GitLab’s Earnings Call: Strong Growth Amid Challenges

Gitlab, Inc. Class A ((GTLB)) has held its Q3 earnings call. Read on for the main highlights of the call.

GitLab’s recent earnings call painted a picture of robust growth and strategic advancements, despite some challenges in specific sectors. The sentiment was largely positive, with strong revenue growth and operating margin improvements leading the way. The company’s focus on expanding GitLab Ultimate and the development of the Duo Agent platform were highlighted as key drivers of success, although there were notable challenges in the US public sector and SMB market. Overall, the positives in revenue and strategic growth initiatives outweighed the negatives, indicating a promising outlook for GitLab.

Strong Revenue Growth

GitLab reported a remarkable 25% year-over-year increase in revenue, reaching $244 million, which exceeded their Q3 guidance by two points. This strong performance underscores the company’s ability to capture market share and drive financial success, even amidst challenging market conditions.

Increased Operating Margin

The company’s non-GAAP operating margin reached an impressive 18%, a full five points above the Q3 guidance. This improvement reflects GitLab’s effective cost management strategies and operational efficiencies, contributing to its overall financial health.

Growth in GitLab Ultimate

GitLab Ultimate now accounts for 54% of total Annual Recurring Revenue (ARR), marking significant expansions at major client organizations. This growth highlights the increasing adoption of GitLab’s premium offerings and its ability to deliver value to large enterprises.

AI Platform Growth

The GitLab Duo Agent platform is on track for general availability, showing promising early results and expansions even before its official launch. This platform is expected to play a crucial role in GitLab’s strategic shift towards a hybrid seat plus usage-based business model, driven by AI advancements.

Recognition and Leadership

GitLab’s leadership in the industry was reaffirmed as it was named a leader in the 2025 Gartner Magic Quadrant for DevOps platforms for the third consecutive year, and for AI coding assistance for the second year. This recognition underscores GitLab’s innovation and influence in the tech sector.

Financial Stability

Ending the quarter with $1.2 billion in cash and investments, GitLab demonstrated a strong financial position. This financial stability provides a solid foundation for continued investment in growth and innovation.

Softness in US Public Sector

The US public sector presented challenges due to slower decision-making related to the government shutdown, creating headwinds that impacted GitLab’s performance in this segment.

SMB Market Weakness

Persistent softness in the SMB segment, which accounts for roughly 8% of ARR, continued to impact GitLab’s growth. This segment’s challenges highlight the need for targeted strategies to address market-specific issues.

Challenges with First Order Business

While there was a slight improvement in the mix of first order versus expansion, it remains below desired levels. GitLab recognizes the need for further investment and time to optimize this aspect of its business model.

Forward-Looking Guidance

GitLab provided optimistic guidance for the future, expecting fourth-quarter revenue between $251 million and $252 million, reflecting a 19% year-over-year growth. For the full fiscal year 2026, they anticipate total revenue of $946 million to $947 million, representing a 25% growth. The company is shifting towards a hybrid seat plus usage-based business model with the Duo Agent platform, aiming to capture more value from increased software activity driven by AI. Despite challenges, GitLab remains confident in its long-term growth prospects.

In conclusion, GitLab’s earnings call highlighted a strong performance with significant revenue growth and strategic advancements, particularly in AI and premium offerings. While challenges exist in certain sectors, the company’s financial stability and forward-looking strategies position it well for continued success. Investors and market watchers can remain optimistic about GitLab’s trajectory, as it continues to innovate and expand its market presence.