Management just made a decision that could imply softer-than-expected growth for the software company.
Shares of software company UiPath (PATH -6.79%) sank on Tuesday after the company announced a round of layoffs. As of 10:45 a.m. ET today, UiPath stock was down about 7%.
A time of transition
The company was already undergoing changes. In its fiscal first quarter of 2025 (ending in April), it announced that CEO Rob Enslin was being replaced by co-founder and former CEO Daniel Dines. The timing was awkward considering that Enslin had taken over sole CEO duties as recently as February.
Therefore, it was already clear that UiPath had a lot going on behind the curtain. And today, it announced it is laying off 10% of its workforce.
According to the filing with the Securities and Exchange Commission, UiPath’s layoffs will be somewhat gradual. Management expects to finish in the fiscal first quarter of 2026, which is one year away.
Considering it has around 4,200 employees, laying off 10% of the workforce is substantial. The company expects it to cost up to $25 million in restructuring costs.
What’s next for UiPath?
UiPath is one of the largest software companies in the world. Its software helps automate menial tasks, and one would think that this would be in higher demand at a time like now when businesses are concerned about efficiency. But the company’s growth rate has dropped quickly, which is obviously a problem for a growth stock.
PATH revenue (quarterly YoY growth) data by YCharts; YoY = year over year.
Investors already knew that things were slowing. Financial guidance from UiPath’s management implies just 8% year-over-year growth in fiscal 2025. But the stock is down again today because the layoffs could imply that its growth won’t even be as good as its modest guidance.
It’s possible. But it’s also possible that Dines is returning as CEO merely to get the company he helped found back on track for the long haul. Investors might not have clarity until August, when it’s expected that UiPath will report financial results for its fiscal second quarter.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends UiPath. The Motley Fool has a disclosure policy.