GitLab slides 5.7% on FY27 growth slowdown despite Q4 beat
Software maker forecasts 15-17% revenue growth next year, down from 26% this year, as analysts slash price targets
GitLab shares fell sharply on Wednesday after the software developer delivered fourth-quarter results that topped expectations but issued fiscal year 2027 guidance signaling a significant growth deceleration that rattled investors.
The San Francisco-based company reported adjusted earnings per share of $0.30 on revenue of $260.4 million for its fiscal fourth quarter, beating analyst estimates of $0.23 per share and $252 million in sales. Revenue increased 23% year-over-year, and the company surpassed $1 billion in Annual Recurring Revenue while generating $220 million in free cash flow for fiscal year 2026.
However, the company's outlook for fiscal year 2027 disappointed Wall Street. GitLab forecast revenue of $1.099 billion to $1.118 billion, representing growth of just 15-17% — a marked slowdown from the 26% revenue growth achieved in fiscal year 2026. More concerning for investors, the company projected non-GAAP EPS of $0.76 to $0.80, well below the consensus estimate of $1.03.
The guidance prompted an immediate market reaction, with shares initially declining approximately 2.6% in after-hours trading to $25.50. The selling intensified in pre-market trading, and by the regular session on March 4 the stock was down about 5.7% to $26.30, extending losses from after-hours and reflecting broader concerns among investors.
Several Wall Street analysts moved quickly to downgrade the stock and slash price targets. TD Cowen analyst Derrick Wood downgraded GitLab to "Hold" from "Buy" and cut his price target to $29 from $56, citing competitive risks from AI coding platforms like Anthropic's Claude Code and OpenAI's Codex, along with what he described as "down-ticked" business checks. DA Davidson maintained a "Neutral" rating but lowered its price target to $30 from $45.
The downgrades follow earlier bearish moves from major firms. Morgan Stanley had already downgraded GitLab to "Equal Weight" from "Overweight" in January, anticipating fiscal 2027 would be a transition year with growth slowing and initial forecasts potentially falling short of consensus. Barclays also reduced its price objective and downgraded to "Underweight" in January.
Management acknowledged challenges during the earnings period, citing headwinds in price-sensitive customer segments and delayed large deals due to budget constraints. The company announced a $400 million share repurchase authorization, signaling confidence in long-term prospects, but the buyback program did little to offset concerns about near-term growth dynamics.
GitLab's growth slowdown reflects broader challenges facing enterprise software companies as customers scrutinize technology spending and the competitive landscape intensifies. The rise of AI-powered coding tools poses an existential threat to traditional DevOps platforms, forcing companies like GitLab to accelerate their own AI capabilities while defending market share.
The company highlighted the launch of the GitLab Duo Agent Platform, which aims to bring "intelligent orchestration to the entire software lifecycle," as part of its strategy to build new multi-year growth drivers. Management emphasized continued focus on security, compliance, and governance in an expanding code environment.
GitLab now trades 58% below its 52-week high of $64.42, reflecting a dramatic reassessment of its growth trajectory. Despite beating quarterly expectations, the stock's valuation multiples — currently trading at roughly 23.7 times forward earnings and 4.9 times trailing sales — face pressure as investors recalibrate expectations for a more mature, slower-growing business.
The coming quarters will prove critical for GitLab as it attempts to balance margin improvement with growth investment while defending its position against well-funded AI competitors. For now, investors are voting with their feet, signaling that a transition from high-growth darling to more measured expansion comes with a steep price tag.