Greetings and welcome to UiPath's fourth quarter and full year 2026 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Elise Furlani, Head of Investor Relations. Thank you. You may begin.
Good afternoon, and thank you for joining us today to review UiPath's fourth quarter and full year fiscal 2026 financial results, which we announced in our earnings press release issued after the market closed 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 UiPath 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 first quarter and full year fiscal 2027 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 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, including our annual report on Form 10-K for the year ended January 31, 2026 to be 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 remarks 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, Alice. Good afternoon, everyone, and thanks for joining us. I want to start by thanking the people who made this year possible. Our employees who executed with discipline and purpose, our customers who trust us with their most critical workflows, and our partners who have made a genuine bet on our platform. This is a team effort, and I feel that every day. We deliver another strong quarter, beating the high end of our guidance across all metrics and closing out a year of disciplined execution. Fourth quarter ARR reached $1.853 billion, up 11% year-over-year, driven by $70 million of net new ARR and revenue of $481 million, up 14% year-over-year. Alongside that growth, we've achieved full-year GAAP profitability for the first time in our company's history. Fourth quarter non-GAAP operating income to $150 million, a 31% margin, a reflection of the operational progress we've made throughout the year, driving meaningful efficiency while continuing to invest in growth. And in Q4, posted our strongest sequential net additions of customers with $1 million or more in AR in two years. We've built over $1 million up over 50% year over year. A reflection of both improved sales execution and deepening enterprise platform adoption. I have never been more energized. What we are seeing now goes beyond a single quarter. We are at an inflection point in how software is built. Advances in AI are dramatically reducing the time and cost required to create software, and that has led to understandable questions in the market about how value will be created going forward. Historically, moments like this don't eliminate software. They shift where value is captured. Enterprises don't simply pay for code. They pay for trust, for operability, and for governance. The ability to run complex systems reliably, securely, and with full accountability. Software falls. The value of a platform that can safely govern, orchestrate, and escape that software rises. And there is a second dynamic that I find even more exciting. When building becomes cheaper, more gets built, more processes get automated, more edge cases get addressed, and more systems become autonomous. Does not shrink the need for enterprise orchestration. It increases it. And this is precisely the environment UI path is designed to operate it. Enter this new agentic era with four advantages. First, a unified platform combining deterministic automation, agentic automation, and enterprise-grade orchestration with governance, security, and scalability built in. This is the full stack. It is what wins new logos and drives expansion across our base, a powerful install base flywheel. Thousands of enterprises run mission-critical workflows on UiPath today, and within those workflows, there are opportunities for agents to be deployed and the overall process to be orchestrated. Two decades of enterprise trust and governance. Deployment experience that AI plus automation is expected to deliver accountability, audibility, observability, and reliability at scale. And fourth, deep vertical expertise with enterprise-wide reach. Regulatory depth in the industries where the stakes are highest, paired with the horizontal ability to orchestrate across the entire enterprise. Let me spend a few minutes on each. Our unified agentic automation platform. As AI makes intelligence more accessible, what matters is execution. Enterprises are getting answers to complex questions faster than ever before. And yet, they still struggle to reliably execute complex cross-system processes with accountability and compliance built in. The goal now is to pair the insights they are getting with the actions and execution that our platform enables. Financial reporting, claims processing, regulatory compliance, these cannot be improvised. They must be institutionalized. Enterprise automation requires two modes, deterministic for precision and audibility and agentic for reasoning and adaptability. Most vendors offer one or the other. UiPath is integrated both under a single control plate, allowing enterprises to move from experimentation to scale, production-grade deployment. Most people think orchestration means agent-to-agent coordination. Real enterprise orchestration brings together agentic automation, deterministic automation, and humans, because that is how work actually gets done. We offer that and the full execution layer underneath it, governing how a transaction moves from start to finish, and ensuring that it completes reliably every single time. This is what Maestro is built to do at enterprise scale. What makes Maestro uniquely powerful is its architecture. It is built on temporal, the most modern workflow technology featuring durable execution and trusted by the most demanding technology companies in the world. Workflows are defined in a way AI agents can generate and modify directly while remaining fully transparent to business stakeholders and auditors. In a world where AI agents are increasingly the ones creating and maintaining workflows, that distinction matters enormously. The customer results make this concrete. A U.S.-based semiconductor company failed to deploy an agentic workflow with another vendor after more than a year of trying. With UiPath, they were successful in under two weeks, leading to a seven-figure expansion across AgentBuilder, Maestro, and TestCloud. Today, they run over 3,000 automations and have saved more than 2 million hours. One, New Zealand, who went from proof of concept to production-grade pilot in five weeks, reduced a four-to-five-day order-to-cash process to 10 minutes, and they are now scaling this across their B2B sales operations. With UiPath, they expect roughly $20 million in cost savings this year, as they plan to further leverage the platform to support their broader transformation programs for install base. The most important story this quarter is the economic shift underway inside our install base. Customers are not experimenting with AI. They are expanding their operating model on our platform. AI product A, which includes Argentic, IDP, and Maestro, reached nearly $200 million this quarter, with strong growth fueled by Argentic. Number, I keep coming back, the number of customers above 100K in AI products grew 25% year over year, and they spent nearly three times as much as those who have not. Additionally, 16 of our top 20 deals this quarter included AI evidence that agentic automation is becoming central to our largest customers' roadmaps. This AI growth is layering on top of a core unattended automation business that continues to grow. We are not seeing AI agents replacing, determining unattended automation in production. We are seeing customers extending their processes with AI. A major US airline illustrates this well. Building on their deterministic foundation, they are now deploying agent builder, communications, mining, and Maestro to automate procure-to-pay and supplier workflows, a blueprint for how customers move from task automations to end-to-end process orchestration, and how the journey drives platform-wide expansion. This is the flywheel. Workflow automated creates a new surface area for agents. Every agent deployed drives more automation, deeper integration, and broader platform adoption. Testing is another area where we see a significant and underappreciated expansion opportunity. As agentic workflows and applications sprawl, Traditional QA simply cannot keep up. Forrester named UiPath a leader in the Forrester way for autonomous testing platforms in Q4 2025, with TestCloud receiving the highest possible scores in seven criteria, including vision, roadmap, and automation creation, orchestration, and execution. The global technology company is a strong example, standardizing their entire automation program on UiPath, expanding into TestCloud, and planning to implement UiPath agents and Maestro to automate supply chain workflows. Starting to driver three, governance. Building an agent is becoming easier. Making it enterprise-grade is not. Enterprise-grade agents require deterministic execution with traceability, exception handling, and audit trace that satisfy external regulators. An American credit union selected UiPath as we were one of the only solutions to meet their strict banking security and government requirements. A European automobile manufacturer, foundation of their Argentina CAI strategy, selecting Maestro because we could deliver enter and human-in-the-loop safeguards at the level their compliance standards demand. In both cases, governance was not a consideration. It was the deciding factor. And that brings us to driver four, vertical depth. It's not just about governance. It's about knowing the domain deeply enough to manage and operate it at scale for real impact. That is why vertical depth matters more in the agentic era, not less. As building becomes easier, differentiation shifts to domain-specific workflow intelligence, especially in industries where the cost of getting it wrong is existential. At VIVE in February, we launched Agentic AI Solutions, purpose-built for healthcare, targeting revenue cycle management, medical record summarization, authorization strategy. We acquired WorkFusion in February, bringing purpose-built agents for financial crime compliance with deep anti-money laundering, and know your customer expertise directly into our platform. extending our reach into the highest-stakes compliance workflows inside global banks. Healthcare and financial services are two examples of a broader strategy. We pair vertical depth with the horizontal reach to orchestrate across every function of a global enterprise, a combination that neither horizontal or vertical platform alone can match. And great platforms don't scale alone. Our partners are building practices, joint solutions, and go-to-market motions around our platform. Expanded partnership with Deloitte is a strong example. Together, we launch agentic ERP, embedding AI agents into mission-critical finance and operations workflows. A Fortune 20 oil and gas company that is migrating to SAP S4 HANA is already scaling through the partnership, expanding this cloud coverage from 10% to roughly 50% on their SAP environment, while building new agentic use cases across the migration. Accenture tells a similar story, we deployed the global agentic sales order entry solution for a strategic life sciences customer, reducing processing time by one-third, unlocking automation for orders previously too complex to handle, and orchestrating autonomous agents, transforming the orders while navigating 150,000 acceptance. I want to give you a preview of what's coming next on our product roadmap. Over the last few months, the world has changed. The boundaries of what is possible have shifted faster than most people expected. We have spent years building a unified platform for exactly this moment, and what it can now With the next generation of coding agents, it's something I'm generally excited about. Our platform is evolving into one where coding agents can participate across the entire automation lifecycle. Agents will work with subject matter experts to discover processes and identify exceptions. They will work with business analysts to generate process definitions, assist developers in building automations, deploy those automations into production, and help manage them at run. The first capability of that vision ships in the next couple of months, and it targets a problem I hear in nearly every customer conversation. Their automation backlog is growing faster than their ability to build. The ROI exists. The executive sponsorship exists. being the time, cost, and specialized skills required to build and maintain production-grade automations. AI coding agents will generate and maintain production-grade unattended UIPath automations in hours instead of weeks. How automations are built. It does not change the platform they need to run on. For example, every one of those automations still needs our platform. Maestro for orchestration, process intelligence and observability, governance for control and audibility, granular access control and creation vaults for security. As we look ahead, $2 billion in ARR this fiscal year, a milestone that reflects the durability of what we have built and the expanding role we play in how enterprises operate. Finally, we invite you to join our annual Agenting AI Summit on March 25th, which will be live streamed on our website. Please reach out to our investor relations team for details. Over to Ashim.
Thank you, Daniel. And good afternoon, everyone. Before turning to the financials, I'd like to provide a quick operational update. Over the past year, we strengthened our operating model, tightening coordination across teams and driving greater consistency and efficiency in how we go to market and serve customers. The result is more predictable execution, tighter alignment across sales, customer success, and product, and greater operating rigor across the business. We've built a more disciplined and scalable global sales cadence. The entire company has been enabled and is focused on pushing our AI capabilities into every deal, customer conversation, and across our internal operations. As we move to fiscal 2027, our priorities are focused on translating these structural advantages into durable growth. First, accelerating growth across our customer base, expanding penetration inside our install base, scaling AI adoption on top of deterministic automation, and deepening our vertical solution strategy in regulated and mission-critical industries, where our platform is most differentiated. Second, driving faster time to value. Selling software is only part of the journey. Our forward deployed engineers, services organization, post-sales team, and partner ecosystem continue to improve their coordination to ensure customers realize value quickly and at scale. Third, scaling operating leverage, including internal adoption of our own agentic capabilities and continued focus on cost discipline. Across engineering, support, and internal operations, we are deploying UiPath agents to streamline workflows, reduce manual work, and accelerate execution. And we are already seeing productivity gains from these deployments. We expect this to become an additional source of operating leverage as adoption defense. These initiatives reinforce the scalability of our model and give us confidence in the next phase of margin expansion. We reached an important milestone on profitability this year. When we first introduced our long-term model, we targeted non-GAAP operating margins of approximately 20%. In fiscal 2026, we surpassed that, delivering a 23% non-GAAP operating margin while continuing to invest for growth. Given the strength and scalability of our model, we are updating our long-term non-GAAP operating margin target to 30%. We are equally focused on GAAP profitability. Over the past several years, we have driven meaningful improvement in GAAP expenses as a percentage of revenue, including stock-based compensation, which declined to 18% of revenue from 25% last year. And we expect that trend to continue. We expect to be meaningfully GAAP profitable in fiscal 2027 and are committed to expanding GAAP profitability over time. 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. Fourth quarter revenue grew to $481 million, an increase of 14%. Normalizing for the year-over-year FX tailwind of approximately $16 million, revenue grew 10%. Total revenue for Fiscal Year 2026 was $1.611 billion, an increase of 13% year-over-year. Normalizing for the year-over-year FX tailwind of approximately $30 million, revenue grew 11%. ARR totaled $1.853 billion, an increase of 11%. Get New ARR was $70 million. This included a $14 million year-over-year FX tailwind. As organizations adopt an AI-first operating model, they are accelerating cloud migration to deploy, orchestrate, and scale automation seamlessly. We ended the year with over $1.2 billion in cloud ARR, which includes both hybrid and SaaS, up over 20% year-over-year. I want to highlight one data point that speaks directly to where the platform is headed. Among customers with more than $1 million in ARR, 90% are using our AI products. When we look at customers with more than $100,000 in ARR, approximately 60% are using our AI products. That level of attachment is a retention and expansion flywheel, and it gives us high confidence in the durability of the customers we are focused on the most. Across our broader base, 42% of customers with over $30,000 in ARR use our AI products, which provides a significant runway for expansion. We ended the quarter with approximately 10,750 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 Enterprise Products Partners, Helix Electric, Vionet Vision, and a U.S. construction company consolidating on UiPath. They chose us to replace multiple-point solutions with a single platform and plan to expand beyond deterministic automation, deploying agentic capabilities across loan origination and mortgage operations. As with prior quarters, the vast majority of customer attrition continues to be at the lower end. To provide a bit more color, when we take a closer look into our total logo count, For full year 2026, customers that spent over $30,000 in ARR increased 7% year-over-year. Customers with $100,000 or more in ARR increased to $2,565, while customers with $1 million or more in ARR increased to $357. Dollar-based gross retention was best-in-class at 97%, and our dollar-based net retention rate remained at 107%. Adjusting for FX, dollar-based net retention was 106%. Remaining performance obligations increased to $1.475 billion, up 19%. Normalizing for the FX tailwind, which was approximately $64 million, RPO grew 14%. Current RPO increased to $913 million, up 13%. Turning to expenses, we delivered fourth quarter overall gross margin of 86%, and software gross margin was 92%. Fourth quarter operating expenses were $263 million. We ended the year with 3,981 total employees. I want to reiterate a significant milestone. For the first time in company history, UiPath delivered a full year of GAAP profitability. For the full year, GAAP operating income was $57 million, and we delivered our second consecutive quarter of GAAP operating income at $80 million in the fourth quarter. Fourth quarter non-GAAP operating income was $150 million, representing a 31% margin. Full-year non-GAAP operating income was $370 million, a 23% margin, and over 600 basis points of margin expansion year-over-year. Fourth-quarter GAAP net income was $104 million. Full-year GAAP net income was $282 million. Fourth-quarter adjusted free cash flow was $182 million, bringing full-year adjusted free cash flow to $372 million. We ended the quarter with $1.7 billion in cash, cash equivalents, and marketable securities, and no debt. During the fourth quarter, we repurchased 780,000 shares at an average price of $12.83. For the full fiscal year, we returned approximately $337 million to stockholders, repurchasing 30.9 million shares at an average price of $10.92. Since January 31st, under our 10B51 plan, we have repurchased an additional 14 million shares at an average price of $12.11 through March 10th, 2026, completing our $1 billion stock repurchase program. Following the completion of the program, our board has authorized an additional $500 million in repurchase capacity. This reflects our confidence in the durability of our cash flows and our commitment to discipline capital allocation. Now, turning to guidance, our guidance philosophy remains unchanged. We base our guidance on what we see in the pipeline and apply prudent assumptions, particularly as the federal and macroeconomic environment remains variable. Our guidance reflects continued momentum across the business and includes WorkFusion's contribution aligned to our ARR definition. WorkFusion strengthens our position in financial services automation through its advanced agentec technology, an area where the demand for compliant, auditable agentec workflows is accelerating. Also included are current foreign exchange rates, including a modest headwind from the yen and a modest tailwind from the euro, which in aggregate have an immaterial impact. Turning to the specifics of our guide, for the first fiscal quarter 2027, we expect revenue in the range of $395 million to $400 million, ARR in the range of $1.894 billion to $1.899 billion, non-GAAP operating rate of approximately $80 million, and we expect first quarter basic share count to be approximately 525 million shares. For the full fiscal year 2027, we expect revenue in the range of $1.754 billion to $1.759 billion, ARR in the range of $2.051 billion to $2.056 billion, non-GAAP operating income of approximately $415 million. Before I close, I want to leave you with a few final modeling points, including the following. First-half revenue to be approximately $795 million. dollars. Second half revenue to reflect similar seasonal patterns as fiscal 2026 with approximately 30% of total revenue in the fourth quarter. First half net UARR to be approximately 73 million dollars. And second half net UARR to reflect similar seasonality as fiscal year 2026 with the fourth quarter being our strongest quarter. We are encouraged by the momentum we're seeing as customers accelerate their shifts of workloads to the cloud. While this is an overall positive, we anticipate that growth in our SaaS offerings will create approximately a 1% headwind to total revenue growth for the full year. Fiscal year non-GAAP gross margin to be approximately 84% as we scale our cloud offerings. Non-GAAP operating income to reflect similar seasonality to our top line metrics. fiscal year 2027 non-GAAP adjusted free cash flow of approximately 425 million dollars also to follow normal seasonal patterns lastly we are committed to managing stock-based compensation and for full fiscal year 2027 we expect dilution to be between two to three percent year-over-year excluding any buyback 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 hold for questions.
Hello, and thank you for your patience. I will now hand the call over to Daniel.
Thank you for coming back after our outage with the service provider for our investor relations conference calls. We are ready to take questions.
I hope that you guys get the chance to listen to the end of our of our reading and also we have published online the entire transcript of the of our earnings calls so thank you again and apologize for the delay we are ready to take questions thank you and with that we will now be conducting a 30-minute question and answer session we do ask that you please limit yourself to one question and one follow-up if like to ask a question please press star one on your telephone keypad the confirmation tone will indicate that your line is in the queue you may press star two to remove yourself from the queue for any participants using speaker equipment it may be necessary to pick up the handset before pressing the star keys one moment while we pull for questions and our first question comes from the line of brian bergen with td count please proceed with your question hi guys thanks for taking the questions here.
First one I have is just as it relates to net new ARR. And as you built the 2027 outlook, just how are you thinking about net new ARR expansion potential here on an FX neutral basis? Sorry if I missed what you said on FX contribution assumptions as it relates to 1Q and the full year, but just trying to unpack that looking ahead. And then my follow-up is going to be on margin. So an up-income margin, appreciate the update on the 30% target. Just want to dig in on how you're thinking about the potential kind of, you know, the moving parts of that as it relates to gross margin and OPEX components moving forward.
Yeah. So, Brian, great to hear from you. When you think about the IAR contribution, I think our guidance kind of says it. There's really no significant or material FX contribution from that versus our prior guidance. So as you look at it, you know, really FX is a minimal impact from where, you know, our previous estimates were. The second piece of it is from a margin standpoint, you know, you look at the moving pieces and definitely, you know, across the board there is opportunity to agentify and to use the technology advances, you know, across every function. That includes, you know, engineering, G&A, as well as sales and marketing, which gives us really the ability to continue to reinvest in growth as needed. But, you know, we're going to look at a balanced way in terms of what makes sense for the company. And you can see our commitment to operating margin expansion over the last two years. And then just back to the IAR, I want to just give a little bit of color. You know, know, when you look at our base, you know, we have a sizable Japan business, so we have headwind from the yen and tailwind to the euro, and they basically net out to be an immaterial impact for the full year. So we're really pleased with the progress, you know, as Daniel commented and I did in the script, you know, we really feel positive about the expansion that we're seeing within our customers and, you know, our ability to stabilize our net new ARR, and that's kind of reflected in both our performance as well as our guidance.
All right, thank you.
Thank you. And our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed with your question.
Yeah, thank you for squeezing in. Daniel, thank you for that disclosure on the ARR traction – sorry, the AI traction with respect to ARR of the $200 million. That was great to see. In terms of the composition of that, could you give us any details on sort of, you know, the split between IDP and what you're seeing on the agent side. But to be certain, you can't sort of disclose that. I'd just love to hear about the underlying momentum with the agentic side of the house, including Maestro, as you go into next year.
Hi, Sandy. We have really a great momentum on, you know, diffusion of the AI within our platform. We have not provided, you know, clear ratios between different components of what we put into the AI, and I will let Ashim to comment further.
Yeah, so, when you look at the way we price, we actually allow pretty good fungibility between our AI and agentic products, actually, both in some of our old pricing as well as our new pricing. So we don't really materially split it out. Well, of course, IDP has been in the market for a longer period of time, for, like, you know, the last two and a half to three years. So IDP, you know, definitely has a good portion of the IRR. But Agentec is a significant portion, you know, and we see that in the platform units. You can see that in the deals and the commentary that we're giving and selling, you know, as a part that we talk about in our script. So from that standpoint, we can't really split it apart. But we also see them as complementary because, remember, IDP also includes IXP, which is not like simple document processing. It really uses advanced technology to be able to parse different documents using different models, and that is part and parcel of the way we price.
Yeah, that's great. That's great context. And then just a follow-up on the guide, Ashim, on two aspects. One, in terms of WorkFusion, how should I think about that contribution when I sort of calculate what the guidance implies from a net-UAR basis. I think there's some reports out there that there are around 25 million AR toward the end of last year, so I just want to sort of sanity check that. And then from, you know, this time last year, there was some concerns around Doge. I think you guys are pretty cautious on the federal business. Just your sort of underlying assumptions about Fed going into next year and maybe the first half of this year, given some of the headwinds you saw this time last year?
Yeah, so the first thing is the $25 million is not accurate. That's the first thing I can say categorically. The second piece is, you know, they also had a different method of accounting. So when we brought it back, you know, even the numbers that have been out there also do not account for it. It is actually below our materiality threshold. So that gives you an indication. We really look at this like a tuck-in acquisition in terms of where it is. And, you know, from that standpoint, you can also just see kind of the strength overall within our guidance, and we've been transparent that that includes, you know, the work fusion contribution, but it is immaterial, and we don't break it out.
And then just on the Fed piece.
Yeah, sorry. On the federal government, we're actually seeing really good traction there. You know, I would say just like the environment, I would say the federal government is a dynamic economy. But I would say our team has done an incredible job connected at really high levels within the organization. And, you know, I'll let Daniel comment on some of his discussions and his views of it. But, you know, within certain agencies, we feel very well strong position. And then there are some agencies, of course, that are going through their changes. But overall, we're actually very bullish about the way our teams are executing and the opportunity that exists there.
Yeah, and we are seeing an increased appetite for more long-term projects, strategic projects, especially in the Department of Work.
Appreciate it. Thanks, Daniel and Ajit.
Thank you. And our next question comes from the line of Michael Turin with Wells Fargo Securities. Please proceed with your question.
Hey, great. Thanks very much. I appreciate you taking the question. Just to start maybe a higher level one, you had some commentary, but just in terms of budgets and what you're seeing around categories like automation and AI, it'd be great to get just a top-down view there and also how you're positioned to capture that in the market where there's just an increasing number of vendors also positioning agentic solutions, which may be newer to market, but might also insert some noise into those conversations.
Look, I think we are really way positioned to help customers with the diffusions of AI within their enterprise workflows. We built Maestro, which is essentially a process orchestration technologies that at its core is a new, powerful workflow engine. That gives us a very interesting advantage in the market right now. So we all know about the impact of the coding agents. I would say that this will translate for us, and I'm extremely bullish about it, into a much faster adoption curve for our customers. We aim to use coding agents to enable our platform for coding agents that will accelerate dramatically the time to value for our customers. And that, of course, includes creation of AI agents, deployment of agents in the context of enterprise workflows. I would like also to stress how important is the combination between deterministic automation and agentic automation into the context of the same platform that can orchestrate both, what I would say, humans, agentic, and deterministic automations.
Thanks for the color there, Daniel. Ashim, just you gave some texture. I know the commentary and the guidance on the call was pretty similar to entering fiscal 27 as 26, but it sounded like in some of the prior answer that maybe public sector is trending a bit better. So just any more context you'd give us around how you're characterizing the current environment, the visibility you have into the model for the forward year at this point, and just how you're thinking about the contribution from the AI product portfolio as that scales in fiscal 27.
Yeah, I mean, we really continue to characterize it as variable, and I'll double-click just again for, you know, anybody who's new in terms of what we mean by that. I think we do see pockets of strength, and we see pockets of pressure or fluctuations that happen from a macroeconomic standpoint, and at the same time, those tend to move around quite a bit. Like, right now, our bullishness in terms of public sector feels really good. Last time of this year, if you remember, we kind of all, you know, felt a lot of uncertainty in that area. We're seeing strengths in areas like, you know, financial services and health care, international markets like Australia. And then there's, you know, obviously the Middle East conflict is there, so there's uncertainty there. So we really characterize it as variable. As I commented in the script, you know, we continue to kind of maintain a very consistent guidance philosophy. You know, we look at our pipeline. We have really deep inspection. We get a lot of signal from the field. Daniel has spent a lot of time with customers over the last three months, four months. We've been very in touch with kind of the field in terms of what we're hearing. And then the other piece is we obviously have very strong now statistical and forecasting models between our finance and our ops team, and we triangulate the three of them. So, you know, we talked about kind of putting the appropriate prudence in there in for guidance, accounting for the variability in macroeconomic environment, and we've done so. And at the same time, when you look at our guidance, I do think it also reflects kind of stabilization of NetMu ARR and what the potential is yielding in terms of the traction our teams are making in the agentic market and how we're positioned. So that's how I would characterize our guidance.
All very helpful. Thanks very much.
Thank you. And our next question comes from the line of Kirk Merton with Evercore ISI. Please proceed with your question.
Hey, this is Chirag on for Kirk. Thanks so much for taking the question. And you highlighted multiple industry partnerships, right, Viva, like with Viva and certain vertical solutions like healthcare and financial crime. Would you highlight healthcare and finance as the two verticals that are showing the strongest willingness to spend right now on agentic AI initiatives, or are there others that you would flag? And when you think about agentic automation at scale, what does success look like in terms of repeatable playbook and sales cycle impact here? Thank you.
I think you got it very right. It's the healthcare. And I think we nominated within the healthcare, in particular, I would say, parts of revenue cycle management, denials, prior authorization. It's a very important type of processes for us. Financial industry has been, you know, since the beginning of the company, our stronghold and we strengthen it with the acquisition of WorldFusion with our big foray into financial crimes. And I would add also the public sector as an important vertical for us that we are eyeing.
Okay.
Thank you. And our next question comes from the line of Terry Tillman with Truist Securities. Please proceed with your question.
Yeah, thanks for taking my questions. I have to – so first on Maestro, it was my impression it's vendor agnostic from an agentic standpoint. Are you all seeing situations where it's involved in managing agents from system record companies or AI native businesses, or is it mostly like a control plane for your own agents? And then I had a follow-up.
Yeah, I think Maestro, it's kind of agnostic in terms of what kind of agents it can manage. Of course, for our own agents that are built with agent builder, we have very tight integrations. But we have also brought agents built with open source frameworks like the land graph type of agents as first class citizens in our platforms. And in terms of using, utilizing agents built on system of records applications, of course, we facilitate using them in our platform. I would not say we manage them. It's more or less like you can call an API that is provided by that platform. But I want to be specific. All agents that are built with open source frameworks can be deployed and executed in the context of the security and governance that our platform provides.
Yeah, that's a good clarification on the API side. Thank you, Daniel. And I guess, Ashim, the SaaS shift, that was an important callout, 1% impact to growth as we look into FY27. I'm also curious, though, is there also starting to be this impact of timing dynamic or around consumption or scaling volumes related to the actual agentic solutions that we need to kind of appreciate that it's not going to show up in revenue yet?
No. I mean, remember, we still price on kind of a bundled, meaning on a subscription consumable type hybrid model, meaning we still kind of use it or lose it units that are there. So we're not on a consumption basis of accounting, so to speak. We're still on an ARR basis of our accounting. So I would say it's not about, you know, any trailing or any delayed impact that you would see there. At the same time, I think our agentic solutions are scaling, and our customers are adopting more and more, as we talked about in the script, and sales are moving very well for us. And, you know, that obviously is what's contributing a little bit to our SaaS Edwin.
Yep, thank you.
Thank you. And our next question comes from the line of Rodi Sultan with UBS. Please proceed with your question.
Awesome. Thanks, guys. Daniel, in your prepared remarks, you mentioned this growing backlog of automations you're seeing at customers. I just wanted to double-click on that. Like, how big is that tailwind of AI unlocking more automatable workflows? And you mentioned the AI product, ARR. but is some material is that sort of pulled through to the core automation business as well? Just want to get your thoughts there.
Yeah, that's an acute observation. Because, you know, the huge interest in AI, it's actually driving a renewed interest in automation. I think in most cases that we are seeing, people expect that the use of AI will result in some sort of automation, and it's It's becoming more clear that AI and the agentic AI and deterministic automation are very complementary. So basically, any AI initiatives surfaces more opportunities for deterministic automation, especially in our case for unattended deterministic automations.
Got it, thanks. And it's so, Paul Farashim, just let me think about the ARR and Revenue Guide for the year, and we think about sort of what the biggest drivers are, you guys really expanded the product portfolio over the past, you know, 12 to 18 months. And just as we think about, you know, AI product, test cloud, vertical solutions, sort of core RTA, like how should we think about sort of what the biggest drivers are on that sort of growth next year as you kind of think about the guide?
Yeah, I think if you just look at some of the metrics that we disclosed, right, 90% of our million-dollar-plus customers have an incorporated AI products, right? I think that is a great, to me, kind of a great tell of the success of the AI products and the ability for us to expand. And we've also talked about the number of customers that still, you know, have room to adopt those AI products that are there. So from our standpoint, AI and agentic is going to lead the way. But at the same time, as Daniel talks about, you know, they're not a separate stream. They actually are very synergistic. As people, you know, pull forward AI and agentic products from us, it actually also pulls through the rest of the platform, whether that is IDP, IXP, unattended robots, et cetera, and we see that. You know, we were very purposeful in discussing, you know, that we are seeing growth rate within kind of the core RPA business, and we look at that as very synergistic as we go forward. The other thing to highlight is we're super excited about our test automation business, and, you know, that is still in its infancy, but we really see that having good traction in the market, and that is also a growth driver for us as we enter this year.
Awesome. Thanks, guys.
Thank you. And our next question comes from the line of Scott Berg with Needham & Company. Please proceed with your question.
Hi, everyone. Thanks for taking my questions here. I'll get to Daniel. We've been doing some work with some partners here. It's become very evident and clear that your partner strategy seems to be resonating really well right now across several different, or your vertical strategy, excuse me, is working well across several verticals. But my question is, as you look into 27, are you able to lean into that strategy even more so given the success you're having there lately, or do you feel like you're already at kind of a maximum effort?
On the contrary, I think we are at the beginning of our vertical strategy. We are doubling down our focus on investments into this year. So if I can summarize our product strategy, I think there are three major pillars that we are seeing right now. So we focus on adopting coding agents all across our platform. So every single artifact that is building on our platform will be built primarily by coding agents. Second is process orchestration that really drives everything, a genetic AI and deterministic workflows. And third, it's vertical solutions. And we are seeing clearly more of a move into customers that have a higher demand of kind of an outcome-based, vision-based, use-cape-based type of solutions that they want to adopt.
Got it. Very helpful there. And then, Ashim, something you can drill down in the quarter a little bit. I know there's a $14 million sale wind around FX for ARR. But what was your assumption of that number going into the quarter? Getting a lot of questions to try to kind of back into the math in terms of how much incremental impact there might have been versus your, you know, expectations 90 days ago.
Yeah, it was honestly right. It was just right in line with that. As I talked about, I think the yen you can see has inverse correlation to the euro, and the net for both of those tended to be zero. We see that both as we look into the current year, as we've seen FX rates move, as well as the current assumption that we see there. So from both our guidance standpoint and our results, we really see an immaterial impact to that. The driver for our beat in the quarter was really just sales execution. And, you know, we feel very strong about the customer response, as we've seen, about the traction that we're getting within our AI products. FX did not have a material impact versus our guidance.
Well, thanks, Mr. Paul. Thank you.
And our next question comes from Kingsley Crane with Canaccord Genuity. please proceed with your question thanks for taking the questions and i think the idea of ai on top of deterministic automations is really resonating uh just on this idea of agentic really being about pulling through to the whole platform just trying to get a sense of how that ends up playing out from a deal timing perspective like is the customer typically renewing at a much higher rate is it happening where they'll adopt ai and then through the life cycle of their contract they'll realize that they need more automations just trying to get more color on that thank you um i think it's all of the above honestly like we've seen the customers renew
just at renewal expand into ai products um we have very good examples of that both within you know across every vertical and every geography there's also areas that you know they're still working through their pocs but it's bolstered their renewal and their confidence given our roadmap and the pocs are moving well so they would expand just a little bit as they continue to kind of dip their toe in the water so from our standpoint it's not one single motion you know it really depends on the on the customer or the circumstance but what is encouraging to us is the success that our proof of concepts this their the feedback that we're getting from customers that you know as daniel talked about governance matters and the full skit the full extent of our
platform is a difference maker for us great and then just a quick follow-up that that number one OS board ranking for for screen agent definitely impressive and that's still holding up just curious like how specifically screen agent is driving more automation growth within customers and there's just a reminder on the unit economics that that's affected by you know running opus versus running haiku things like that thanks things of deployment of the screenplay agent we are seeing really good use cases from our customers.
The powerful use of this screenplay agent is that it is used in the context of autonomous workflows. So basically the best we combine like using deterministic UI automation technologies and in the places where it's extremely difficult to define in rules how to use the screen when the screens are have you know high degree of variability our customers are using the screenplay agent so that basically extended our platform in a few use cases that we couldn't basically touch and I think it's still only to comment on how does
it help with the platform adoption thank you and our next question comes from the line of our shenga mentovic with wolf research please receive your question all right thanks for taking the question i just kind of wanted to go back and expand kind of on the error guidance the methodology in terms of that conservatism like what does that mean and i understand we're not going to be talking about inorganic from work fusion 20 million whatever it is even if you strip out that number growing at the 65% rate the CEO talked about, is there a way that it still looks a little bit less conservative in that guide? And if there is a little bit less conservative dynamic where it's just, hey, larger renewal cohorts and also more confidence in that execution tailwind that you started to see exiting the Yeah.
So one is I just want to correct, like, I don't think we should, you know, the metrics that we talked about, as I said, we bring it on at a different ARR methodology. so I really want to caution everybody to use kind of those assumptions. It's immaterial for a reason as we've done that test. The second piece is, you know, while the business is growing at 65%, remember we also have, you know, overlapping customers, et cetera. We really view this as a technology tuck-in that can drive utilization and stickiness across our agentic and AI platform. And, of course, you know, we do see potential there for the upsell, but we also have to go through an integration period, you know, with the company. And that is, you know, all baked into our guidance from that standpoint. You know, we look at it as our core business continues to be very strong, and we are stabilizing, you know, net new ARR. And, you know, with AI and Agentec, we do feel bullishness, you know, about the overall business. But given the macroeconomic environment continuing to be variable, you know, we do layer the appropriate prudence that is there.
Got it. And then just in response to an earlier question, I didn't really kind of get the in line with the constant currency guide. Can we just clarify what was the constant currency ARR growth rate implied in the guide for revenue and for ARR growth? Because the communication throughout the year on tailwinds and incremental headwinds has kind of laid up a weird kind of analysis to figure out what the actual core constant currency growth was.
Yeah. You know, from our standpoint, we gave the $14 million, which we assumed for the guidance that was there. But the growth rate remains 11% for us. It is largely immaterial year-over-year.
Thank you. And our next question comes from the line of Siti Panigrahi with Mizuho Securities. Please receive your question.
Hi, this is Phil on for Siti. So you guys raised the long-term non-GAAP operating margin target to 30%, which is a meaningful step up. Can you walk us through what gives you confidence in that number and what is the timeframe of achieving that target?
Yeah, so, you know, right now we're, you know, we're in and around 23% north of that. We've shown really good progress in scalability over the last couple years in particular. The first thing is we just continue to operate with really good discipline, And so we constantly are moving investments to higher return areas. And so when you're able to do that, it obviously creates a scalability of expansion. The second is, you know, we believe in the productivity that is being unlocked right now with Agentic. And that agentification within our own business is something that is, you know, very exciting for us and our teams to unlock further steps of productivity. And that includes all areas within the company. We can be more productive, expand, and support our broader roadmap really with, you know, similar technology spend just because of the advances that are there or R&D spend. The same goes with our G&A function as well as our sales and marketing function. So we're really seeing that scalability just even with the technology advances as well. In terms of timeframe, you know, it's a long-term margin target. We, you know, that's, you know, as it implies, that's kind of within a three-year timeframe from our standpoint in and around it. And at the same time, like, you know, we don't take – we're not waiting for three years. We're going to continue to execute and, you know, drive productivity as we see fit.
Thank you. And our next question comes from the line of Koji Aiketa with Bank of America. Please choose your question.
Yeah. Thanks so much for taking the question. I'm going to ask one on dollar-based net revenue retention. So it's down a point to 106% when adjusting for FX. And so looking into fiscal 27, what are the main drivers we should be thinking about, whether that's product, geography, vertical, or maybe something else in there that can drive expansion in that metric? And how should we be thinking about the dollar-based net revenue retention assumptions that are embedded in the guide? Is that flat up or down from the 106%? Thanks so much.
Yeah, I think when you look at overall net new ARR stabilizing, like, we don't really see a difference in the mix shift between net new logos as well as expansion. We see them both as areas that will continue. We've kind of operated in this 80, 20, 70, 30 split. So, you know, that gives you, I think, enough data to be able to see that net new ARR stabilizes over this period of time from where we are. In terms of what gives us confidence or kind of how we see that expansion, again, as we spoke about earlier, it is really around our AI and agentic products. And then with that, really pulling through the overall platform, including deterministic automation, continuing to expand across our customer base.
Thank you. Thank you. And our next question comes from the line of James Kissinger with Watertower Research. Please proceed with your question.
Hi. Thanks for taking my question. I guess first, just from the foundational model perspective, has the anthropic supply chain risk designation, have you seen any kind of ripples from that at all? Is there any kind of exposure at all or any change in behaviors out there?
And then just on the work fusion acquisition, does that portend potentially future acquisitions and other verticals for agentic abilities thanks yeah in relation to anthropic our strategy was from the beginning to be model agnostic and we one of the features that many of our customers have requested is to give them the capabilities of choosing what model and even bring their own model to to be used by our platform so we do offer anthropic models but they are optional and not mandatory and from this perspective there is zero impact on our working relationship with the public agencies in the US about work fusion yeah it's we are always looking into the market especially for talking acquisition that gives us the talent, technology, and expertise in a particular vertical.
Thank you. And with that, ladies and gentlemen, that does conclude the question and answer session. I would now like to turn the floor back to management for any closing remarks.
Well, thank you so much for listening to this call. And once again, I would like to apologize for the outage that we experienced, and I'm looking forward to meeting many of you in the coming days thank you and with that ladies and gentlemen this does conclude today's teleconference we thank you for your participation you may not disconnect at this time and have a wonderful rest of your day