Automation software company UiPath Inc. saw its stock slide almost 8% in extended trading today despite posting strong second-quarter financial results that topped expectations and raising its full-year guidance.

The company reported a profit before certain costs such as stock compensation of a penny a share on revenue of $195.5 million, up 40% from a year ago. Wall Street had been looking for a loss of 5 cents per share on sales of $184.3 million.

UiPath Chief Executive Daniel Dines (pictured) talked of “strong momentum” enjoyed by the company, highlighting both new customer additions and “robust expansion” with existing customers, reflected by a dollar-based net retention rate of 144%.

“The opportunity to unlock human potential is vast and we are in the very early stages of the automation market,” Dines added. “We believe we have a long-term opportunity to drive durable growth and build a company that will transform how organizations compete, employees experience work, and companies interact with their customers.”

UiPath is a leader in the robotic process automation market. It sells an RPA platform that’s used by companies to reduce costs and operational errors by automating repetitive work. It relies on artificial intelligence models that learn how employees perform common tasks in business applications. Then, it creates software robots that can replicate those workflows, thereby reducing the need to perform many of those tasks manually.

The company said its annualized recurring revenue jumped 60% in the quarter, to $726.5 million, above Wall Street’s forecast of $703.8 million. The company also reported net new ARR of $73.9 million, up 33% from a year ago.

UiPath ended the quarter with more than 9,100 paying customers, up from about 8,500 that were reported at the end of its first quarter three months ago.

Dave Vellante of SiliconANGLE sister market research firm Wikibon praised UiPath’s strong ARR growth but said investors were clearly hoping for an even better performance:

Earning fm @UiPath were strong w 60% ARR growth yr/yr. ~3% beat but the street wanted a bigger # or higher ARR growth. Stock is down after hours nearly 8%. This is a great long term story. Not surprising that a small beat was met with a tepid response. Welcome to public markets pic.twitter.com/WhogJW5x5q

— Dave Vellante (@dvellante) September 7, 2021

Analyst Holger Mueller of Constellation Research Inc. wondered if the after-hours stock drop stemmed from concerns investors may have over UiPath’s cost management and its long-term profitability.

“The company is growing rapidly with 40%-plus revenue growth, and that’s happening because enterprises want to bridge the gaps between their automation islands,” Mueller said. “But UiPath’s costs more than doubled compared to one year ago, leaving the company deep in the red. That’s something its management will need to look at more closely in the coming quarters. The company can definitely get itself into a better situation, but it will need to employ tighter cost control.”

For the next three months, UiPath said it’s looking for revenue of between $207 million and $209 million, versus the consensus estimate of $205.8 million.

UiPath also raised its full-year guidance, saying it now sees annualized recurring revenue in a range of $876 million to $881 million, up from an earlier forecast of $850 million to $855 million. Wall Street has forecast annual ARR of $854.8 million.

Photo: SiliconANGLE