philosophy here is unchanged. We guide to what we see in front of us, and we maintain a prudent outlook. We are pleased with the team's execution in what continues to be a variable macroeconomic environment. Before I walk through the specifics of guidance, beginning this quarter, we will provide the impact of FX for both the incremental impact since our prior guidance and the YoY impact. As Ashim mentioned earlier, our results reflect movements across several currencies, including the EUR, JPY, INR, and RON. Turning to guidance. For the third fiscal quarter 2027, we expect revenue in the range of $440 million-$445 million.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

This includes no incremental FX impact since the time of our last guide, and a $10 million YoY FX headwind. ARR in the range of $1.992 billion to $1.997 billion. This includes a $1 million incremental FX headwind since the time of our last guide and a $4 million YoY FX headwind. Non-GAAP operating income of approximately $100 million. We expect third quarter basic share count to be approximately 523 million shares. For the fiscal full year 2027, we expect revenue in the range of $1.789 billion-$1.794 billion. This includes a $1 million incremental FX headwind since the time of our last guide and $20 million YoY FX headwind, inclusive of $2 million headwind that was realized in the first half of the year and an expected headwind of $18 million in the second half of the year.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

ARR in the range of $2.065 billion-$2.070 billion. This includes a $1 million incremental FX headwind since the time of our last guide and a $5 million YoY FX tailwind, inclusive of $10 million tailwind realized in the first half, partially offset by expected headwinds in the second half of the year. Non-GAAP operating income of approximately $445 million. Finally, we continue to expect fiscal full year 2027 non-GAAP adjusted free cash flow of approximately $425 million and a non-GAAP gross margin of approximately 84%. Thank you for joining us today, and we look forward to speaking with many of you during the quarter. With that, I will now turn the call over to the operator. Operator, please poll for questions.

Operator

We will now move to our Q&A, question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found on the bottom of your webinar application. When you are called upon, please unmute your line and ask your question. If you have joined via the phone line, please dial star five to raise your hand. Please note that participants will be limited to one question and one follow-up. We will now pause briefly to assemble the queue. Our first question will come from Sanjit Singh with Morgan Stanley. Your line is open. Please go ahead.

Sanjit Singh
Sanjit Singh
Analyst at Morgan Stanley

Hi, can you hear me?

Ashim Gupta
Ashim Gupta
COO at UiPath

Loud and clear, Sanjit.

Allise Furlani
Allise Furlani
VP of Investor Relations at UiPath

Sanjit, we cannot hear you.

Operator

Sanjit, are you there for your question? Sanjit seems to be having some technical difficulties. We will come back to him and go to our next question. Our next question is going to come from Michael Turrin with Wells Fargo. Your line is open. Please ask your question.

Analyst at Wells Fargo

Hi, this is Phil on for Michael. I have a quick question on the FDEs. It sounds like with coding agents reducing the FDE implementations quite significantly, how much more deployment capacity are you guys getting for FDE, and does that change any of your hiring plans as customer demand scales?

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Yeah. Hi, Phil. We are in a kind of proving stage at this point to understand how much incremental value we get from coding agents in conjunction with FDEs. Our initial results are very encouraging and if, I believe that we are seeing a positive trajectory. I think this is not so much about how many FDEs we plan to hire, but it is about how much our customers can accelerate their time to value. This is an equally important technology for our partners as well as many of our customers use the implementation services provided by our partners. We will keep you up to date. This is a very important focus for us going forward and a big focus of the entire Products and Engineering organization is to keep improving the performance of coding agents on our platform.

Analyst at Wells Fargo

Thank you.

Operator

Your next question will come from Bryan Bergin with TD Cowen. Your line is open. Please go ahead.

Bryan Bergin
Bryan Bergin
Analyst at TD Cowen

Hi, guys. Good afternoon. Thanks for the question. Hitesh, congrats to you on the CFO role.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Thank you.

Bryan Bergin
Bryan Bergin
Analyst at TD Cowen

Wanted to just get a sense, if you can give us an update on your approach in monetization here on agentic and AI solutions. How is that conversation evolving with clients? Can you also comment on how model costs and tokenomics are influencing the contracting appetite for the broader deals with agentic and deterministic?

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Yeah. We continue to see an increased appetite from our customers to get a platform that combines, I would say, intelligence with exactness. Our platform, it's best in the world in process orchestration, in task automation, in document processing. We are quite agnostic in supporting the best agentic frameworks in the world, like LangChain, and Claude Agent SDK, and Codex harness, and some others. We are model agnostic. I think this combination, it's extremely appealing to our customers. We provide basically the rails for running the business while they can choose the flavor of intelligence that they have to deliver.

Bryan Bergin
Bryan Bergin
Analyst at TD Cowen

Okay. Thank you. My follow-up, just maybe can you speak to the improvement of net new ARR in 2Q? Obviously, trying to just distill how much is coming from AI-related products. Any way you can help try to break that down between contribution from penetration of new agentic AI offering deployments into your existing clients versus perhaps landing newer clients with the full suite here? Certainly encouraging to hear the stat on that top 20 largest deals you gave us. Sticking with net new ARR, just any caveats as we look to the implied second half that you've guided to?

Ashim Gupta
Ashim Gupta
COO at UiPath

Yeah, I'll turn it over to Hitesh to answer on guidance. Look, we're right now reporting ARR product periodically as we talk about, Bryan, but the stats that you talk about, they're encouraging. I think there is more encouragement when we listen to our customer calls and our sales team, the executive touch points that we're having. The reality is they are making the deals have higher ROI, which leads to larger deal values. What is also encouraging is we're really attacking larger, more complex problems. I think as the world continues to change, that increases our stickiness, so it really has a twofold area, giving us more upfront, but making us more strategic within the customer. We're really pleased with the progress just across the platform and our ability to deliver that. Hitesh, if you want to talk about guidance for it.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Yeah, sure, Ashim. As I mentioned, our philosophy as it relates to guidance has remained unchanged. We guide to what we see in front of us. Also, we take a prudent approach. With regards to platform, as Ashim mentioned, the platform positioning is resonating extremely well with our customers. I myself met with three of our customers this past week, and every single conversation is resonating very well. As we also mentioned, 18 of our top 20 deals included AI this past quarter. We are making this equation into account as we think about our guidance for not only Q3, but also for Q4.

Bryan Bergin
Bryan Bergin
Analyst at TD Cowen

Thank you.

Operator

Your next question will come from Scott Berg with Needham & Company. Your line is open. Please go ahead.

Scott Berg
Scott Berg
Analyst at Needham & Company

Hi, everyone. Nice quarter. Thanks for taking my questions. Daniel, I wanted to start on go-to-market and some of the sales successes you seem to be having. You have talked a lot the last couple of quarters about improved execution there, but it seems to be meeting an end market that is also seeing some improved demand. Where do you think you are in that cycle? Are you back now on a sales execution level that you want to be 100%, or do you still feel like you have a little ways to go to hit your stride properly?

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

I think we are working right now on both ends of the spectrum. I think on the product side, we are making the most innovative steps that I think we ever made in our product. We are ready to announce at our big FUSION event, basically our new doctrine about how we are seeing the adoption of AI and orchestration and automation across of an enterprise. On the sales side, I think, given the market dynamic, I think we have started to understand a bit more how our customers think about the AI adoption. I think in a way among our existing customers, we are seeing a reduced confusion, if I can say, about AI.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

They understood, I think it's a better understanding on when it's best to use AI, when it's best to use automation, and how they coexist with each other, which I cannot say so much about customers at large.

Scott Berg
Scott Berg
Analyst at Needham & Company

Yeah.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

When we go after new logos, it might be a bit of a different conversation. Overall, we are also seeing an increased appetite in the market for outcome-based deals, which it's an interesting area for us. I think at this point, they are just scattered and really across the globe. But it might become a much bigger trend, but we are watching closely to understand how we play on these both ends.

Scott Berg
Scott Berg
Analyst at Needham & Company

Understood. Helpful there. Ashim, as I look at your net revenue retention metrics, they've been incredibly stable the last six quarters. Maybe you'll cover this in your Analyst Day coming up, but how do we think about net revenue retention over the interim period here? You have a lot more to sell. Sounds like the demand environment's certainly improving a little bit for you all. My guess is customer expansions start to come back versus maybe what we've seen a couple of years ago, but can that number be back above 110% for any extended period of time, or is this high 100% range, 108%, 109% the right way to think about NRR for the near term?

Ashim Gupta
Ashim Gupta
COO at UiPath

No, look, that's what we're planning for. I think the progress we've made has actually been really phenomenal. We ended last year at 106%, so we are up three points already, as we move to that goal. I would say the trajectory is upward in a stable way, which I think is really good versus kind of up and down. We feel very good about it. To your point, we have more products that we are scaling into our customers, as Daniel mentioned. As I mentioned, I think the sales execution continues to improve. Frankly, our focus on consumption is also very critical in that discussion and the standing. We actually feel very good about that trajectory. We'll talk about it more. We obviously don't do long-term forecasting around these key metrics, but the trend is positive.

Ashim Gupta
Ashim Gupta
COO at UiPath

I would also note, the movement upwards and stability is happening at higher and higher scales, which speaks to the expansion on a dollar basis expanding. That is the color that I would give there.

Scott Berg
Scott Berg
Analyst at Needham & Company

Understood. Thanks for taking my questions.

Operator

Your next question will come from Sanjit Singh with Morgan Stanley. Your line is open. Please go ahead.

Sanjit Singh
Sanjit Singh
Analyst at Morgan Stanley

Yeah, thank you for taking the question. A two-parter, maybe one for Ashim. As we look to the federal business, in Q3, their fiscal year end is coming up at the end of September. Just thoughts on the federal pipeline opportunity, how that is shaping up. Then, a question for Daniel. I think you and I have been talking about what sort of playbooks and use cases are resonating right now. I think you have called out software testing as something that is particularly resonating. Has there been other sort of use cases, whether it is industry-specific or cross-industry specific use cases that have started to resonate in Q2?

Ashim Gupta
Ashim Gupta
COO at UiPath

Yeah. So look, I think our federal business is doing a really exceptional job. Joe Perino is the leader there. I think him and the team has really impressed us and the entire team just with how close they are getting to the customers and the agencies, partnering with incredible partners that are doing transformative work, in the Department of War, in many of the agencies well beyond it. And applying and learning some of the areas that we have in our healthcare business to some of the healthcare processes within the government. All of those things are shaping up very nice with the pipeline. And the work that we have done in terms of getting close to understanding and influencing the environment there has been really phenomenal. So we are actually very pleased with the trajectory of the federal business.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Yeah, and on the use cases, we are very excited here about our use case sellings and our vertical solutions approaches. So besides tests, we are seeing increased demand around revenue cycle management and, of course, on financial crimes where we see good pipeline creation, but also office of the CFO is a place where we are traditionally extremely strong, and also we launched recently our solution in financial services for loan originating. So overall, this is becoming a big area of focus for us as we believe that the vertical selling, solution selling has the capability of pulling our entire platform. And traditionally, our business model was a lot on land and expand, and this really help us to continue that motion.

Sanjit Singh
Sanjit Singh
Analyst at Morgan Stanley

Appreciate the thoughts, Daniel. Thank you.

Operator

Your next question will come from Jacob Zerbib with William Blair. Your line is open. Please go ahead.

Jacob Zerbib
Jacob Zerbib
Analyst at William Blair

Hi, how are you? This is Jacob. I am for Pat McIlwee, and thank you for taking my question. You spoke a little bit about less confusion around AI in the market, which is great to see. Can you talk a little bit about how your sales team is adapting to this new environment, and particularly as it relates to large new customer lands?

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

I think we are doing a lot of education in the market of what is basically the seam between where AI is best and where exact execution is best. As I said in the previous answer, we are kind of changing our sales approach to be much more use case based selling. We have starting this trend in our U.S. business couple of years ago. We perfected it here, and we plan to roll it more across our entire GTM organization.

Jacob Zerbib
Jacob Zerbib
Analyst at William Blair

Got it. Thank you.

Operator

Your next question will come from Raimo Lenschow with Barclays. Your line is open. Please go ahead.

Raimo Lenschow
Raimo Lenschow
Analyst at Barclays

Oh, perfect. Thank you. Ashim, all the best. First of all, and then two questions. Daniel, the one thing that is coming up here today, and that is probably why we have share reaction here after hour market is that it looks like there is a new AI model coming out from one of the big frontier guys that apparently is so much better in doing jobs or doing workflows. I do not want you to specifically answer that, but in your conversations with clients and with customers, how do you think about that? Obviously, AI is going to get better, but you guys are more in the deterministic world. How do you think about the workflows you guys are doing versus the workflows you kind of want to share or AI should be doing?

Raimo Lenschow
Raimo Lenschow
Analyst at Barclays

I know it is a bit of a fundamental question again, but it is just coming up again, and it would be good to go through that again. Then I have one follow-up for Ashim.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Look, I had many discussions with our customers across the last few months. I think if you look at AI is getting more powerful with the day, obviously. But there is an interesting limitation of AI, which I want to point it to, which is the AI cannot learn on the job. When you hire an employee, you expect that you do not give them manual. This is how our business run. No company is able to have this manual. An employee learns by reading some documentation, but learning from other people, being in meetings, talking to customers. It is a continuous learning. So they get transformed by this experience. That is not true for AI. It is the same model you apply to all enterprises. In every question you ask AI, you basically have to provide the entire modus operandi of your enterprise.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

If you think of this limitation, it is becoming clearly that enterprises will have to create what I call a map of work, where you will have to describe in a very specific way how the enterprise work. You will have to also put as much effort as possible into building the framework that gives your rails in how the business operate. In my opinion, everything that can be done by automation and orchestration should be done by that, because it is exact, it is reliable, it is tokenless, it costs less. Then AI is basically surrounding into this enterprise framework. In a way, you can look at our platform like an enterprise harness that can control and give AI all the information required to run an enterprise. But all the customers I talk to, they want these workflows to sit on their property, not on the model's property.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

All this manual that I am talking is their property. It is not model's company's properties. To me, that is really the best combination into having the enterprise framework that provides orchestration, automation, and that is the harness around the model. That would provide the best optionality for an enterprise.

Raimo Lenschow
Raimo Lenschow
Analyst at Barclays

Yep. Okay. Perfect. Yeah, makes sense. Ashim, if I think about ARR and revenue or the subscription revenue you were reporting, there is a relationship. Last couple of years, revenue growth ahead of what we have seen on ARR group. How do you think about that relationship, especially going forward, as we think about going from here? All the best. Thank you.

Ashim Gupta
Ashim Gupta
COO at UiPath

Thanks, Raimo. I am still here, but I appreciate everything, and I am super excited to partner with Hitesh and Daniel. Raimo, remember, we have the ASC 606 accounting phenomenon that is there. As we sell more of our total platform upfront, it changes the mix of licenses and the cloud-based software is particularly in some of the bundling of our platform. We will get into more of that at Investor Day, so to speak. There is still a minor SaaS headwind that hits there, but depending on the mix of the deals and where we are selling more platform, that can result in a mix shift between the subscription service revenue and the license revenue. That is really what it is. When you look at overall ARR, as we point to net new ARR, we are actually pleased with the acceleration that we are now seeing there. Right?

Ashim Gupta
Ashim Gupta
COO at UiPath

As I just want to emphasize that for everybody between 606 and beyond, last year, we were really going down YoY. First half of this year, first quarter, we were pretty well stable, and you can see the results there for second quarter in terms of the acceleration, and that really shows you what we feel is the better reflection of the business and its trajectory today.

Operator

Your next question will come from Terry Tillman with Truist Securities. Your line is open. Please go ahead.

Terry Tillman
Terry Tillman
Analyst at Truist Securities

Yeah. Can you all hear me okay?

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Yes, Terry.

Terry Tillman
Terry Tillman
Analyst at Truist Securities

Yeah. Hitesh, congrats to you on this expanded role as CFO. Two questions. The first question is just on the 18 of the top 20 deals, including some sort of AI product attached. I am curious, though, is it pretty similar in terms of that initial landing or impact, and was outcome-based monetization involved in any of those? Then I had a follow-up for Ashim.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Yeah. Again, the 18 of the top 20 deals which included AI is basically how we are seeing an excitement towards the platform from our customers. That is what we are seeing that, we are seeing whenever AI is part of, or the platform is part of the deal composition, the deal is naturally much larger than what we would have seen otherwise. That trajectory is there.

Terry Tillman
Terry Tillman
Analyst at Truist Securities

Okay. All right. Thanks for that, Hitesh.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Yeah. Perfect.

Terry Tillman
Terry Tillman
Analyst at Truist Securities

Yeah, absolutely I did. I have got the harder one for you, Ashim. I am kidding. Talking about strengthening execution and leading strategic priorities, I assume you have got a whole slew of things that are more low-hanging fruit, near-term things, and then maybe as you all end the year and you continue to evolve products, maybe there are some bigger things into next year. Anything at all you could share early on some excitement in areas you see where you could have a quick impact? Thank you.

Ashim Gupta
Ashim Gupta
COO at UiPath

Yeah, I think we're already having quick impact. I think especially in terms of getting off to a fast start post-sale, I've seen a really remarkable execution and turnaround from our teams. Those turnaround times are now happening pre-deal closure, where our teams are moving faster on the delivery area. The second piece is just the coordination between our partners, our services team, and our FDE team as we go through complex implementations. I feel like those are areas where, while we can always improve, we're seeing some of the low-hanging fruit getting addressed there. I will tell you, I'm just super excited by the delivery and the connectivity that we see with the product team.

Ashim Gupta
Ashim Gupta
COO at UiPath

Raghu Malpani, our CTO, is incredibly field-oriented, so that connection between product and delivery and go-to-market, I think is something that as it continues to strengthen, really gives us a right to win as we take on larger, more complex problems for our customer.

Terry Tillman
Terry Tillman
Analyst at Truist Securities

Got it. Thank you.

Operator

Your next question will come from Vinod with Evercore. Your line is open. Please go ahead.

Analyst at Evercore

Hi, everyone. Thank you for taking my question. You mentioned improved sales execution. Can you talk about some of the specific factors that are driving the improvement? Are there any changes to how you're compensating reps to incentivize them to try out more of your AI products? Thank you.

Ashim Gupta
Ashim Gupta
COO at UiPath

Yeah. I think the first thing is it's really the team on the ground. We have incredible leaders across our, what I would say our market units, like U.S. financial services, U.S. healthcare public sector, our manufacturing, and what we call summit, like our industrial and manufacturing enterprises, and really globally. Many of them have been in seat for a good period of time. I think it really starts upfront with their focus, right? It's less about Daniel, myself, and top-level leadership, but really the expertise that is being deployed on the field and just the message around customer first and trying to continue to cut the bureaucracy that we have over the last two years, and we still can do more, to be super clear on that. I think that's one.

Ashim Gupta
Ashim Gupta
COO at UiPath

The second piece is I do think the cross-functional connectivity between product, sales, marketing, I think that is continuing to strengthen. It's very fast-paced, so how do we enable our sales teams faster and more thoroughly with better content? Those are areas of focus for us that are being driven really by a number of leaders across the company. In terms of compensation, we of course use sales comp as a tool to drive it. The reality is, in a lot of customers, there is a pull towards a broader platform. Frankly, combining probabilistic with deterministic automation really is a part of what we have. As we launch new products, we of course, try to do incentives, whether that's spiffs or uplifts on quota retirements. We do that selectively, and we're really pleased with the results.

Ashim Gupta
Ashim Gupta
COO at UiPath

We have to continue to do that as the environment and our product portfolio moves.

Analyst at Evercore

Thank you.

Operator

Your next question will come from Sanika Merchant with RBC Capital. Your line is open. Please go ahead.

Sanika Merchant
Sanika Merchant
Analyst at RBC Capital

Hey, guys. This is Sanika on for Matt Hedberg from RBC. Thanks so much for taking the question, and congrats on the quarter. You've talked about the positive traction you're seeing on your agentic offerings. Can you talk through how you're thinking about pricing for the company's agentic offerings over time, especially as customer adoption of these offerings starts to scale? Thanks.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Yeah. I think we are still experiencing with different pricing model on our agentic. We introduced recently a transaction-based pricing that it's all-inclusive in our process orchestration of all the necessary calls that one has to do to complete a transaction. I would say that probably we are going more towards outcome-based pricing that would be inclusive of the tokens required to complete a transaction.

Sanika Merchant
Sanika Merchant
Analyst at RBC Capital

Got it. Super helpful. Thank you. Just as a follow-up, you have talked about ARR acceleration and also talked about reaching the $2 billion ARR milestone. What would you say are the most important factors that could drive you to the higher end of your fiscal year 2027 ARR expectations? Are there any puts or takes you would call out that we should keep in mind? Thanks.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Yeah. Again, as I mentioned earlier, we are seeing significant alignment with our customers, and the platform story is resonating extremely well with our customers, especially the combination of deterministic and agentic which is helping us expand the deal size. That is one of the key things which we are excited about, and that is something which is baked into our guidance, as we think about Q3 and Q4.

Sanika Merchant
Sanika Merchant
Analyst at RBC Capital

Thanks, guys. Congrats.

Hitesh Ramani
Hitesh Ramani
CFO at UiPath

Thank you.

Operator

Your next question will come from Keith Bachman with BMO Capital Markets. Your line is open. Please go ahead.

Analyst at BMO Capital Markets

Hi. This is Jonathan on for Keith. Thanks for taking my question. Daniel, I wanted to direct this to you. You have talked a lot about governance and orchestration as customers are moving AI initiatives into production. I wanted to ask, as you are engaging with customers today, where are you seeing the greatest urgency? Do those discussions tend to start with governance and control requirements or with broader orchestration initiatives? Thanks.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

I would say that there is an increased appetite of our customers to get the breadth of our platform. I think, in a way, our platform aligns very well with the Gartner Magic Quadrant that is called Business Orchestration and Automation Technologies. I do not think necessarily that it is customers are waking up or thinking, I want to buy orchestration. But I think definitely our customers are waking up thinking, what is the best platform that can help me get the outcomes, run the processes faster, with less human errors, and bringing the AI, but in a way that preserve my intellectual property? I think this combination of factors is what drives the platform at this point.

Analyst at BMO Capital Markets

Great. Thank you.

Operator

This concludes our Q&A session. I would now like to turn the call back over to management for closing remarks.

Daniel Dines
Daniel Dines
Founder and CEO at UiPath

Thank you so much for all the questions. We are looking forward to seeing as many of you during the next few months, and especially at our FUSION event in Vegas. Thank you.

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