GitLab (NASDAQ: GTLB) saw its shares climb 13% in Wednesday trading after the DevSecOps platform delivered second-quarter results that surpassed analyst expectations and lifted its full-year revenue and profit forecasts. The move signals growing investor confidence that artificial intelligence in software development is expanding—rather than eroding—demand for GitLab's offerings.
For the quarter, GitLab reported revenue of $286.3 million, a 20% year-over-year increase that topped Visible Alpha consensus estimates. Adjusted earnings came in at $0.24 per share, also beating projections. The company highlighted a record quarter for gross bookings, reinforcing the strength of its sales pipeline.
AI coding tools open new growth avenues
CEO Bill Staples said the increasing adoption of AI-powered coding tools and agents has created a "significant opportunity" for GitLab to broaden its customer base. Management believes that higher code volumes and a new class of software builders will drive demand for capabilities spanning source code control, security, governance, context, and orchestration.
The upbeat results prompted William Blair to upgrade GitLab to Market Perform from Underperform. Analyst Jason Ader cited growing confidence in the company's growth trajectory, including a sequential improvement in gross net retention for the first time since 2024. He also pointed to better go-to-market execution, with increased account executive capacity, improved productivity per representative, and stronger sales attainment. Early adoption of GitLab's Flex offering, he noted, provides evidence that the company can expand beyond its traditional seat-based model.
Analysts raise targets, but caution remains
Several firms increased their price targets following the report, though ratings stayed mixed. UBS maintained a Neutral rating while lifting its target to $50 from $40. Analyst Radi Sultan noted that guidance does not include a revenue headwind from Flex and cautioned that the transition could introduce noise in reported revenue growth over the next two quarters. The shift to Flex is expected to take more than three fiscal years, with the maximum revenue headwind from the self-managed renewal cohort estimated at $13 million.
Bank of America also kept a Neutral rating and raised its 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. He highlighted GitLab's DevSecOps Platform (DAP), noting that paid committed recurring revenue jumped to $40 million from $15 million in the prior quarter. Management is targeting $100 million in paid committed recurring revenue by fiscal 2027.
Sales execution strengthens outlook
Needham reiterated its Buy rating and raised its price target to $65 from $38. Analyst Mike Cikos emphasized a 30% year-over-year increase in account executive capacity and a 10% improvement in productivity per representative. GitLab also recorded more than 1,700 first orders during the quarter, representing growth of over 100% year over year, while first-order net-new annual recurring revenue rose 39%.
Piper Sandler raised its target to $52 from $28 while retaining a Neutral rating. The firm acknowledged improving execution, accelerating net annual recurring revenue growth, and stronger new-logo growth. It noted that the quarter represented GitLab's largest quarterly beat since the third quarter of 2024. However, Piper Sandler also cautioned that headline revenue growth continues to decelerate, and further valuation expansion likely depends on an acceleration in total revenue growth, which it expects no earlier than fiscal 2028.
The broader AI-driven software rally has lifted several names in the sector, with companies like ServiceNow seeing similar optimism and Workday drawing mixed reactions despite strong results. GitLab's performance underscores the competitive landscape as AI reshapes software development.
This article is for informational purposes only and does not constitute financial advice.
