Shares of UiPath (NYSE: PATH) initially soared today after it reported better-than-expected results in its fiscal second-quarter earnings report last night.

However, that rally quickly gave way to a sell-off once the stock market opened this morning. Investors seemed to reexamine the news in the context of a disappointing employment report that showed the economy weakening faster than expected. That led to a sharp sell-off in tech stocks, weighing on UiPath.

As a result, the stock was trading down 5.3% as of 11:30 a.m. ET after opening up 10.4%.

UiPath beats estimates, but it’s not enough

UiPath specializes in robotic process automation (RPA), or using bots to handle office tasks like payroll processing or insurance claims.

Growth has been slowing in a weak software market and it faces competition from generative artificial intelligence (AI) alternatives. In the fiscal second quarter of 2025, ended July 31, revenue rose 10% to $316.3 million, which topped estimates at $303.7 million.

UiPath’s customer base is shifting from licenses to subscriptions, and subscription services revenue rose 21.7% in the quarter as license revenue fell, showing growth in its biggest-priority business is stronger than it looks. Similarly, annual recurring revenue (ARR) was up 19% in the period, and dollar-based net retention rate was 115%, indicating that existing customers increased their spending by 15% over the last four quarters.

On the bottom line, its generally accepted accounting principles (GAAP) operating loss increased from $77.6 million to $103.3 million, and adjusted earnings per share fell from $0.09 to $0.04, ahead of the consensus at $0.03.

Why UiPath stock was down

The weak unemployment report and tech sell-off seemed to dim UiPath’s prospects as its revenue growth is slowing and it’s still deeply unprofitable on GAAP basis as stock-based compensation now makes up about 30% of revenue.

UiPath did raise its full-year revenue guidance to a range of $1.42 billion to $1.425 billion, or 8% growth at the midpoint, and it sees adjusted operating income of $170 million.

While Wall Street always likes to see a guidance hike, the concerns about slowing growth and wide GAAP losses seem valid. UiPath isn’t a need-to-have product for customers and its performance could deteriorate quickly if the macro environment weakens.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends UiPath. The Motley Fool has a disclosure policy.