What Happened?
Shares of devSecOps platform provider GitLab (NASDAQ: GTLB) fell 14.2% in the morning session after the company reported third-quarter results that beat expectations but offered a mixed financial outlook that signaled slowing revenue growth.
Despite revenue growing 24.6% year-over-year to $244.4 million and adjusted earnings per share beating estimates by 24%, investors focused on the cautious guidance. The company's forecast for fourth-quarter revenue of $251.5 million implied year-over-year growth of 19%, a notable deceleration. While GitLab raised its full-year profit forecast, this was overshadowed by worries about the top line. Adding to the concerns, GitLab's Net Revenue Retention Rate, a key metric showing how much existing customers are spending, slipped to 119% from 121% in the prior quarter. The combination of slowing revenue growth and declining net retention outweighed the company's current profitability beat, leading to the sharp sell-off.
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What Is The Market Telling Us
GitLab’s shares are extremely volatile and have had 37 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 previous big move we wrote about was 1 day ago when the stock gained 3.9% on the news that the company received positive commentary from analysts ahead of its third-quarter fiscal 2026 earnings report. The software company was scheduled to release its results on December 2. In the lead-up to the announcement, Rosenblatt Securities reiterated its "Buy" rating on the stock with a $58.00 price target. Similarly, an analyst at Bank of America Securities maintained a "Buy" rating, setting a price target of $72. GitLab's own projections added to the optimism, as the company expected revenues to grow by approximately 23% year over year for the quarter. This anticipated growth was expected to be driven by customer adoption of its AI-powered security and software development platform.
GitLab is down 33.5% since the beginning of the year, and at $37.50 per share, it is trading 48.7% below its 52-week high of $73.14 from February 2025. Investors who bought $1,000 worth of GitLab’s shares at the IPO in October 2021 would now be looking at an investment worth $360.91.
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