UiPath (NYSE: PATH) delivered a Q1 that was stronger than the headline numbers suggest. And the headline numbers were already strong. Revenue of $418 million beat the $397.5 million consensus by over 5% and came in well above the company's own guidance midpoint. Non-GAAP diluted EPS of $0.15 was a penny light of the $0.16 estimate. The real story is what happened on the GAAP income statement: operating income of $28 million, the first time the company has reported a GAAP profit in its fiscal first quarter.
Revenue climbed 17% year-over-year. License revenue of $149.3 million (up 16%) and subscription services of $252.9 million (up 16%) drove the increase. Professional services and other revenue jumped 47% to $16.2 million, though that line remains small relative to the core. ARR reached $1.901 billion, up 12% year-over-year. Net new ARR was $49 million, with a dollar-based net retention rate of 109%. The retention number is steady, not accelerating, but it confirms existing customers are expanding their deployments.
The margin story is where this quarter gets interesting. GAAP gross margin held at 82%, while non-GAAP gross margin slipped a point to 83%. That's not a concern. The real leverage came from operating expenses. GAAP operating margin swung from negative 5% to positive 7%, a 1,200 basis point improvement. Non-GAAP operating income of $92 million (22% margin) more than doubled from $70 million (20% margin) a year ago. The improvement is structural, not one-off. Stock-based compensation fell to $53.3 million from $76.4 million, a 30% decline that reflects both a lower headcount and a lower stock price reducing the grant-date fair value of new awards. That line item is now a tailwind rather than a drag.
Cash flow was also strong. Operating cash flow of $132 million and non-GAAP adjusted free cash flow of $130 million both improved year-over-year. The company ended the quarter with $1.42 billion in cash and marketable securities. That balance is down from $1.69 billion at year-end, partly due to $244 million in share repurchases. The buyback pace is aggressive for a company with $6.2 billion in market cap, but it's funded by cash flow and a fortress balance sheet.
Guidance tells a more cautious story. Q2 revenue is expected between $395 million and $400 million, implying roughly 14% growth at the midpoint, down from the 17% reported this quarter. Full-year FY2027 revenue guidance of $1.776 billion to $1.781 billion implies 14% growth at the midpoint, a deceleration from the 16% growth the company delivered in FY2026. Non-GAAP operating income guidance of $430 million for the full year implies a 24% margin at the midpoint, up from the 22% reported this quarter. Management is signaling confidence in margin expansion but caution on top-line momentum.
The beat against estimates was driven by license and subscription strength, not by one-time items. The GAAP profitability milestone is real and durable, given the operating expense discipline. But the guidance implies growth is decelerating, and the stock's post-earnings move will depend on whether investors focus on the beat or the implied slowdown. The next quarter's net new ARR will be the tell. If the $49 million this quarter was a trough and Q2 accelerates, the growth narrative strengthens. If it slips, the margin story alone won't sustain the multiple.