GTLB Q2 Deep Dive: Go-to-Market Changes and AI Strategy Shape Outlook

September 04, 2025 at 09:21 AM EDT

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DevSecOps platform provider GitLab (NASDAQ: GTLB) announced better-than-expected revenue 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
Net Revenue Retention Rate: 121%, down from 122% in the previous quarter
Annual Recurring Revenue: $887.9 million vs analyst estimates of $858.3 million (36% year-on-year growth, 3.5% beat)
Billings: $244.5 million at quarter end, up 20.7% year on year
Market Capitalization: $7.75 billion

StockStory’s Take

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.

Looking ahead, GitLab’s forward guidance is shaped by major go-to-market initiatives and a transition toward a hybrid sales and product-led growth model. Management indicated that scaling new business acquisition is a priority, with leadership changes and expanded self-service channels expected to play a key role in future growth. Staples stated, “We’re ramping efforts to balance our enterprise expansion with targeted new customer acquisition.” However, the company also expects continued budget pressures in the small business segment and anticipates that the benefits of these organizational changes will take several quarters to materialize. The team remains focused on leveraging AI-driven innovation and building a foundation for longer-term profitability.

Key Insights from Management’s Remarks

Management pointed to strong enterprise demand, ongoing AI integration, and a shift in sales strategy as primary contributors to quarterly results, while also addressing challenges in the small business segment and leadership changes.

Enterprise segment expansion: GitLab’s largest deals were driven by increased adoption of Ultimate and Dedicated products, with customers such as Virgin Media O2 and major US banks expanding their commitments due to embedded security and compliance features.
AI integration progress: The launch of the Duo Agent platform and new partnerships with AI providers like Anthropic, OpenAI, and Amazon were highlighted as differentiators, allowing customers to leverage AI tools directly within GitLab’s DevSecOps platform.
Sales strategy overhaul: The company is implementing parallel sales-led and product-led growth tracks, including a new business division focused on first-order acquisition and a self-service experience, aiming to accelerate new customer additions.
Leadership transitions: CFO Brian Robbins’ departure and the appointment of a new Chief Product and Marketing Officer signal a significant leadership reshuffle intended to support GitLab’s next phase of growth and operational scale.
SMB headwinds: Management called out persistent softness in the small and medium business segment, noting increased price sensitivity and budget constraints, but emphasized that this group represents a small portion of total revenue.

Drivers of Future Performance

GitLab’s updated outlook centers on scaling new customer acquisition, evolving its sales organization, and integrating AI across its platform, while managing challenges in the small business market.

Go-to-market transformation: The company is ramping up specialized teams for new customer acquisition and expanding sales capacity in key verticals and geographies, targeting improved pipeline coverage and more sophisticated enterprise engagement.
AI-driven product innovation: Ongoing investment in AI features, including the Duo Agent platform and partnerships with major AI providers, is expected to drive customer adoption and open new monetization opportunities through both seat-based and usage-based pricing models.
SMB segment risk: Management anticipates continued budget pressure and slower growth in the small business segment, with efforts focused on pricing experimentation and packaging, though this segment remains a minor part of overall revenue.

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 $44.21, down 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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