After incurring significant losses throughout this year, circumstances within the software market appeared to have brightened, particularly for UiPath (NYSE:PATH). Specializing in robotic process automation, UiPath delivered an outstanding earnings beat for the third quarter. The surprising result catapulted PATH stock on Friday, with shares initially gaining 13% before settling up 12%.
According to Zacks Equity Research, UiPath delivered earnings per share of 5 cents, beating out the consensus target for a loss of 4 cents. In addition, the latest figure compared favorably to the year-ago quarter’s result of breakeven earnings. These stats are adjusted for non-recurring items.
On the revenue front, the robotics software specialist posted $262.74 million, beating Zacks’ consensus target by 5.92%. As with the bottom line, the latest sales tally compared favorably to Q3 2021’s result of $220.82 million.
According to Zacks, UiPath exceeded both EPS and revenue targets four times over the last four quarters.
Moreover, the software solutions provider’s annualized renewal run rate (increased 36% to $1.11 billion from the year-ago period. Per MarketWatch, “ARR is a metric often used by software-as-a-service companies to show how much revenue the company can expect based on subscriptions.”)
Adding to the positive sentiment toward PATH stock, management disclosed it anticipates Q4 revenue to hit between $277 million to $279 million and ARR to reach between $1.17 billion to $1.18 billion. Analysts forecast revenue of $276.9 million and ARR of about $1.16 billion.
PATH Stock Helps Buoy the Software Segment
Naturally, the dramatic reversal against earlier dour expectations sent PATH stock skyrocketing. Primarily, the development bodes well for UiPath, though it also encourages the wider software sector.
“We are pleased with our third quarter fiscal 2023 results as ARR grew 36 percent year-over-year and we delivered meaningful non-GAAP operating margin expansion,” said Rob Enslin, UiPath co-CEO. “Our new go-to-market initiatives are driving results and resonating with customers. We closed several notable third quarter deals using this value-selling approach and are widely engaged with both new and existing customers as we head into the last quarter of fiscal year 2023.”
Just as importantly to market observers, the dramatic lift in PATH stock may represent the early innings of a software sector recovery. Earlier this week, shares of financial and human-capital management software provider Workday (NASDAQ:WDAY) popped up double digits. The company delivered a top-and-bottom-line earnings beat for its Q3 report.
Adding to the enthusiasm for PATH stock, shares gained nearly 30% over the trailing month. This dynamic reflects investors willing to take a shot that the bottom for the underlying sector is in. Still, UiPath remains a risky proposition. Since the start of the year, PATH is underwater to the tune of 67%. Still, the latest Q3 report may go a long way in shifting perceptions.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.