Advances in artificial intelligence (AI) are advancing so rapidly that it is increasingly difficult to imagine a world in which technology does not impact almost every facet of daily life.
While much of the discussion around AI revolves around areas like accelerated computing and healthcare, another use case piqued my interest. The integration of artificial intelligence into business workforces represents a unique and compelling long-term opportunity.
Cathie Wood, CEO of Ark Invest, said AI software has the ability to significantly increase productivity in the workplace. In a recent report, Wood suggests that AI automation software could be a $13 trillion market by 2030.
Believe it or not, many companies are working to create more efficient work environments through the power of technology. UiPath (NYSE:PATH) is a major player in the field of AI-based automation tools, and I believe this could be the best investment option in this pocket of the AI ​​field.
Let’s explore how AI can redefine workplace dynamics and evaluate why UiPath is an exciting long-term opportunity.
Workplace productivity is ripe for disruption
Bringing efficiency to basic tasks is not a new idea. In many cases, technology has been the key to unlocking these gains.
In Ark Invest’s Big Ideas 2024 report, Wood presents some interesting case studies related to robotics and how they improved the performance of the mundane and administrative aspects of the job.
For example, Wood claims that the advent of the washing machine reduced the average time it takes to do laundry by 87%. Likewise, the integration of assembly lines into factories has significantly reduced the time it takes to manufacture a car.
These ideas have been applied in the workplace for decades. For example, sales and marketing managers have relied on customer relationship management (CRM) tools such as Selling power for many years.
Additionally, enterprise resource planning (ERP) suites from SAP And Oracle have helped some of the world’s largest companies aggregate their financial data, analyze their operational metrics, and much more.
According to Wood, by automating tasks using artificial intelligence, the productivity of the average worker could increase 4.5 times. If all potential software companies captured just 10 percent of the productivity gain, Wood says, these companies could reap $13 trillion in combined revenue.
This scenario implies that UiPath has a new opportunity when it comes to the intersection of AI and workplace productivity. Let’s take a look at the company’s actual performance and how it compares to the competition.
UiPath leads the charge
UiPath operates in the robotic process automation (RPA) market. Essentially, the company’s software helps automate administrative tasks and boost workflow processes.
UiPath ended last year with more than 2,000 customers spending at least $100,000 annually on its platform. Additionally, UiPath grew its customer base by 26% year-over-year for those spending at least $1 million per year on its software suite. This highlights UiPath’s strong penetration among small and medium-sized businesses (SMEs) as well as large enterprise accounts.
Accelerated customer adoption is not entirely surprising given the increase in demand for AI over the last year. The company grew its revenue by 24% last year, to $1.3 billion. Meanwhile, adjusted free cash flow was $309 million. In comparison, the company was essentially breaking even based on free cash flow over the prior year.
With an impressive partner ecosystem that includes SAP, IBM, AccenturePwC and Deloitte, I think UiPath’s growth story is just beginning.
A compelling evaluation story
The table below compares UiPath to a cohort of other enterprise software platforms offering workplace productivity solutions. With a price-to-sales (P/S) ratio of 8.4, investors can see that UiPath is positioned right in the middle of this set of peers.
What I find most interesting about the analysis above is that UiPath’s value is more in line with the larger tech giants operating in the RPA space – with Microsoft being the only exception. Given the success Microsoft demonstrated this through its CoPilot platformit’s not entirely surprising to see it trading at such a notable premium among this set of peers.
Keep in mind that UiPath ended last year with about $2 billion in cash and equivalents on its balance sheet. Although the company is cash flow positive, one thing to consider is how the company will allocate its resources. In order to compete with the big tech giants at scale, UiPath will likely need to increase its spending.
Although this would have an impact on the company’s bottom line, it could prove to be an interesting strategy. I’m optimistic about the efficiencies AI can bring to the workplace in the long term, and I agree with Wood’s theory that the market opportunity is enormous.
So far, UiPath has proven that it can compete in the RPA market with larger, better capitalized companies. Given how quickly AI is impacting other important end markets, I believe this will be the earliest the technology begins to have serious impacts on work environments.
I think now is a good time to consider purchasing shares in UiPath as productivity becomes a focal point for businesses of all sizes.
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Adam Spatacco holds positions at Microsoft. The Motley Fool ranks and recommends Accenture Plc, Asana, Atlassian, Microsoft, Monday.com, Oracle, Salesforce and UiPath. The Motley Fool recommends International Business Machines and recommends the following options: long January 2025 $290 calls on Accenture Plc, long January 2026 $395 calls on Microsoft, short January 2025 $310 calls on Accenture Plc, and short calls from $405 in January 2026 on Microsoft. The Mad Motley has a disclosure policy.
Artificial intelligence (AI) productivity tools could be a $13 trillion market, according to Cathie Wood. Here is 1 stock that could dominate. was originally published by The Motley Fool
