GitLab shares (GTLB) gained 13% in trading Wednesday after the DevSecOps platform reported better-than-expected second-quarter results and raised its full-year revenue and profit forecasts.
The results offered investors evidence that the growing use of artificial intelligence in software development could expand rather than weaken demand for GitLab’s platform.
GitLab reported revenue of $286.3 million for the second quarter, up 20% year over year and above estimates compiled by Visible Alpha.
Adjusted earnings came in at 24 cents per share, also exceeding analyst expectations.
GitLab sees opportunity from AI-powered coding
CEO Bill Staples said the increasing use of AI to develop software has created a “significant opportunity” for GitLab to expand sales. The company also reported a record quarter for gross bookings.
The results come as software development increasingly incorporates AI-powered coding tools and agents.
GitLab’s management believes higher code volumes and new types of software builders could increase demand for tools covering source code control, security, governance, context and orchestration.
William Blair upgraded GitLab to Market Perform from Underperform following the results.
Analyst Jason Ader cited growing confidence in the company’s growth outlook, including an improvement in gross net retention sequentially for the first time since 2024.
Ader also pointed to better go-to-market execution, including increased account executive capacity, improved productivity per representative and stronger sales attainment.
He said early adoption of GitLab’s Flex offering provided evidence that the company could expand beyond a purely seat-based business model.
Analysts raise price targets after results
Several analysts increased their price targets following GitLab’s results, although ratings remained mixed.
UBS maintained its Neutral rating while raising its price target to $50 from $40.
Analyst Radi Sultan said the company’s guidance does not include a revenue headwind from Flex and warned that the transition could create additional noise in reported revenue growth over the next two quarters.
Sultan noted that the transition to Flex is expected to take more than three fiscal years, while the maximum revenue headwind from the self-managed renewal cohort is estimated at $13 million.
Bank of America also maintained a Neutral rating and lifted its price target to $54 from $45. Analyst Koji Ikeda said the key question is whether GitLab can gain market share as AI agents increasingly write software.
Ikeda pointed to GitLab’s DevSecOps Platform (DAP), noting that paid committed recurring revenue increased to $40 million from $15 million in the previous quarter.
Management is targeting $100 million in paid committed recurring revenue in fiscal 2027.
Improving sales execution supports outlook
Needham reiterated its Buy rating and raised its price target to $65 from $38. Analyst Mike Cikos highlighted a 30% year-over-year increase in account executive capacity and a 10% improvement in productivity per representative.
Cikos also noted that GitLab recorded more than 1,700 first orders during the quarter, representing growth of more than 100% year over year.
First-order net-new annual recurring revenue increased 39%.
Piper Sandler raised its price target to $52 from $28 while retaining a Neutral rating.
The firm cited improving execution, accelerating net annual recurring revenue growth and new-logo growth.
Piper Sandler said the quarter represented GitLab’s largest quarterly beat since the third quarter of 2024.
However, it also noted that headline revenue growth continues to decelerate and said further valuation expansion likely depends on an acceleration in total revenue growth, which it expects in fiscal 2028 at the earliest.
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