There is a fascinating transformation taking place in the software development industry that is attracting the attention of both professionals and investors. The company at the forefront of this revolution recently released impressive results for the most recent quarter, with revenue reaching $182.6 million, a 31% year-over-year increase. This dynamic growth is supported by a growing number of customers, with more than 9,300 clients generating recurring revenue of over $5,000 per year, and that number is growing each quarter.

Today, we will focus on a company that operates in a dynamic and trending industry. Its major customers include such prestigious organizations as NASA. Although the company has long been overlooked for its less than satisfactory results, the situation is now beginning to change and its future prospects are very promising.

Company introduction

GitLab $GTLB is a technology company that has developed a software development platform. This platform helps teams manage code and facilitates processes such as testing and deployment of software.

The company was founded in 2011 by Dmitry Snytnik, Valery Sizov, and Michal Gorny. It is currently headquartered in San Francisco, California, where it continues to grow and expand. GitLab has grown rapidly and now operates globally, with over 1,300 employees working in remote positions around the world.

GitLab is unique in that it offers a platform that integrates the entire software development cycle - from planning and design to coding to testing and deployment. Their flagship product is the GitLab DevOps platform, which facilitates collaboration between developers and IT teams. This platform includes tools for repository management, CI/CD (Continuous Integration/Continuous Deployment), monitoring, and more. GitLab strives to eliminate the need for different tools for different phases of development, saving time and increasing efficiency.

Its clients include a wide range of companies and organizations, including well-known names like NASA, IBM, and Ticketmaster. This diversity shows how flexible and adaptable their platform is to different needs and industries. GitLab is also committed to community development, both through its open-source projects and various educational initiatives.

The history of GitLab is also fascinating. The company was originally developed as an open-source project and transformed into a full-fledged company in 2014. In 2021, GitLab went public on NASDAQ, a major milestone in its growth.

Highlights

The company expects to capture a significant portion of the market by transitioning from several specialized single-purpose software design tools to an integrated platform of DevOps tools. Several analysts, such as those at Gartner and Forrester, rank it among the top DevOps platforms.

GitLab's recent advances in AI tools are generating excitement among its customer base as enterprises increasingly look for ways to improve productivity and security in their software development processes.

Company executives emphasized that customers are particularly excited about GitLab Duo, which has delivered significant benefits. These include up to a 90% reduction in time spent on toolkit operations, 50% faster delivery times, and 50% faster vulnerability detectiondemonstrating the meaningful impact of an AI-driven platform. During the quarter, the company also launched GitLab Duo Enterprise, priced at $39 per user per month. Management cited Barclays, F5 and KeyBank as examples of customers that purchased GitLab Duo and other Ultimate licenses to adopt AI during the quarter.

The company's CEO

Sid Sijbrandij is CEO and co-founder of GitLab, a DevOps platform company. His leadership is characterized by an emphasis on transparency, inclusivity, and an innovative approach to remote working that has become a model for many other companies. Under his leadership, GitLab has experienced significant growth and has become one of the leading players in the industry, reaching approximately $579 million in revenue in 2024

Sijbrandij is focused on creating a culture where all employees have the opportunity to contribute, not only within the team, but also publicly, as part of his philosophy of openness. His approach includes sharing internal documents and strategic goals with the entire team, which contributes to greater trust and collaboration

It is also interesting to note that the CEO of $GTLB controls 45.5% of GitLab's voting stock through two classes of shares, indicating a high level of confidence in the company's future.

Why is the company interesting?

After meetings with the company's management, Mizuho analyst Gregg Moskowitz reiterated a Buy rating on GitLab stock with a target price of $62. The analyst noted that management is very bullish on other opportunities in the market with a total addressable value of $40 billion. Currently, GitLab and Microsoft's GitHub only represent approximately 5% of the market share in the software development lifecycle.

Management expects demand for GitLab Duo Pro to grow in 2025 due to the wave of generative AI. The analyst also highlighted the company's optimism about its GitLab Dedicated offering, which is showing higher-than-expected customer interest and increasing average revenue per unit.

Overall, Moskowitz remains "optimistic about GTLB's ability to execute and grow at a high level in the medium to long term, primarily due to several factors such as user expansion, price increases and the potential for additional sales."

How was the last quarter?

Total revenue came in at $182.6 million, up 31% year-over-year. The company also reported significant improvement in operating margin, both GAAP and non-GAAP metrics.

Key results include operating cash flow of $11.7 million and non-GAAP adjusted free cash flow of $10.8 million. GitLab CEO Sid Sijbrandij said organisations need to deliver software faster to improve their performance and respond to intense competition. He said the combination of an end-to-end platform and AI solutions delivers measurable benefits to customers and improves security.

CFO Brian Robins confirmed that the second quarter results show the value customers are getting from GitLab's integrated platform. Management is optimistic about future growth, especially given the opportunities in AI.

Other key figures include an increase in the number of customers with annual recurring revenue (ARR) over $5,000 to 9,314, up 19% from last year, and the number of customers with ARR over $100,000 grew 33% to 1,076. Total value of contracts in progress (RPO) increased 51% year-over-year to $747.9 million.

GitLab was also named a leader in the first Gartner® Magic Quadrant™ for AI Code Assistants and launched GitLab Duo Enterprise, an end-to-end AI add-on for DevSecOps teams. The company expects to generate revenue between $187 million and $188 million in the third quarter of fiscal 2025.

Long-term results 👇

The company's revenue has shown a positive growth trend in recent years. This growth is noticeable and indicates that the company is increasing its ability to generate revenue. The company's cost of revenues and operating expenses have also increased, but the rate of growth in expenses has been lower than the rate of growth in revenues, which is positive.

The company's net earnings remain negative, indicating that the company is not yet generating profits for shareholders. Although there has been a deterioration in losses in recent years, the positive trend in sales and the relative stabilization of costs may indicate that the company is in a transition period and may be approaching a turning point.

Expectations for the next quarter

GitLab's forecast for the third quarter looks very good, as the company is targeting earnings of 15 to 16 cents on revenue of $187 to $188 million. By comparison, Wall Street says it expects third-quarter earnings of just 11 cents per share on revenue of $187 million.

"Organizations need to deliver software faster to increase performance and respond to strong competition," the CEO said. "Our results demonstrate that the combination of our end-to-end platform and artificial intelligence solutions delivers results for our customers by aligning with business objectives, providing measurable benefits and improving security."

Analyst Predictions

Based on 23 Wall Street analysts who have offered 12-month price targets for Gitlab over the past 3 months. The average target price is $65.00 with a high prediction of $80.00 and a low prediction of $50.00.

Fair price according to Bulios

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The information in this article is for educational purposes only and does not serve as an investment recommendation. The authors present only facts known to them and do not draw any conclusions or recommendations for the reader.

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