DevOps platform provider GitLab Inc. (NASDAQ: GTLB) saw its shares surge over 10% on speculation that the company is exploring a sale after attracting buyout interest. Furthermore, a sense of urgency arose as the acquisition interest may spark other interested parties to strike first. This is all rumors being spread around as the company made no announcements, nor has any party actually come forward with an announcement. Shares peaked at $56.50 while holding gap-fill support at $52.04.

GitLab operates in the computer and technology sector, competing with other DevOps platformers, including Amazon.com Inc. (NASDAQ: AMZN), Microsoft Co. (NASDAQ: MSFT), and Oracle Co. (NYSE: ORCL).

What Does GitLab Do?

GitLab provides a development, security, and operations (DevSecOps) software platform. It’s also one of the most popular Git repositories, which is a central location to store software development files. This enables better collaboration between developers and departments, providing superior version control and delivery. Git repositories are a single source of truth regarding the software being developed. GitLab also integrates enhanced security measures throughout the software development cycle, making it a scalable, all-in-one, single-stop DevSecOps platform for over 30 million users.

Speculation of GitLab's Potential Acquirers

Many names are being floated around regarding which companies are interested or would be a great fit for GitLab. Cybersecurity firm Datadog Inc. (NASDAQ: DDOG) is the main contender considering an acquisition. The market confirmed this with diverging price moves as GitLab shares rose 9% while Datadog stock fell 7%.

Alphabet Inc. (NASDAQ: GOOGL) Google owns a 22% stake in GitLab. An acquisition could be a complementary fit to its Google Cloud offerings, enhancing its attractiveness to software developers. Microsoft and Amazon.com could also benefit their cloud offerings with the toolsets provided by a GitLab buyout. However, a Datadog acquisition would enable GitLab to maintain its Cloud neutrality. Whoever acquires GitLab will also acquire a customer base of 30 million users.

Why the Acquisition of GitLab Makes Sense

Datadog is an observability platform enabling security information and event management (SEIM), providing operators with a bird's eye view of its complete IT operations. SEIM aggregates log and access data to provide real-time security monitoring analysis. An acquisition of GitLab would mark its footprint in the DevOps segment while enhancing the security benefits of its DevSecOps offerings. The combination would provide complete end-to-end visibility for clients using GitLab development tools with Datadog's monitoring and analytics. Analysts believe a Datadog merger would enable GitLab to expand its revenue model, which is currently seat-based, to align with Datadog's consumption model.

Doubters Make Their Argument

Barclay's analysts doubt whether Datadog would have the financial resources to orchestrate a buyout. The company had $2.8 billion in cash and cash equivalents, which is a fraction of GitLab’s $8.5 billion market cap. Datadog would have to incur expensive debt financing options to pursue an acquisition.

Barclays analysts noted, "If Datadog were to come after GitLab, such a transaction would likely represent about a quarter of Datadog's market cap. The company does not have enough cash on hand to fund the transaction and, hence, would need to finance the acquisition using debt or equity financing. While both would be options available to the company, we don't view either as ideal in the current climate."

GTLB Stock Attempts a Bull Flag Breakout

The daily candlestick chart for GTLB illustrates a bull flag breakout pattern. GTLB initially triggered a rectangle channel breaking on its fiscal Q1 2025 earnings. GTLB gapped down to $52.04 and sold off to a low of $42.46 on June 20, 2024. GTLB formed a rounding bottom and staged a rally back up through the $52.04 gap-fill price level. The bull flag formed after peaking the flagpole at $53.80. The parallel trendline pullback gapped to breakout to $56.50 on the takeover rumor, but shares have fallen back down to retest the gap-fill support at $52.04. The daily relative strength index (RSI) is coiled around the 60-band. Pullback support levels are at $50.74, $46.98, $43.58, and $41.61.

GitLab analyst ratings and price targets are at MarketBeat. There are 25 analyst ratings comprised of 21 Buys and four Holds, with an average consensus price target 25.% higher at $67.50.