GitLab Surges Over 5% on Strong Q3 Earnings and Revenue Beat
The DevOps platform topped analyst estimates and posted robust growth in large customer accounts, signaling strong enterprise demand amid a competitive market.
Shares of GitLab Inc. (GTLB) jumped more than 5% in trading Tuesday after the software development platform reported third-quarter financial results that significantly outpaced Wall Street expectations, fueled by strong growth in high-value enterprise customers.
The company announced non-GAAP earnings of $0.25 per share, beating analyst consensus by 24%. Revenue for the quarter reached $244.4 million, a year-over-year increase of 25%, also surpassing forecasts. The positive results sent the stock up $2.22, or 5.4%, to close at $43.37.
GitLab's performance offers a significant boost of confidence for the company, particularly as some analysts had recently expressed caution regarding its growth trajectory. The results were driven by a 23% year-over-year increase in customers with more than $100,000 in annual recurring revenue (ARR). This metric is closely watched by investors as a key indicator of GitLab's success in moving upmarket and securing larger, more stable enterprise clients.
Further demonstrating its business momentum, the company reported that its remaining performance obligations (RPO)—a measure of contracted future revenue—grew 27% from the previous year to $1.0 billion. This growth in deferred revenue provides enhanced visibility into the company's future performance.
"The strong quarter highlights GitLab's ability to execute on its 'one DevOps platform' strategy, which resonates with enterprises looking to consolidate tools and improve efficiency," noted a technology analyst at RBC Capital Markets in a note to clients following the release.
The robust earnings report comes at a critical time for GitLab, which operates in a highly competitive landscape dominated by giants like Microsoft's GitHub and Atlassian. While GitHub leads in community-driven open-source projects and Atlassian excels with its integrated suite of developer tools, GitLab has carved out a niche as a comprehensive, end-to-end platform for the entire software development and security lifecycle. This all-in-one approach is proving attractive to large organizations aiming to simplify complex workflows.
Before the earnings announcement, Wall Street sentiment was mixed. While the consensus rating from 22 analysts remains a 'Buy' with an average price target of approximately $57.59, Truist Securities had downgraded the stock to 'Hold' in November, citing concerns over a potential slowdown. Similarly, DA Davidson reiterated a 'Neutral' rating just ahead of the report. Tuesday's strong showing may prompt some analysts to reassess their models.
Looking ahead, GitLab's continued innovation in artificial intelligence with its GitLab Duo suite of features will be a key area to watch. The company is in an arms race with GitHub's Copilot and Atlassian Intelligence to embed AI assistants throughout the development process, a trend that could unlock new revenue streams and drive further platform adoption.
Based on the strong quarterly performance and positive guidance for the fourth quarter, investors will be watching to see if GitLab can maintain its growth momentum and continue to win market share from its larger rivals in the evolving DevSecOps space.