UiPath gets downgraded by UBS as DOGE budget cuts bite

Business automation company UiPath (PATH) has become another casualty of the U.S. government’s cost-cutting spree, as federal contracts — once seen as a steady revenue stream — turn into a liability.

PATH stock have dropped 15.85% since the start of 2025, although the stock slightly rebounded on Friday.

In its latest earnings report, the company warned investors that federal employee layoffs — driven by the Department of Government Efficiency (DOGE) — would affect its business.

A day later, UBS (UBSG) cut UiPath’s price target from $14 to $10 while maintaining its “sell” rating.

“While uncertainty began in January (aligning with more aggressive efforts from DOGE to cut spending in the Fed space), the company is now also flagging increased uncertainty to broader commercial budgets, impacting potential decisions,” UBS analyst Jeff Hickey wrote in a note.

A year-end financial disclosure from UiPath revealed the company missed its customer renewal target, largely due to fewer sales to the federal government.

Hickey expects even more customer churn this quarter, as public sector layoffs continue.

Meanwhile, UiPath’s acquisition of UK-based AI company Peak on March 12 won’t move the needle on revenue or expenses this year, according to UBS.

How dependent is UiPath on government sales?

UiPath currently holds at least seven federal contracts.

Those include agreements with the Department of Defense, General Services Administration (GSA), Department of Transportation, Environmental Protection Agency (EPA), Social Security Administration, Department of Homeland Security, and the IRS.

The GSA contract is set to expire in August, meaning UiPath could face another revenue hit soon. The value of these contracts varies significantly — from a $10 million license with Homeland Security to a $200,000 agreement with the Department of Transportation.

In 2024, UiPath generated $197 million in total licensing revenue, but the company posted a net loss of $73 million, slightly lower than the previous year.

While its state government, educational, and international contracts (including deals with Canada) are not currently at risk, state and university budgets could shrink if federal funding tightens.

UiPath also serves retail, healthcare, and manufacturing sectors, with over 10,000 customers globally. But as Hickey warns, government spending cuts could ripple through the private sector, compounding UiPath’s challenges.