UiPath Inc (PATH) 2026 Q3 法說會逐字稿

Greetings, and welcome to the UiPath third quarter 2026 earnings conference call. (Operator Instructions) Please note that this call is being recorded.

I will now turn the conference over to your host, Allise Furlani, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon and thank you for joining us today to review UiPath's third quarter fiscal 2026 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; and Ashim Gupta, Chief Operating and Financial Officer, to deliver our prepared comments and answer questions. Our earnings press release and financial supplemental materials are posted on the UI Pass Investor Relations website. These materials include GAAP to non-GAAP reconciliations.

We will be discussing non-GAAP metrics on today's call. This afternoon's call includes forward-looking statements regarding our financial guidance for the fourth quarter fiscal year 2026 and our ability to drive and accelerate future growth and operational efficiency and grow our platform product offerings and market opportunity. Actual results may differ materially from those 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 the 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 31, 2025, and our subsequent reports filed with the SEC. Forward-looking statements made on this call reflect our views as of today. 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 comments to our Investor Relations website immediately following the conclusion of this call. In addition, please note that all comparisons are year-over-year, unless otherwise indicated.

Now I would like to hand the call over to Daniel.

Thank you, Allise. Good afternoon, everyone. Thanks for joining us. We are pleased with our performance in the quarter, which was driven by team's focus, consistent execution and progress across our strategic priorities. Our automation strategy combining the reliability of deterministic automation with the intelligence and adaptability of agentic AI continues to align with what customers want most: trusted enterprise-grade automation that delivers tangible ROI fast.

We've always believed that our approach to automation, agents and orchestration creates a durable competitive edge. This quarter's results reinforce the value of our platform and the improved execution from our teams. We beat the high end of our guidance across all metrics levering third quarter ARR of $1.78 billion, up 11%. Further reinforcing my conviction that our business is stabilizing and being driven by $59 million in net new ARR. Revenue was $411 million, an increase of 16%.

Our disciplined approach to operational efficiency continues to strengthen profitability, resulting in our first GAAP profitable third quarter while increasing non-GAAP operating income to $88 million or a 21% margin, and we are on track to be GAAP profitable for the full year 2026 for the first time.

The momentum we are seeing in the market isn't just in our results. It's in how customers and partners are engaging with UiPath. You could see that momentum in action at Fusion where thousands of customers, partners and developers joined us in Las Vegas to see how agentic AI is delivering measurable ROI today. We showcased advancements across the UiPath platform, including new integrations with partners like OpenAI, Microsoft, NVIDIA, Google and Snowflake.

And real customer storage where we had leading enterprises across key verticals, sharing how they are transforming mission-critical processes with agentic automation. Customers tell us they get the most impact from a unified platform, bringing together deterministic automation, agentic intelligence and process orchestration.

And we are seeing that play out that enterprises move quickly from pilots to production. Over 950 companies are developing agents, and there have been more than 365,000 processes orchestrated with Maestro across our platform. A powerful example is one of the world's largest investment management firms which shows UiPath for Maestro's vendor-agnostic architecture and ability to connect systems.

They've already demonstrated measurable impact through multiple agentic POCs integrating with ServiceNow, Confluence and specialized teams to orchestrate end-to-end workflows and delivering a 95% reduction in time to value and tens of millions in projected savings. With more than 260 automations, they expanded this quarter to increase their adoption of agentic automation. And together with ash link, has identified over 40 high-value use cases expect it to generate more than $200 million in savings over the next three years.

These stories demonstrate how our innovation is meeting customers where they are and helping them scale. And it's that customer energy that inspire many of the new capabilities we announced at FUSION. One of the most exciting is UiPath screen play, where we are combining traditional RPA with the power of LLM build more reliable automation. Screen play, unstrand intent, build multistep plans and execute them autonomously, giving developers and business users a faster way to automate complex UI tasks.

Our screenplay technology is one of the best position in the computer use benchmark or OS. We are also helping customers move from pilot to production faster through continued enhancement to agent builders, including a new visual canvas for debugging and optimization and reusable templates that make automation easier to scale that focus on usability is driving real customer success.

A great example is USI Insurance Services which selected UiPath because of our multi-agent orchestration capabilities. Working with, are automating a complex workflow where UiPath agents and robots process incoming requests and generate output, all orchestrated by Maestro. USI expects over $32 million in savings over the next three years.

As more customers scale their agentic automation programs, we're expanding that what agents can do, especially in document heavy processes. This quarter, we introduced agentic capabilities to our intelligent extraction and processing, our IXP product which delivers specialized extraction and validation agents that handle complex nondeterministic scenarios and reduce manual review. And with UiPath's autopilot for IXP, customers can automatically generate document template saving hours of setup time per project.

A great example is Core Well Health, which plans to leverage IXP to automate the processing of referral information into Epic, in addition to improving efficiency and currency, they are on track to redirect $1.5 million of labor savings this year and expect over $3 million next year. Something like this show how our innovation is helping customers turn manual document heavy work into intelligent automating processes.

And these strong results continue to earn us third-party recognition. We were named a leader in the inaugural Gartner Magic Quadrant for intelligent document processing which we believe highlights our capabilities for data and information extraction to help enterprises unlock value from their documents in the age of AI and agentic automation.

We are also recently recognized as a leader in the Gartner Maj quadrant for AI augmented software testing tools, which, in our view, validates our vision for a genetic testing and the results our customers achieved with UiPath Test cloud. One example is energy, which adopted at test cloud to address testing challenges across SAP and its digital apps. With a genetic testing and autonomous cells healing, they expect 30% better coverage faster cycles and almost $2.9 million in savings over three years.

And lastly, we are proud to be recognized by Everest Group as both a leader and star performer in the 2025 intelligent process automation platform and full suite IPAP peak metrics assessment, this recognition underscores the strength of our end-to-end platform, our innovation in agentic automation and AI integration and the tangible business impact we are delivering for customers. These recognitions highlight the strength of our unified platform, which connects every layer of automation from discovery to orchestration within a single governed system.

They also reinforce what we hear directly from customers. The power of our platform comes from how it works together. And at the center of that platform is Maestro, our orchestration engine. Maestro builds beyond managing automation it serves as the control plane for how work is orchestrated across the enterprise, powering through end-to-end automation at scale.

A powerful example is the leading US managed care provider that is leveraging UiPath agents, robots and my stroke to tackle a backlog of more than 140,000 provided appeals. They automated the entire workflow using agents to classify forms, robots to handle processing and Maestro to orchestrate the process.

The result is a streamlined operation targeting 80% autonomy in year one. As Maestro becomes more deeply embedded in customer operations, we are continuing to enhance its capabilities with new features like case management and process apps, Case management helps customers model and manage now running processes, while process apps enable customers to build tailored end user experiences with real-time visibility and actionable insights to drive proactive operational improvement.

In order to realize the value of agentic, customers need a strong foundation in deterministic. And this quarter, we announced the general availability of API workflows, which delivers API-centric automations that complement RPA and agents. We believe this strengthens our position as one of the industry's most comprehensive automation platform. We are continuing to expand our cloud footprint in important markets like Switzerland.

And at GITEX, we announced the launch of Automation Cloud in the UAE. This expansion gives customers the ability to run automation, AI agents and orchestration in a secure, locally hosted environment that meets regional data residency and governance requirement. The power of our platform really comes to life when it's applied to industry-specific challenges. We are focused on building vertical solutions that help customers accelerate our constant ROI.

The capabilities we gained through our peak acquisition earlier this year, are extending these vertical capabilities. By combining their industry-leading pricing and inventory optimization technology with Maestro and our broader platform capabilities with creating an agent merchandising, pricing and inventory solution with Debenhaams Group. We are taking this point genic solution to market with other leading retailers and manufacturers expanding the reach of our platform across key verticals.

These industry solutions are just one way we're helping customers realize fast term value. We're also enabling them through deep collaborations with global technology leaders. At FUSION, this collaboration came to life through new integrations, including with Microsoft Azure AI foundry, enabling UiPath agents to work seamlessly with Azure agents and models.

Using model context protocol, UiPath, expands integrations with Microsoft Copilot and empowers organizations with the trust and governance needed to run agents at scale. We announced a collaboration with open AI to deliver a ChatGPT connector bringing open AI's frontier model directly into enterprise workflow simplifying AI agent development and accelerating time to value. We also launched a new conversational agent with Google's Gemini models enabling natural voice-driven automation without complex coding.

Additionally, we introduced a new integration with NVIDIA, allowing organizations to enhance high trust workflows like fraud detection and health care with AI models deployed through NVIDIA NIM micro services. And finally, we partner with Snowflake's combined agentic automation with Snowflake Cortex AI, helping businesses to data insights into fast autonomous action.

While our technology partnerships expand what's possible with our platform, our go-to-market partners make that innovation real for customers. During the quarter, we expanded our collaboration with Deloitte to help organizations accelerate how they build, test and release software. By combining the genetic testing capabilities of UiPath, Tesla would Deloitte Ascend, we are transforming the testing life cycle with Agent I to automate repetitive tasks, we take changes and execute tests autonomously.

And with autopilot for testers and agent builder embedded in Ascend, Deloitte teams can leverage over 1,500 prebuilt testing bots and AI agent. Lastly, we are encouraged by our federal sector performance this quarter, where efficiency mandates are creating a long-term tailwind for automation. Highlights this quarter include expansions with the US Coast Guard to modernize core systems and improve mission readiness for automation and AI.

The Department of Veterans Affairs which is automating disability claims and enhancing contact center service for veterans and the social security administration which is migrated to the cloud to expand to our IDP solutions to help accelerate benefits processing. Our unified platform and innovation continue to strengthen these partnerships and underscore the significant opportunity ahead in the public sector, even as the federal purchasing environment remains dynamic with pockets of strength.

Looking ahead, our continued innovation is expanding what's possible for customers and delivering measurable results for the power of deterministic and agentic automation. What continues to set UiPath apart is our unified end-to-end platform architecture, delivering one connected experience from discovery to deployment with Maestro orchestrating work across systems and our built-in governance capabilities, ensuring control, compliance and trust I am pleased with the progress we are making in improving the execution of our teams and the pace of innovation across product organization is delivering for customers. We feel well positioned as we close out the year and continue executing on our vision for the future.

With that, I'll turn the call over to Ashim.

Thank you, Daniel, and good afternoon, everyone. Before turning to the financials, I'd like to provide a quick operational update. This quarter reflects the meaningful progress we've made in sharpening execution across the strategic priorities Daniel outlined earlier this year, including strengthening customer relationships, accelerating innovation and driving operational rigor across the organization.

Through these areas of strategic focus, we have improved performance of our sales team. Deepened areas of strategic focus, we have improved performance of our sales team, deepen engagement and strengthened alignment with our customers' priorities. We're partnering earlier co-developing solutions and scaling automation faster. Our broad installed base gives us unique visibility into enterprise workflows helping customers connect people, robots and AI agents to deliver measurable outcomes at scale.

Our pace of innovation continues to accelerate, supported by deeper ecosystems, integrations and advancements in our genic automation platform. Combined with disciplined execution, these efforts contributed to another solid another quarter of solid top line and bottom line performance, including our first GAAP profitable third quarter and putting us on track for our first GAAP profitable year.

And we're seeing customers lean in a great proof point of our end-to-end platform is a leading cybersecurity company that expanded to our agentic products. With support from our four deployed engineers, they are leveraging UiPath agents, robots, IXP and Maestro to create seamless end-to-end workflow. IXP extracts data from purchase orders across 700 vendors, robots retrieve quote details from SAP, and agent supply confidence before passing the data to sales order creation.

Maestro orchestrates the process, ensuring speed, accuracy and control, which is expected to help them improve their accuracy rate from 50% to 90%. Turning to the quarter. Unless otherwise indicated, I will be discussing results on a non-GAAP basis, and all growth rates are year-over-year. I also want to note that since we price and sell in local currency, fluctuations in FX rates impact results.

Rates have remained largely stable since the time of our last earnings call through the end of the quarter. And as a result, there is no incremental FX impact to our third quarter results. Third quarter revenue grew to $411 million, an increase of 16%. The Normalizing for the year-over-year FX tailwind of approximately $5 million, revenue grew 14%. ARR totaled $1.72 billion, an increase of 11%. This included a $6 million year-over-year FX tailwind. Net new ARR was $59 million.

We ended the quarter with approximately 10,860 customers. We continue to be successful in signing new enterprise logos that align with our strategy of targeting long-term customers with a propensity to invest, including new logos like Newfield Health, Resue Holding and an Australian brick manufacturer, which selected UiPath due to the breadth of our agentic automation platform, and they will be leveraging UiPath robots, agents, IXP Maestro and process mining to auto sales order processing. As with prior quarters, the vast majority of customer attrition continues to be on the lower end.

Customers with $100,000 or more in ARR increased to 2,506 and continue to have a strong dollar-based net retention rates. While customers with $1 million or more in ARR increased to $333 million. Dollar-based gross retention remained best-in-class at 98%, and our dollar-based net retention rate was 107%, underscoring the durability of our customer base as they embrace our agentic automation solutions. Adjusting for FX, dollar-based net retention rate was 100%. Remaining performance obligations increased to $1.265 billion, up 12%. Normalizing for the FX tailwind, which was approximately $20 million, RPO grew 10%. Current RPO increased to $840 million, up 17%.

Turning to expenses. We delivered third quarter overall gross margin of 85%, and software gross margin was 91%. Third quarter operating expenses were $261 million. We delivered our first GAAP profitable third quarter, with GAAP operating income of $13 million, up from the prior year GAAP operating loss of $43 million. GAAP operating income included $71 million of stock-based compensation expense.

Third quarter non-GAAP operating income was $88 million, representing a 21% margin, up more than 700 basis points year-over-year and driven by our continued focus on operational efficiency. Third quarter non-GAAP net income was $85 million, which excludes a nonrecurring noncash tax benefit of $184 million from the release of a valuation allowance on certain deferred tax assets. Third quarter non-GAAP adjusted free cash flow was $28 million.

We ended the quarter with a healthy balance sheet of $1.5 billion in cash, cash equivalents and marketable securities and no debt. Now turning to guidance. We are pleased with the team's execution in what continues to be a variable macroeconomic environment. We continue to maintain a prudent outlook and guide to what we see in front of us.

As Daniel mentioned, we are pleased with the progress of our public sector team. As a reminder, while we are encouraged by early traction with our agentic capabilities, adoption is still in its early phases, and we don't expect a material top line contribution in fiscal 2026.

Lastly, since the end of the quarter, the Japanese yen has depreciated against the US dollar, creating a headwind to fourth quarter guidance. Turning to the specifics of our guide. Despite the incremental FX headwind from the yen, we are raising guidance for the progress we've made on our operating priorities and the strength we are seeing in the business.

For the fourth fiscal quarter 2026, we expect revenue in the range of $462 million to $467 million. This range reflects an approximately $3 million headwind driven by FX rate movements since we provided guidance on our second quarter earnings call. ARR in the range of $1.844 billion to $1.849 billion. This range reflects an approximately $3 million headwind driven by FX rate movements since we provided guidance on our second quarter earnings call.

Non-GAAP operating income of approximately $140 million. And we expect fourth quarter basic share count to be approximately 536 million shares. And finally, we continue to expect fiscal year 2026 non-GAAP adjusted free cash flow of approximately $370 million and non-GAAP gross margin of approximately 85%. 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 Instructions)

Bryan Bergin, TD Cowen.

Hey guys, good afternoon. Thank you. Maybe just starting off here on some of the Agentic solution traction. Daniel, I had you mentioned, I think, 950-plus clients. Just first, is that comparable to the, I think, the 450 or so last quarter using Agent Builder? Or is that a broader kind of view across your Agentic solutions?

Just trying to get a sense of kind of that quantitative traction, if you could share that. And for the cases where you are seeing scaling past the proof of concepts, is it more about the underlying clients and their capabilities or more so about the specific types of use cases that they're pursuing? Thank you.

Thanks, Bryan. Yeah, we are seeing really good momentum across our agentic offering. And this creates a pull-through across the entirety of our platform. we are seeing some kind of consistent buying patterns emerging from POC to pilots and to some use cases into production.

I would say that it's more the highest ROI use cases are very customer specific. I don't see necessarily a single one across multiple industries or different departments. But overall, it's pretty encouraging to see the movement from again, from pilots into production for some of them.

Okay. And then my follow-up is on the federal business. So you had positive commentary here, probably a surprise for some given the shutdown. Just curious, was there any shutdown impact just worth calling out here in October and into November?

No, there is no direct impact from the shutdown. You got to remember, Bryan, a lot of our projects are just funded through the bills. So and many of them are considered are in critical operations like in areas like the Department of Defense, et cetera. So we had no major impact from the shutdown.

All right, very good. Thank you.

Jake Roberge, William Blair.

Yeah, thanks for taking the questions in the next quarter. Congrats on the results. I know there's some FX impact, but your Q4 guide implies that net new ARR could start growing again on a constant currency basis. Can you talk about the driver of that return to growth and just how we should think about the sustainability of net new ARR growth moving forward?

Yeah. I think the entire business is positive. We are really pleased with how our team executes. We see consistent execution across the board. I would like to nominate especially our teams in Americas, where we are really seeing signs of great traction, especially in the agentic. And yes, I would say it's overall, it's things are improving and stabilizing.

Yeah. I would just echo what Daniel said as well. I think there is no magic to it. We talked about the improved execution. The focus the launch of the new products, we think, is going to continue to help us both definitely indirectly in pulling through our platform and increasing stickiness and getting us deeper in customer conversations.

But then as we go through time more directly. And we look at kind of just as the business stabilizes, there's a lot of good news, both the consistency of the leadership, the talent that has been brought in as well. So those are factors that contributed. There's not one single magic button or one silver bullet that we're counting on for that.

Okay. That's helpful. And then I know you're not expecting a material contribution from AI solutions this year. But for customers like that cybersecurity company that you called out in the script that are starting to put these agents and Mitra processes into production. Can you help us understand what type of pricing uplift or monetization that you're seeing once we actually get these go-lives in production?

Yeah. It's not about the pricing uplift. I think the first thing to note is we talked about the cybersecurity, Jake, is it's pulling through the entire platform. IP additional robots, process orchestration. So I think that is an important part of this. It's not agentic in isolation. It is agentic paired with the rest of our platform that really is driving value for our customers.

So I see this kind of the monetization, not as a pricing uplift, but increasing stickiness, giving more conviction to deepen our platform into the architecture of our customers, as customers really like the road map and are starting to experiment with agentic and find tangible ROIs through the full breadth of our platform.

Very helpful. Thanks for taking the questions.

Mike Turrin, Wells Fargo.

Yeah, hey, this is Austin Williams on for Michael Turrin. I just wanted to go back to US Federal. I'm curious how results in 3Q came in versus your expectations at the beginning of the year related to Doage? And then maybe just as a follow-up. Anything you can add on the OpenAI collaboration, what exactly that could drive for UiPath?

I would say that the federal business continues to be a dynamic environment for us with pockets of strength. We are really encouraged by the progress in I think it's returning to a new normal. The deals that we mentioned in the scripts are really already sorted. Tim is executing well with focus on efficiency positioning as well. The projects are long term and strategic, not short term.

We continue to be prudent in our guidance estimations about the sector. On the OpenAI, yes, we use GPT5 across the board in our platform. We highlighted especially the use in one of the most innovative parts of our platform, the product that I mentioned in the script called ScreenPlay, which is basically our own version of computer use or operator.

But the key thing here is that we can combine the reliability of UI automation with the power of adaptability of LLM driven computer use. And I think to my knowledge, we are the only company that can succeed delivering autonomous UiPath using LLMs, using this approach. Thank you.

Matthew Hedberg, RBC Capital Markets.

Hey guys, This is Mike Richards on for Matt. Kind of building on that last question, there is a ton of excitement around all the partnerships you guys announced, and I think it validates your positioning and orchestration. So I was wondering, even beyond open eyes, if you could just give some more details around the partnership just in terms of is there a joint go-to-market element to any of them? I know it's early, but have you seen any pipeline build as a result of these partnerships? Just any more details so a lot of excitement around it.

I would say that at this point, our the partnership that we announced at FUSION are clearly into the technology-enabling partnerships. And they were driven largely by our customer needs. We always we praise ourselves for having an open platform that can really be flexible and customizable to customer needs. So we believe so, if we look at kind of our partnership, we believe that the foundation of delivering reliable in enterprise have different layers.

So it has the data layer, ontology layer, so we this is where our partnership with Snowflake is shining. We offer ourselves the automation, the RPA and API and agentic layer. But of course, with open AI and Google we use the Frontier LLMs in order to power the agentic. We use NVIDIA for security and governance in regulated industry. So I think our goal is to create a set of partnership that offer a very solid foundation to deliver reliable AI into a secure and governed manner.

Super helpful. And then if I could just do a follow-up. I think before we talked about in the early days of the orchestration opportunity for you guys, it's been mostly agents created on UiPath. I was just wondering, have you seen more of a shift to third-party agents yet? Or is it still you guys are mostly orchestrating agents built within UiPath?

We are seeing many customers interested in building coded agents where we have partnered with companies like lung chain, crew AI and Lama Index. And we are seeing right now a mix of agents that are hosted and managed by our platform that are both low code and coded agents. I think at this point, it's kind of too early to see us managing external agents that are built completely outside of our platform.

Sanjay Singh, Morgan Stanley.

Yeah, Hey everyone, This is Ryan Lance on for Sanjit. Just with regards to the channel, you mentioned the expansion of your partnership with Deloitte. So can you just provide some additional details around how much incremental pipeline is now partner sourced relative to a year ago? And maybe just how these partnerships can help drive additional kind of AI-related product deployments next year?

Yeah. One is, I think the quantum has definitely increased, but more than the quantity, it's the quality. So when you look at the S/4HANA migrations that are happening and partners like Deloitte and their presence within many of these customers, we're now involved in those conversations. And I think that, that is helping pull us through and being in the conversation about larger scale transformation processes.

I think that is Deloitte has obviously done a really exceptional job and that partnership has been meaningful for us. But I think that's a motion that we're also seeing across our teams with various partners that are there. So the quality for me is much higher quality pipeline than just a superficial quantum or a quantity number that I would tell you about.

Okay. Great. And then just one follow-up. You guys have driven some pretty meaningful OpEx leverage throughout this year. And I'm just curious if you could provide any additional details around how you're thinking about OpEx investment next year to kind of support this AI product rollout and just broader monetization path.

Yeah. Of course, I'm not going to provide anything specific regarding next year at this time. But I think putting this year in context, we'll give you a sense of the strategy that Daniel and the leadership team here are employing. So I think the first thing is we've got an OpEx leverage by not austerity but by discipline and really being super focused on where we prioritize it. So we are actually hiring in our engineering segments. We are expanding sales capacity.

As we talked about earlier this year, and last year, really, our focus has been continuing to drive efficiency across our processes, being selective about overlay functions in terms of where we're investing. And I think that area allows us to get operating leverage while still being able to invest in key areas. So as we're looking at our platform, whether it's for deployed engineers, whether it is more hand hands and legs at our customer sites or just core engineering capabilities.

Those are areas that are in our investment zone. When you look at our line item, we're getting leverage across every area because we're really going to all of the cost structures that exist outside of those three and really seeing what are the areas of efficiency and prioritization. And that has not just given us OpEx leverage, it's also enhanced our focus and has contributed to us being better in our execution cadence as well.

Scott Berg, Needham & Company.

Hi everyone, nice quarter. Thanks for taking my questions. When I was at the conference a couple of months ago, so the partners I spoke with really talked about a high level of pilots and proof of concepts that your customers are going through right now with the different types of AI functionality? And I know it's not a big part of the expectations around bookings for this year but I guess, as you've seen some of them convert to actual sales or production, are there any key drivers or levers that you've learned through some of these that you can help maybe use some of these other deal cycles you're currently going through?

Yeah. We see this pattern emerging. I would say that the landscape is extremely scattered right now. We have deployed our teams in various use cases across various industries. We see some particular partners emerging in health care like, for instance, in revenue cycle management, prior authorization, claims management and financial services, financial crimes, it's but again, I think it's a bit too early to mention one particular use case where we see like great replicable potential.

Understood. And then, Ashim, as you look at the fourth quarter guidance, someone else had already mentioned that the implied ARR number suggests that your net new ARR is up again on a year-over-year basis, help us kind of think through maybe the construction of that. Is that just purely a result of the improved execution that you all have been working on this year?

Or is there some aspect of maybe deals that were maybe slipped from Q2 and Q3 that kind of moved in to the expectation? And I know that AI, some of the functionality there is not a big driver this year. But are there some expectations around maybe some bookings improvements in that category that's helping kind of drive what your initial guidance here is?

Yeah. So let me be super clear on it. There's nothing in terms of like slip deals from third quarter or anything that is timing oriented, Scott, in any material or significant way. There's always normal course deals that move back and forth, right, deals that we're in your fourth quarter pipeline that closed early in deals that closely. That's just normal course and nothing out of the usual that I would talk about. When you look at the year-over-year growth implied within our guidance, I think there's three main factors for me. The first is execution.

We are seeing improved execution across the board from our sales team. It is supported by good customer activity, maybe not one or two deals, but really broad-based activities of POCs and pilots and renewals that are coming in with more conviction about our long-term place in the architecture that leads to natural upsells, et cetera. there is macroeconomic environment, as I talked about in the second quarter earnings call around foreign exchange, that will play a role in that year-over-year impact that is there. And then the third one is I just think momentum.

I think that we've had a good stable base now in terms of if you look at our sales stability six months, nine months after kind of the restructuring that we had completed at the beginning of the year. as well as just a little bit of the normalization around areas like the public sector, which we've said is kind of back to a new normal. No catch up, but at least at this time, a new normal. We feel like we're still prudent on our overall assumptions on the macroeconomic environment.

But it's a confluence of things that to me are at the opposite end of when net new ARR was declining. I mean would poor execution, foreign exchange having a headwind and frankly, just losing having too much inconsistency in our strategy as well as our organizational structure. So I'd say all three are contributing to that, to the stabilization of net new ARR you're seeing.

Understood. Helpful, thank you.

Alex Zukin, Wolfe Research.

Hi, this is Arsenio for Alex Zukin. And I guess congrats on the results and also just kind of wanted to expand on downtick in NRR was? Was it just weakness at the low end? Or was there anything else? And then you kind of unpack what's driving that stronger new business, but is there anything that you can kind of give us in terms of Q4 applications on that new business strength given the three factors you just talked about?

Yeah. So look, I think there, I think when you look at it, definitely at the lower end of the segment. We've talked about that. It has a little bit of pressure on the net new ARR. To give you a supplemental metric, our net dollar expansion rate for customers between $100,000 and $1 million was 113%. So that can quantifiably show kind of the lower cohort having more pressure. And I think you get a little bit of the law of large numbers as well.

But as we stabilize net new ARR, obviously, the rest of the metrics begin to stabilize as well. And you can see that pattern starting both with our third quarter results and, of course, kind of the guidance that we've provided here.

Got it. And then just to kind of follow up on kind of the same thing. You doubled the number of customers developing agents quarter-over-quarter and Maestro process instances. What date uplift you've seen in those customers? And is it kind of fair to assume that into next year as that revenue ramps, it can help sustain that NRR and offset some of that low-end weakness that we've seen?

Yeah. We will continue to contend that we're in the early innings of agentic. I think what the momentum around customer activity, it has both the direct and indirect. I think the indirect definitely has started to help us and will continue to help us. customer pulling through other parts of our platform, investing in us as a longer-term part of their enterprise architecture.

In terms of direct sale direct monetization place for agentic. We're this we'll update everybody as we kind of get into next year around assumptions there. But for the immediate short term, there's nothing material as we cited in the script.

I thank.

Kingsley Crane, Canaccord Genuity.

I think it's interesting if we think about the Code Red moments over the past couple of weeks, it's clear that competition among model providers is healthy, of course, that makes integration, orchestration even more valuable. Have you seen a shift in perception in the past quarter? And then from an integration activity perspective, how is heterogeneity trending?

I don't think we necessarily yet a shift. I think you aim at Google Gemini release. We were using Gemini in our ISP business for a few quarters somehow. I think as a platform, we continue to assess all the frontier LLMs and we use frankly a mixture of them.

And for instance, in our ISP business, we use GTV to understand the better the structure and inventor documents, while we can use Gemini for specific extraction like multiple tables, indicated tables. This is just an example. But across the platform, we always monitor and use the best of breed LLMs.

Great. And then just a quick follow-up, Ashim, you mentioned in your prepared remarks that you're partnering earlier, your co-developing solutions earlier. That's been a big focus for this year. Just to what extent did this directly translate into improved results in Q3? And then do you think that this could be more of a future predictor of success next year?

I think a leading indicator, yes. I think any time you're closer to customers, you are innovating with them, you're solving problems. I think it helps. And I would say what our conviction is, is that ROI is going to be where choices are made. And so as we're co-innovating, as we're teaming up with partners around bigger problems, I think we have a chance to have meaningful impact around ROIs, which we feel we'll continue to do that. I think it also shows the relevance of UiPath. If I can like in terms of the validation of the agentic framework, it's not Merchitecture.

It's real product that has real impact that both partners and customers can innovate around. And I think that is super important and a really great validation point for our product team, our sales team and all of our customer teams combined. To answer your question around third quarter, as we've cited in the script as well in the prepared remarks, there's no meaningful impact from agentic in our near-term results.

We feel like this is continued disciplined execution. What agentic continues to do is the closer you are to customers the more you are a part of their long-term road map and architecture, the more that they're willing to invest and pull through the existing parts of your platform today, and have higher level impacts within their organ that indirect we're definitely feeling the momentum and we're excited about it.

Kirk Materne, Evercore.

Hi, this is Chirag on for Kirk. Congratulations on the strong quarter in traction. Daniel, you've talked briefly about prebuilt Agent solutions, highlighted strong modernization use cases within certain categories in the past, which verticals do you see adopting these prebuilt genic solutions the fastest? And are you moving more aggressively into industry-specific packaged automation at all?

Yeah. our verticalized approach is getting a lot of traction within UiPath. We put a lot of focus and effort. We actually did recently the rework of our product and engineering teams to better address the creation of vertical solutions. In terms of the industries, we focus on health care, financial and financial services primarily with again, with an accent on revenue cycle management in health care and in financial services, I would say, I would say, financial crimes, can be one of the know your customers anti-money laundering type of risk cases we are seeing the most interest from our customers.

Okay. Maybe just one more. What are your thoughts on the balance between deterministic automation and agentic or LLM-based automation? And do you see this balance shifting materially at any point over the next few years or few quarters?

Look, our thesis is that they are very complementary, and they address different steps in the business process. And in many processes as long as task workflow is well defined. People would use a deterministic automation. There is need to use an based. You use an LLM in order to create deterministic automation was to maintain it to make it to improve it over time, but you don't use an LLM to drive it. But of course, there are so many areas where you cannot have rules are able too complicated or process is too complex, you sift through tons of documents where or it involves conversational aspect of the process.

So in all these areas, LLMs are an amazing complement to the deterministic automation. And I also want to mention that the orchestration piece that combined the AI-based and deterministic with humans in the is an essential piece that is required in order to deliver a solution that is secure, covered for the enterprise. We continue we have continued saying that orchestration is the key. We announced our effort a year ago. And I'm pleased to see that across the industry, people are talking right now and realize that orchestration is a key technology in order to deliver a reliable AI.

All right. Thank you very much. Congrats again on the quarter.

Terry Tillman, Truist Securities.

Hi, this is Dominique on for Terry. So it was mentioned previously that one of the biggest customer hurdles with agent the consumption pricing is spend predictability. So have early deployments given you end up usage patterns to help customers forecast more reliably. And also just curious as to what else you all are doing to help customers get over that hurdle?

Look, we are constantly evaluating how our customers are adopting AI. And we aim to have a pricing model that really reflects the adoption of consumption of. We constantly monitor industry trends. And I would say the entire industry is dynamic at this point and is trying to figure out what's the best pricing. We are pretty flexible in our approach.

We can price by components. We also are pretty flexible on understanding and outcome-based pricing can be for our customers. But again, I think we are in the early innings of really understanding consumption patterns across agent at scale, I mean.

Got it. And then just as a follow-up, has the typical cycle time frame from an agentic PLC to a production deployment shortened versus earlier in the year? If so, could you just highlight what specific efforts are driving that compression? Or what do you all plan to do to accelerate it?

Yeah. I think we, as a company, understand a bit better how various use cases. We are building internally solutions accelerators that can help us replicate experience across industries and verticals. And my estimation is this trend will continue to accelerate within next year.

I strongly believe that the key to unlock huge scale AI consumption in enterprise is the prepackaged solutions where will we can meaningfully accelerate the time to value. This is why, as I mentioned before, we put a lot of emphasis in building these solutions.

Great, Thank you, and And there are no further questions at this time. So I'll now hand it back to management for closing remarks.

Thank you so much for all the questions. I would like to wish you happy holidays. And as usual, we like to here from as many as you throughout the quarter. Thank you.

Thanks. This concludes today's call. All parties may disconnect.