What Happened?
Shares of software development tools maker GitLab (NASDAQ:GTLB) jumped 12.7% in the pre-market session after the company reported strong financial results for the third quarter (FQ3 2025). Revenue and adjusted operating profit beat in the quarter, which is only the start of the good news. GitLab also provided optimistic adjusted operating profit guidance for the next quarter, which beat analysts' expectations despite an in-line revenue guide. Its full-year adjusted operating profit guidance also came in much higher than Wall Street's estimates. Overall, we think this was a decent quarter, with some key metrics above expectations.
After the initial pop the shares cooled down to $68.99, up 4.4% from previous close.
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What The Market Is Telling Us
GitLab’s shares are very volatile and have had 26 moves greater than 5% over the last year. But moves this big are rare even for GitLab and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 25.1% on the news that the company reported weak fourth-quarter results and provided full-year revenue guidance below expectations. In addition, its full-year EPS guidance significantly missed, coming in 43% below analysts' forecasts.
On the other hand, GitLab beat Wall Street's revenue estimates, driven by a better-than-expected net revenue retention rate (130% vs estimates of 127%). Furthermore, its number of customers with more than $100k in ARR significantly outperformed (955 vs estimates of 859).
During the quarter, GitLab appointed Sabrina Farmer as its Chief Technology Officer. Farmer joined the company from Google, where she was VP of Engineering.
Overall, the results could have been better. Software names have been showing weaker 2024 guidance across the board this quarter, and GitLab was not spared.
Following the results, Wall Street analysts largely maintained their sentiment toward GitLab. Mizuho analyst Gregg Moskowitz lowered the price target on the stock from $87 to $75, adding, "We share investors' disappointment and surprise regarding the guidance...Nevertheless, we believe GTLB is oversold, and we remain confident in its ability to grow due to AI monetization, our view that management's estimate of a $10M-$20M FY25E revenue impact from pricing is conservative, and our research that indicates healthy upsell potential."
GitLab is up 14.9% since the beginning of the year, but at $68.99 per share, it is still trading 11.1% below its 52-week high of $77.60 from February 2024. Investors who bought $1,000 worth of GitLab’s shares at the IPO in October 2021 would now be looking at an investment worth $664.11.
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