DevSecOps platform provider GitLab (NASDAQ: GTLB) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 29.2% year on year to $236 million. On the other hand, next quarter’s revenue guidance of $238.5 million was less impressive, coming in 1.2% below analysts’ estimates. Its non-GAAP profit of $0.24 per share was 46.3% above analysts’ consensus estimates.
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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
- Free Cash Flow Margin: 19.7%, down from 48.5% in the previous quarter
- Net Revenue Retention Rate: 121%, down from 122% in the previous quarter
- Market Capitalization: $7.88 billion
“This quarter’s results demonstrate the strength of GitLab’s AI-native DevSecOps platform as we continue to drive customer-focused innovation,” said Bill Staples, GitLab chief executive officer.
Company Overview
With its all-remote workforce pioneering a new approach to software development, GitLab (NASDAQ: GTLB) provides a single-application DevSecOps platform that helps development, operations, and security teams collaborate to build, secure, and deploy software faster.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, GitLab’s 37.1% annualized revenue growth over the last three years was exceptional. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, GitLab reported robust year-on-year revenue growth of 29.2%, and its $236 million of revenue topped Wall Street estimates by 4%. Company management is currently guiding for a 21.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 20.9% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is admirable and implies the market sees success for its products and services.
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Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
GitLab’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 122% in Q2. This means GitLab would’ve grown its revenue by 22.5% even if it didn’t win any new customers over the last 12 months.
Despite falling over the last year, GitLab still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.
Key Takeaways from GitLab’s Q2 Results
We liked that GitLab's revenue outperformed Wall Street’s estimates. We were also impressed by the company's optimistic full-year EPS guidance, which beat analysts’ expectations. On the other hand, its revenue guidance for next quarter slightly missed and its full-year revenue guidance was in line with Wall Street’s estimates. Zooming out, we think this was a mixed quarter. Software companies have been held to a pretty high standard this earnings season, and investors were likely hoping for more. Shares traded down 10.3% to $42.10 immediately following the results.
So should you invest in GitLab right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
