The artificial intelligence (AI) company will be acquired by next year.

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gave S&P 500 And Nasdaq Composite Both have posted returns of around 10% so far in 2024. One of the biggest catalysts driving these returns is artificial intelligence (AI).

While this can make the technology sector particularly attractive, smart investors know that not all opportunities are created equal.

A stock that has outdone itself amid the AI ​​euphoria. UiPath (NYSE: PATH )A developer of robotics process automation (RPA) software to help office workers with administrative tasks. At the start of the year, shares of UiPath were hovering around $25. But now? The stock is down more than 50% this year, and shares trade for just $11.

Let's explore what's going on at UiPath, and I'll make the case for why the company will be acquired within the next year.

What's happening in UiPath?

The chart below illustrates some of the key financial metrics for UiPath over the past five years. On the surface, there are two low lights.

First, UiPath's revenue and gross profit growth is slowing. Second, it's impacting the dynamic mix and the company's profitability — or lack thereof.

PATH Revenue (Quarterly) Chart

For its first quarter of fiscal 2025, which ended April 30, UiPath added just $44 million in net new annual recurring revenue (ARR). By comparison, during the company's fiscal year 2024 (ended Jan. 31), UiPath added $260 million in net new ARR — which translates to an average of $65 million per quarter.

Where will UiPath go next?

At a high level, sales of enterprise software have cooled over the past two years. An environment of stubborn inflation and rising interest rates has caused businesses of all sizes to rein in costs and operate under tighter budgets.

While I understand these dynamics, I think pointing to a challenging macroeconomic picture only works for so long. During UiPath's earnings call, investors learned that sales cycles have gotten longer because potential customers aren't getting around to buying the company's tools at all.

Another shocking detail revealed during UiPath's earnings call was that CEO Rob Enslin has stepped down and is being replaced by the company's co-founder, Daniel Dines.

Image source: Getty Images.

Who might be interested in acquiring UiPath?

While Dines may well spark some new energy into the company, I suspect the board of directors brought him back for one reason: to broker a sale.

UiPath's products fit perfectly into the overall AI picture. However, the company faces stiff competition from mega-cap tech. This is where I see witches playing a big role.

Could be a potential acquirer for UiPath. Microsoft. The Windows developer has invested billions in OpenAI, the startup behind ChatGPT. Over the past year, Microsoft has integrated ChatGPT into its ecosystem, most notably its Azure cloud computing platform and its workplace productivity tools.

I think UiPath's RPA software can complement Microsoft's existing workplace automation services. Additionally, considering that Dines worked at Microsoft in the early 2000s, I think there is good partnership potential for the companies.

Except for Microsoft, I suppose Sales force Could potentially be suitable for UiPath. Salesforce is a highly acquisitive company, having spent tens of billions buying businesses like MuleSoft, Tableau, and Slack. Each of these assets helped extend Salesforce's capabilities beyond customer relationship management software. UiPath offers an exciting new layer to Salesforce and can enhance the company's existing line of AI-powered productivity tools.

I think the last company might be interested in UiPath. Service Now, a leading IT workflow management platform. ServiceNow works in a wide range of generative AI applications, one of which is RPA.

While this gives the company a clear overlap with UiPath, I should note that ServiceNow isn't nearly as receptive as Microsoft or Salesforce. The company has grown mostly organically, making many smaller acquisitions than the big tech cohorts above it.

It is important to note that the views expressed above are my own. UiPath may very well undergo a turnaround and emerge as a much stronger company than it is today. Additionally, I would not encourage investors to buy shares of UiPath, on the assumption that it could be acquired.

No matter what happens, one thing is certain: UiPath is at a really interesting point right now. I'm excited to see what happens and learn more from management in the coming quarters.

Should you invest $1,000 in UiPath now?

Before buying stock in UiPath, consider this:

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Adam Spotako holds positions at Microsoft. The Motley Fool has positions and recommends Microsoft, Salesforce, ServiceNow, and UiPath. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.

Prediction: This artificial intelligence (AI) company will be acquired by next year was originally published by The Motley Fool.

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