Earnings Call Transcript - PATH Q4 2025

Operator, Operator

Greetings and welcome to the UiPath Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allise Furlani, Vice President of Investor Relations. Thank you, Allise. You may begin.

Allise Furlani, Vice President of Investor Relations

Good afternoon, and thank you for joining us today to review UiPath’s fourth quarter and full year fiscal 2025 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 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, which 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 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 these 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, 2024, and our subsequent reports filed with SEC, including our annual report on Form 10-K for the year ended January 31, 2025 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 the call. In addition, please note that all comparisons are year-over-year unless otherwise indicated. Now, I would like to turn the call over to Daniel.

Daniel Dines, Founder and CEO

Thank you, Allise. Good afternoon, everyone. Thanks for joining us. I want to express my gratitude to the UiPath team and our partners for their dedication and focus throughout the year, as well as to our customers for their trust in us. We achieved revenue of $424 million. Without a $2 million foreign exchange headwind, revenue would have reached $426 million. We concluded the year with ARR of $1.666 billion, marking a 14% increase year-over-year. These results were influenced by the ongoing geopolitical situation. While we are optimistic about our public sector business, the government transition that began in January affected the timing of deal closures, resulting in slightly lower than expected ARR for the fourth quarter. We continue to closely engage with our federal customers, who consistently provide feedback. Our agentic platform offers real efficiencies and remains integral to their strategic plans. However, we recognize that in the short term, the government is navigating administrative priorities, which we will support. This has been factored into our linearity and overall guidance for the year. Additionally, we have observed significant volatility in the macroeconomic landscape, particularly in the last two weeks. Discussions with customers reveal that this external environment has instilled uncertainty regarding their budgets. Foreign exchange rates have also shown significant fluctuations recently. In light of these trends, we are adopting a cautious approach for fiscal 2026, adding prudence to our overall outlook considering the volatile environment. We are confident we are adequately accounting for macro trends as they stand today. Looking beyond immediate challenges, we have strengthened the company’s foundation considerably. Despite market uncertainty, we are focused on positioning for long-term success and believe we are well-equipped to manage the current climate. As we look ahead to fiscal 2026, we remain committed to three main strategic priorities: accelerating innovation within our agenting roadmap, boosting adoption among our customer base, and enhancing operational rigor and efficiency across the organization. I continue to devote much of my time to traveling and interacting with customers, partners, and our team. Our product and engineering teams are innovating more rapidly than ever, providing cutting-edge solutions, and our innovation roadmap is fostering deeper, more meaningful relationships with customers and strategic partners. We have made significant progress in executing the priorities we set last year and are on track with our go-to-market changes and restructuring. Our sales leaders are driving alignment within their teams while increasing our emphasis on customer centricity. The team is motivated and entirely aligned with our strategy to ensure success for our customers in fiscal 2026 and beyond. Over the past six months, we have conducted thorough reviews of our top customers to assess their health and developed executive-sponsored plans to enhance adoption and co-innovation while maximizing ROI. These initiatives are already yielding strong customer engagement and momentum. There is always work ahead, but our innovation engine is operating at full capacity. Our agent automation products are gaining traction in the market, and we have substantial opportunities for execution. Fiscal 2025 was UiPath's most innovative year, introducing groundbreaking products and capabilities such as Autopilot, Agent Builder, and Agentic Orchestration, among others. We are merely at the beginning. Agentic automation is reshaping how businesses function, and we are continuously redefining possibilities with what we believe is the industry's most advanced and comprehensive agentic automation platform. Customers view us as a provider of tangible results rather than mere promises. After evaluating competitive agentic vendors, a leading scientific instruments provider chose our platform due to our unique capacity to utilize agents across applications. They are currently developing and implementing agentic use cases with UiPath Agent Builder for various processes. Another example includes a major global semiconductor firm that signed a significant deal in the quarter to purchase our agentic products aimed at enhancing their employee experience and ensuring competitive differentiation. Agent Builder, which entered private preview in December, is our most successful preview to date, with hundreds of customers testing use cases that span various operational challenges. Excitement among our partners and customers is robust, with approximately 3,000 agents creating essential processes. For instance, Allegis Global Solutions is testing agents in their workflows for invoice reconciliation, resulting in a substantial improvement in their accuracy rate and a significant reduction in development time for automation. While building quality agents is important, the real transformative outcomes come from orchestrating agents, robots, and people together for optimal business processes. Our new Agentic Orchestration product is designed to facilitate this. With its public preview launching this week, Agentic Orchestration enhances our platform’s differentiating ability by orchestrating specialized teams of agents with robots and people, ensuring accuracy during key transactions. Our platform is exceptional as it extends beyond the UiPath ecosystem to orchestrate agents throughout an enterprise’s entire application framework. Furthermore, we plan to support hosting and orchestrating agents created with leading open-source frameworks. We believe that this comprehensive orchestration capability sets us apart, enabling our customers to address complex processes without vendor lock-in. Customers are already using Agentic Orchestration to enhance efficiencies, such as a multinational food and beverage corporation looking to streamline their supply chain process. Our newly launched Agentic Testing product exemplifies how we are disrupting traditional application testing with AI agents to boost productivity. Autopilot for testers speeds up the entire testing lifecycle by streamlining various testing processes, while Agent Builder allows customers to create custom agents for their specific needs. We continue to see strong adoption of our application testing products, including an expansion with a global animal health company that plans to automate 90% of their application testing, saving approximately $5 million. We are also focused on developing specialized vertical solutions, and we are pleased to announce the acquisition of Peak AI, which enhances our capabilities in price and inventory across multiple industries. This acquisition aligns seamlessly with our agentic automation goals, strengthening our vertically specialized agents and integrating them into our orchestration framework. Moving to Autopilot for everyone, its enhanced user experience is driving adoption, with a significant increase in unique customers in the quarter, including a financial technology company that implemented Autopilot to refine their merchant category validation process. Autopilot helps troubleshoot workflows, optimizing performance for safe and effective AI operationalization. Our product innovation efforts also invigorate our partner ecosystem, paving new avenues for growth through strategic partnerships. We are excited to enhance our collaboration with Deloitte by launching an Agentic ERP solution that merges UiPath automation with leading ERP platforms. This will enable organizations to autonomously orchestrate workflows, leveraging generative outputs and tweaking processes through feedback loops. This partnership is not just about savings; it aims for unmatched efficiency and intelligence that fosters dynamic decision-making and competitive power. Our advancement in agentic automation further deepens our relationship with Microsoft, who shares our vision for this technology and is eager to partner with UiPath. This collaboration underscores our dedication to innovation and delivering value to our customers. Our strong vision and ongoing investment in innovation continue to earn us recognition from industry analysts. In the last quarter, we were rated highest in the leader category in the Everest Group’s Intelligent Automation Platforms PEAK Matrix Assessment 2024, which reflects our unwavering commitment to innovation and the comprehensive capabilities of our automation platform. Finally, I invite you to join our Annual Agentic AI Summit to see how agentic automation is transforming businesses. The event will be live-streamed on our website on March 25th. Please contact our investor relations team for more information. Now, I’ll pass the call over to Ashim.

Ashim Gupta, Chief Operating and Financial Officer

Thank you, Daniel. And good afternoon everyone. I’d also like to extend a thank you to the team for their hard work and dedication. Your efforts drive our success, and we appreciate everything you do to serve our customers, innovate across our platform, and execute against our strategic initiatives. Before turning to the financials, I would like to share an update on our key operating priorities. Starting with our partner ecosystem, we have made significant progress over the last nine months, driving alignment across the organization. This has resulted in a more connected team with an improved overall incentive structure that is better aligned to performance and rewards higher-performing partners. We have also more closely integrated our partners with our go-to-market teams and have been proactively focusing on enabling them to drive adoption of our agentic solutions along with our professional services team. In addition, I am encouraged with the progress we are making in driving greater and more proactive visibility and discipline in our pipeline and customer health. Overall, our operational rigor is improving, thanks to the effective and cross-functional collaboration of our teams. I am pleased by the progress we made in fiscal 2025 and believe our highly differentiated agentic automation platform positions us well for long-term growth and profitability. As we move forward, as Daniel has said, innovation is our number one priority, and we will continue to invest in driving AI and agentic, while delivering margin expansion through more disciplined expense management. 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 $424 million, an increase of 5% year-over-year. Excluding an FX headwind of $2 million, revenue would have totaled $426 million. Total revenue for fiscal year 2025 was $1.43 billion, an increase of 9% year-over-year. ARR totaled $1.666 billion, an increase of 14%, driven by net new ARR of $60 million. Excluding the FX headwind, net new ARR would have totaled $61 million. As we have discussed, our AI products and overall platform are key differentiators, driving both growth and customer retention. Over the last several years, as we have introduced products like Document Understanding and Communications Mining, our sales team has done a great job integrating them into customer solutions and driving adoption, which has resulted in an AI product attach rate of approximately 20% of our total customers. More importantly, for our customers with greater than $1 million in ARR, our attach rate is over 85%. A great example of the tangible ROI our customers achieve with our AI solutions is a European security company. They expanded to the full UiPath Platform to leverage AI for more advanced automation use cases to automate email routing of unstructured data and document attachments, aiming to achieve net annual savings of $30 million by 2030. In order to fully take advantage of our AI products, our customers are accelerating their move to the cloud. We ended the year with over $975 million in cloud ARR, up over 50% year-over-year, including both hybrid and SaaS offerings. An example of this is one of our largest customers, a leading US financial services firm, who expanded in the quarter as they migrate their extensive automation program, spanning thousands of processes across multiple divisions to the cloud. With this transition, they plan to accelerate their adoption of autopilot, communications mining, and IDP, while enabling a faster integration of our agentic capabilities to drive efficiency and innovation. We ended the quarter with approximately 10,750 customers. Normalizing for customer hierarchy changes, our customer count was flat year-over-year. We continue to be successful in signing valuable new enterprise logos that align with our strategy for targeting long-term customers with a propensity to invest, including new logos like Nutanix, Lake Michigan Credit Union, Southern Illinois Hospital Services, ACS Industries, and Living Spaces. 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, customers that spend over $30,000 in ARR increased 7% year-over-year. This is also reinforced by our continued growth in customers with $100,000 or more in ARR, which increased to 2,292, and customers with $1 million or more in ARR, which increased to 317. Our largest customers are continuing to expand on our platform, and during fiscal year 2025, customers with $5 million or more in ARR grew 30%. Moving on, dollar-based gross retention of 98% continues to be best in class and our dollar-based net retention rate as of the fourth quarter was 110%. Remaining performance obligations increased to $1.243 billion, up 7%. Current RPO increased to $806 million, up 14%. Turning to expenses. Fourth quarter overall gross margin was 87%, and software gross margin was 91%. Fourth quarter operating expenses were $236 million. We ended the year with 3,868 total employees. In the fourth quarter, we achieved GAAP profitability for the second year in a row and delivered GAAP operating income of $34 million. This included $88 million of stock-based compensation expense. Full-year GAAP operating loss was $163 million, including $358 million of stock-based compensation. Non-GAAP operating income in the fourth quarter was $134 million, resulting in a record non-GAAP operating margin of 32%, an improvement of over 400 basis points year-over-year, and a reflection of our continued efforts to streamline the business. Full-year non-GAAP operating income was $241 million and full-year non-GAAP operating margin was 17%. I am pleased with our non-GAAP adjusted free cash flow generation for the fourth quarter and full-year of $145 million and $328 million, respectively. We ended the year with a healthy balance sheet of $1.7 billion in cash, cash equivalents, and marketable securities and no debt. During the fourth quarter, we continued to return capital to shareholders, repurchasing 744,000 shares of our Class A common stock at an average price of $12.57. For the full fiscal year, we returned approximately $390 million to shareholders through share repurchases, repurchasing 31.8 million shares of our common stock at an average price of $12.30 per share. Since January 31st, under our 10b5-1 plan, we repurchased an additional 1.4 million shares at an average price of $12.19 through March 11, 2025. Now, turning to guidance. Our guidance philosophy remains unchanged and we continue to guide to what we see in front of us while factoring in relevant trends, opportunities, and potential constraints. We are actively monitoring the many moving parts in the macroeconomic landscape, including the US public sector and global economic conditions. Our guidance takes into account the following. First, as Daniel mentioned, while we remain optimistic about the long-term opportunity in the US public sector, the ongoing transition has created short-term uncertainty for deal closures, and we have factored this into our guidance for fiscal 2026, with a more pronounced impact in the first half of the year. Second, we have seen an increase in volatility in the overall macroeconomic environment, particularly in the last two weeks, and, as a result, we have made prudent assumptions to our guidance. Third, we are pleased with the progress our customers are making to move more of their workloads to the cloud, particularly as customers continue to adopt our AI products and plan their agentic roadmaps. While this is an overall positive, we expect growth in our SaaS offerings to be a 2% headwind to full-year revenue growth this year. Turning to the specifics of our guide. For the first fiscal quarter 2026, we expect revenue in the range of $330 million to $335 million, ARR in the range of $1.686 billion to $1.691 billion, non-GAAP operating income of approximately $45 million. And, we expect first quarter basic share count to be approximately 553 million shares. For the fiscal full year 2026, we expect revenue in the range of $1.525 billion to $1.530 billion, ARR in the range of $1.816 billion to $1.821 billion, non-GAAP operating income of approximately $270 million. Before I close, I want to leave you with a few final modeling points. Including the following: first-half revenue to be approximately $665 million. First-half net new ARR to be approximately $48 million, and second-half net new ARR and revenue to reflect similar seasonality as fiscal year 2025. While we have substantially completed our go-to-market transition, we expect the final stages to create a more pronounced seasonal pattern in fiscal 2026 with the second half of the year being stronger than the first. Fiscal year non-GAAP gross margin to be approximately 85% as we scale our cloud offerings. Non-GAAP operating income to reflect similar seasonality to our top-line metrics. Fiscal year 2026 non-GAAP adjusted free cash flow of approximately $370 million, also to follow normal seasonal patterns. Lastly, we are committed to managing stock-based compensation and for fiscal year 2026 we expect dilution to be between 2% to 3% year-over-year. 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, Operator

The first question comes from the line of Jake Roberge with William Blair. Please proceed.

Jake Roberge, Analyst

Hey, thanks for taking the questions. Just wanted to follow up on the headwinds that you've seen over the past few weeks. I understand the public sector dynamic in January, but could you flesh out those comments about the significant volatility over the past two weeks and just what you're starting to see and hear from customers on that front?

Daniel Dines, Founder and CEO

Well, I would say that everybody is seeing the volatility. It's not only us. And we are in constant contact with customers. And look, some of the deals are being delayed. For instance, we were talking this week on Monday with a Canadian bank. And they told us that all approvals in the last 90 days are now being re-reviewed. And look, we have to base in the appropriate prudence for the year, given what we are seeing right now.

Jake Roberge, Analyst

Okay. That's helpful. And then great to hear about the 3,000 agents that have already been created on the platform. Can you talk a little bit more about the early areas or use cases that you're gaining traction with agents? And then maybe just comparing interest, how agents are being monetized versus your existing RPA deployments.

Daniel Dines, Founder and CEO

We focus on delivering agents that operate within the framework of complete enterprise business processes. Previously, many agents were primarily chat-based, but we are now creating agents that are activated by enterprise workflows. These agents receive and process data to provide actionable recommendations, which are then executed by robots after thorough review. We are identifying numerous use cases in various industries, particularly in financial services and healthcare, such as general ledger coding, healthcare prior authorization, denials, and insurance claims processing. There are several processes where we can implement these agents, aligning with our strength of deploying them in areas where robots are already functioning. Our strategy involves assessing human input alongside robots to integrate agents that assist employees in their tasks. This approach contributes to our idea of Agentic Orchestration, as we take on more human tasks, we increasingly need to coordinate the efforts of agents, robots, and humans.

Operator, Operator

Thank you. Our next question comes from the line of Bryan Bergin with TD Cowen. Please proceed.

Bryan Bergin, Analyst

Hi, guys. Thanks for taking our questions. First on the public sector pressure. Is there any way you can help frame the scale of this and maybe the mix of business that is for you, particularly the US federal within public sector? And just maybe how you see that part of the portfolio performing just so we can segment that out from the broader commercial portfolio.

Daniel Dines, Founder and CEO

Yeah. Generally, we are not breaking it forward, but federal has been one of our best-performing verticals. And we have confidence with our federal customers. But government is going through a transition. And we are staying close to our customers. We saw the disruption starting in January. In the conversations with customers, look, the disruption has continued, and we expect it to continue for the near future.

Ashim Gupta, Chief Operating and Financial Officer

So, Bryan, what I would add, if you go back to our investor conference, it's our third largest vertical across the company. And just to add a little bit more flavor, in some cases, there are moratoriums on procurement for new contracts. So while something may be funded, they are working through reconciliation bills, overall things, and they are just working through the transition, and that is really changing some of the procurement processes. Again, we're in constant touch with them; our customers there. Everybody feels good about the value. Actually, they see us as a real avenue to meet a lot of DOGE's goals. But we have to give the appropriate space to let them work through the transition and continue to demonstrate our partnership and value.

Bryan Bergin, Analyst

Okay. Understood. As then just as we think about the shape of '26 as you see it now, any finer points on how and maybe some of the net new ARR comments you had assumed based on your current plan, give us a sense of where you see that stabilization or trough potentially of net new ARR as you move through the year?

Ashim Gupta, Chief Operating and Financial Officer

I believe that when you examine the guidance we've provided for both the first and second halves, it's evident that the first quarter and the first half will face challenges due to the macroeconomic climate and the time needed for the public sector to stabilize. From our team's viewpoint, we are quite optimistic about the progress and stabilization in several areas. Healthcare and financial services in particular regions are performing exceptionally well. We feel confident about the advancements made there. In the second half, while we have accounted for overall improvements throughout the year, we expect to see more noticeable seasonality in the first half.

Operator, Operator

Thank you. Our next question comes from the line of Mark Murphy with JPMorgan. Please proceed.

Unidentified Analyst, Analyst

Hey, thanks for taking the question. This is Ari on for Mark Murphy. As you're seeing this increase in certainty in the market, after probably putting a damper on customer willingness to invest in new technologies. One could extrapolate that to AI. But do you think this incremental uncertainty is kind of going to make customers a little bit less reluctant to invest in new technologies? Or do you think they’re going to see it as maybe the way out of what's going on in the lever for more efficiency and cost savings? Thanks.

Daniel Dines, Founder and CEO

No, I don't think this is related in any way with investing in new technologies or not. I think the uncertainty applies to all sorts of investments. On the contrary, in our discussions with our customers, we are seeing quite a good pull towards agentic. Agentic really opens up many doors, and informally, we were talking with the CIO of a major bank here in New York. He saw the demo of our product, and basically, he said, 'Guys, you are onto something really, really cool that is quite differentiated in the market, and we are interested in it.' So the pull exists there, but the reluctance is related to uncertainty.

Ashim Gupta, Chief Operating and Financial Officer

I would just add that from my discussions with several CFOs over the past two weeks, there is a shared sense of uncertainty. As a result, the general response has been to ensure that budgets and controls are established to better navigate the evolving macroeconomic landscape. While this is reflected in tighter budgets and deal closures, we are not seeing a short-term impact on the activity of proof of concepts and interest in agentic. In fact, we are increasingly reallocating our teams to meet the demand for understanding agentic, conducting pilots, and running proof of concepts, which is a positive indicator for us. That's my perspective on the situation.

Unidentified Analyst, Analyst

And just as a quick follow-up, if we're looking at the commercial side of things, do you see any difference in the impact of these stressors in the US versus Europe or any other international markets, or is it pretty evenly distributed?

Ashim Gupta, Chief Operating and Financial Officer

I think it's a general statement. I think the entire globe is feeling the environmental pressures. I will say, as we've stayed closer to our Canadian customers, there’s definitely more pronounced sensitivity around, just as Daniel gave you some of those examples. But we see that really broad spread, whether it's around healthcare, financial services, or different geographies. I think everybody's feeling the uncertainty of the current environment.

Operator, Operator

Thank you. Our Next question comes from the line of Raimo Lenschow with Barclays. Please proceed.

Sheldon McMeans, Analyst

Hi, this is Sheldon McMeans on for Raimo. Thanks for taking our question. So UiPath has worked with federal government agencies like the IRS to increase automation and efficiency. And I think the ROI is clearly there, but when there's a widespread efficiency initiative like we're seeing, there could be screens that show shelving that's not indicative of value, particularly for the IRS that sees more activity around this time of year. My question is, is there an opportunity to shift to more of a consumption-based model to help more tangibly align monetization to value or could you give us any more color on what proactive approaches you're taking here?

Daniel Dines, Founder and CEO

Yeah, look, IRS is a big customer for our document understanding solution, which is in fact monetized based on consumption. And yes, of course, we believe that our platform is very aligned with the new administration goals of government efficiency, and we are looking forward to really help achieve these goals. At the same time, you mentioned IRS. I think they are one of the agencies that are under a moratorium for 30 days. We still work closely with many of our agencies. The interest is there, but it's prudent, I think, not to assume very much for the time being.

Sheldon McMeans, Analyst

Understood. Thanks for the color there. And a few quarters ago, you called out some hesitation in decision making due to the rapidly evolving AI landscape. I was wondering, is that part of the change that you're seeing, maybe customers waiting for more maturity around agentic AI before putting new automation use cases into production?

Daniel Dines, Founder and CEO

Yeah, in a way, if I can say, there is a continued wave of confusion and clarity around AI. I would say initially, everybody thought the new AI would do basically everything, replacing everything. I think now customers are taking a much more moderate stance on AI. This is why agentic is getting a lot of interest because agentic is pragmatic and it promises real value gain. I think we all have, even if we take our experience with robots, which is kind of, it's suspicious of AI that imitates people. So I think we have a lot of experience in delivering tangible values to our customers. So, the real value is when you can shift work from people and deliver autonomously. This is the real, real value. That was true for our platform, where our unattended robots deliver more revenue and more value for our customers than the attended robots. Not to say the attended are not valuable, but the ratio dramatically shifts into autonomous use cases.

Operator, Operator

Thank you. Our next question comes from the line of Sanjit Singh with Morgan Stanley. Please proceed.

Sanjit Singh, Analyst

Yeah. Thank you for taking the question. Dan, I was wondering if we could get an update, and it sort of follows on the previous question about monetization with respect to some of the government use cases. But broadly, can you walk us through your pricing and monetization strategy for your agent portfolio?

Daniel Dines, Founder and CEO

Yeah. So we are going to monetize our agents and the Agentic Orchestration via a consumption-based model. We are going to announce pretty soon our monetization strategy as we plan to enter general availability towards the end of April, beginning of May.

Sanjit Singh, Analyst

Understood. So we'll definitely look out for that. Ashim, going back to federal, I guess, sort of two related questions. Do you have confidence that federal will be a long-term customer of UiPath? And if that's the case, this year is just going to be a headwind because of DOGE. Is there any way you can sort of frame out the underlying growth of the business ex-federal, how that shaped up either in Q4 or what you think that looks like for the balance of the year?

Ashim Gupta, Chief Operating and Financial Officer

We are not providing a specific breakdown at this time. However, as mentioned, this is one of our top-performing areas, and we have strong confidence in our relationships with federal customers. We view the current situation as a short-term disruption or uncertainty. As we engage in ongoing conversations with our federal clients, they continue to emphasize the positive impact we are making on productivity, which aligns well with the goals of DOGE. Therefore, we see this more as a temporary impact during the government transition period.

Operator, Operator

Thank you. Our next question comes from the line of Michael Turrin with Wells Fargo. Please proceed.

Michael Turrin, Analyst

Thank you for taking my questions. Ashim, last quarter you mentioned stable net new ARR. Is it accurate to say that the difference between that and what we're seeing now is due to the growing uncertainty you've mentioned? Can you share what steps you are taking to ensure that you remain part of the federal conversation, knowing this situation is largely out of your hands? Additionally, regarding the AI products, how should we consider them as a potential offset? Could you also address how you are integrating new products into your initial forecasts? Thank you.

Ashim Gupta, Chief Operating and Financial Officer

Yes. Let me break down the questions for you. So one is, yes, the majority of the impact we're talking about is around the macro environment, inclusive of the public sector. So from a stabilization standpoint, we honestly are very encouraged by the progress we've made on execution. The changes in go-to-market and the stabilization of our teams. So we feel good about the stabilization of it. Really, since January, the public sector changes began, or the administration transition began. We're seeing that continue, and I think everybody has been looking at the news and kind of talking to customers and seeing different companies react to the latest developments in the geopolitical climate. So we feel good about the stabilization. The headwind that we are breaking into our guidance is really around those two factors for ARR. We are obviously excited also about agentic and AI. We see those both of those products as continuing to gain traction. We disclosed the attach rate of 20% for AI-based products. And as Daniel commented, really the momentum on agentic, we are seeing positive response from our customers. That of course we've baked in a two-point headwind for SaaS headwind, which explains some of the revenue decrease as well from current consensus or current models. In terms of staying close to our customers, I'll let Daniel also comment on that. But we have very good executive sponsorship. We frequent Washington quite often, both between our go-to-market leadership and our executive leadership. We are connected to very good levels within the agencies and staying connected throughout. Lastly, just overall on the AI and agentic, we are incredibly excited about our customer momentum that we're seeing there and the metrics that we're seeing from our private preview. We're still in the early innings of that. We're focused on getting that successful with our customers. While we expect momentum to build throughout the year, we don't expect it to be a material contributor to revenue in fiscal year 2026.

Operator, Operator

Thank you. Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed.

Unidentified Analyst, Analyst

Hey guys, this is Stephen here for Alex. Thank you for taking my question. First of all, on the acquisition that you announced, can you share a little bit more about the strategic rationale and also to what extent can we see the contribution of the acquisition in FY ‘26? And then I had a quick follow-up.

Daniel Dines, Founder and CEO

Yeah, we are pretty excited about Peak. We are welcoming here a team of great AI talent. And we long plan to enter into more verticalized agentic space. This is going to be a team that will help us build around them. We are starting with these two use cases around price and inventory. They also have a good team of practitioners, data scientists that can help also promote our overall agentic push. They are based in the UK, where we already have a very strong AI team. We are building a lot of products. So, from a consolidation perspective, it was really good. I’ll let Ashim comment more on the ARR implications.

Ashim Gupta, Chief Operating and Financial Officer

Yeah, I think it's really immaterial to our overall year. As with previous acquisitions, we really view these as tuck-in acquisitions. So they're not at a disclosable level, and they're not material from an overall impact for our company, so we don't disclose them.

Unidentified Analyst, Analyst

Got it. Thank you, guys. And then really quickly on the go-to-market changes. So I know you guys went through a lot of changes last year and you talked about it a little bit in this call as well. So we assume that the go-to-market changes are sort of behind us now and that we are in the steady state?

Daniel Dines, Founder and CEO

Our go-to-market changes are largely complete. We've been only three quarters into a significant transformation for the company. I am pleased with the extent of this change. The energy levels within our company are becoming healthier. People are supportive of our new direction. We are committed to executing our strategy and plans with stability.

Operator, Operator

Thank you. Our next question comes from the line of Kirk Materne with Evercore ISI. Please proceed.

Chirag Ved, Analyst

Hi, this is Chirag on for Kirk. Thanks so much for taking the question. There's been a lot of energy and optimism in the agentic space, especially at initial POC stages. And on the call, you've highlighted your attach rates, the innovation, and some customer deals. So just at a high level, how would you characterize UiPath's competitive advantage and right to win in this category when looking out over the next year, next two years? Thank you.

Daniel Dines, Founder and CEO

Our strategy for agentic is straightforward. We are building on our existing deployments and providing our community with an agent builder, a low-code tool that enables our technical business users to create agents. This is an easy win for us; we can enhance the capabilities of our robots with agents within our current deployments. Additionally, we are adding more features for end-to-end process automation through our agentic orchestration capability. This is a clear direction for us and is essential for our success, with positive traction and feedback from our customers. However, we have recognized that our agent builder cannot address all potential use cases, as it primarily caters to a smaller range of use cases and technical business users. This is why we see significant interest in open-source frameworks like CrewAI and LangChain, among others. We intend to support integration with agents developed using these frameworks. By integration, I mean hosting, deploying, managing, and orchestrating them alongside our robots for actions integrated into our orchestration platform. By adopting this open approach, we are creating a comprehensive agentic platform. I'm not aware of any other company pursuing a similar strategy, which helps prevent vendor lock-in and supports internal data science teams in managing the agents they build effectively.

Chirag Ved, Analyst

Really appreciate it. Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Scott Berg with Needham & Company. Please proceed.

Scott Berg, Analyst

Hi, everyone. Thanks for taking my questions. I guess I got two probably quick ones here. Ashim, your cloud ARR has shown nice growth. I think you said over 50% for the year to $975 million. Within that growth, how much of that is coming from customers that are moving their workloads from behind the firewall to your cloud solutions? Or is the majority of it from net new business? Thank you.

Ashim Gupta, Chief Operating and Financial Officer

Actually, it's both. I think our sales team has done a great job on new logos going directly to the cloud. Our cloud platform and what our product and engineering teams have done has been quite remarkable in terms of the capabilities and the cloud-first mentality that Daniel has driven across the teams has really done just that. But we are seeing, as I noted, the financial services firm, moving a lot of their workloads and their footprint to the cloud. One of the reasons is because our pace of innovation has also increased and people want to take advantage of the AI products, and they can do that faster and more efficiently by being on our cloud platform. So it's honestly broad-based, and that's why you see the growth rates that you're seeing there from both cloud as well as hybrid. The last thing to note is I think agentic only furthers this and the customers are realizing that value. That is another reason why we see continued cloud growth and SaaS growth in our business.

Scott Berg, Analyst

Got it. Helpful. And then my follow-up is on agents. 3,000 agents is a big number, but you have nearly 11,000 customers today. Are you seeing customers kind of start small with, say, pilots when they're thinking about an agentic strategy with 1Zs, 2Zs, just kind of starting that to get a feel for it? Are you seeing any customers kind of jump all in right away and deploy maybe tens or dozens of these agents in a single instance?

Daniel Dines, Founder and CEO

We are observing both scenarios. Most customers are starting with small proof of concepts because they want to better understand the technology. However, there are a few customers that have already moved on to larger deployments. We highlighted one in the third quarter, and there's another significant deal in the fourth quarter. We've also engaged three customers in a limited general availability phase. We've established this limited phase because they are eager to implement agents into production, and we are providing them with the support they need. The enthusiasm is evident, but we are still in the early stages of proof of concepts and piloting.

Operator, Operator

Thank you. There are no further questions at this time. I'd like to pass it back over to management for any closing remarks.

Daniel Dines, Founder and CEO

Thank you so much for your questions, and we are looking forward to meeting many of you during the quarter. Thank you.

Operator, Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.