GitLab’s second quarter results generated a negative market reaction, despite revenue and adjusted profit both surpassing Wall Street expectations. Management attributed quarterly performance to accelerating growth in enterprise customer segments and robust adoption of high-value products such as GitLab Ultimate and Dedicated. CEO Bill Staples highlighted the company’s ongoing push into AI-driven DevSecOps, noting that security features and seamless integration of AI tools are driving large customer expansions. Additionally, operational efficiency improvements contributed to significant year-over-year margin gains. Still, management acknowledged incremental softness in small and medium business customers and cited ongoing organizational changes as factors impacting the quarter.
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GitLab (GTLB) Q2 CY2025 Highlights:
- Revenue: $236 million vs analyst estimates of $227 million (29.2% year-on-year growth, 4% beat)
- Adjusted EPS: $0.24 vs analyst estimates of $0.16 (46.3% beat)
- Adjusted Operating Income: $39.57 million vs analyst estimates of $24 million (16.8% margin, 64.9% beat)
- The company reconfirmed its revenue guidance for the full year of $939 million at the midpoint
- Management raised its full-year Adjusted EPS guidance to $0.83 at the midpoint, a 10.7% increase
- Operating Margin: -7.8%, up from -22.5% in the same quarter last year
- Net Revenue Retention Rate: 121%, down from 122% in the previous quarter
- Annual Recurring Revenue: $850.7 million vs analyst estimates of $858.3 million (30.3% year-on-year growth, 0.9% miss)
- Billings: $244.5 million at quarter end, up 20.7% year on year
- Market Capitalization: $8.03 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From GitLab’s Q2 Earnings Call
- Rob Owens (Piper Sandler) asked about the impact of recent executive turnover and how new leadership will shape GitLab’s product and go-to-market direction. CEO Bill Staples emphasized a mix of stability and fresh perspectives, with a focus on scaling beyond the first billion in revenue.
- Matt Hedberg (RBC) inquired about the timeline for the new sales initiatives to show results. Staples explained that the ramp-up is expected to occur over the second half of the year, with meaningful benefits anticipated in the following year.
- Koji Ikeda (Bank of America) questioned ongoing softness in the SMB segment and what’s driving it. CFO Brian Robbins clarified that SMB represents about 8% of revenue and is primarily impacted by price sensitivity and minimal sales support, with ongoing adjustments to pricing and packaging.
- Derrick Wood (TD Cowen) explored the competitive threat from AI-powered coding tools moving further into GitLab’s core market. Staples responded that GitLab’s platform addresses broader software lifecycle needs, positioning itself as complementary rather than directly threatened by code-generation tools.
- Gray Powell (BTIG) sought clarity on potential disruption from go-to-market changes and sales incentives. Staples assured that compensation plans and territories remain stable, with new teams focusing on customer acquisition to minimize disruption.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the effectiveness of GitLab’s new customer acquisition strategies and evolving sales organization, (2) the pace of adoption for AI-driven products and the Duo Agent platform, and (3) whether persistent softness in the SMB segment stabilizes or continues to weigh on growth. The transition and ramp-up of new leadership will also be a key area to watch.
GitLab currently trades at $48.00, up from $46.94 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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