Is GitLab's 15% YTD Decline a Strategic Buying Opportunity?

The 15% year-to-date decline in GitLab's stock price has sparked debate among investors. For value investors, the question is whether this dip reflects overcorrection or a genuine undervaluation of a high-growth SaaS company with expanding margins, AI-driven innovation, and a robust balance sheet. Let's dissect the fundamentals to determine if this is a strategic entry point.

Revenue Growth and Margin Expansion: The Foundation of Value

GitLab's financials in fiscal 2025 (ended January 31, 2025) underscore its resilience. Total revenue hit $759.2 million, a 31% year-over-year increase, with non-GAAP operating margins improving from -0.2% in 2024 to 10% in 2025. This margin expansion, driven by disciplined cost management and scalable cloud infrastructure, is a hallmark of a maturing SaaS business. For 2026, GitLab has guided to $936–$942 million in revenue, implying a 24% growth rate. While this is slightly lower than its 2025 pace, it remains well above the 15–20% range typical of high-growth SaaS peers.

The company's customer base is also expanding meaningfully. Customers with over $100,000 of ARR grew 29% to 1,229, and its dollar-based net retention rate hit 123%, indicating strong cross-selling and upselling. These metrics suggest GitLab is not just acquiring customers but deepening relationships, a critical factor for long-term value.

AI Integration: From Disruption to Differentiation

Critics argue that AI could disrupt traditional SaaS models, but GitLab is turning this challenge into a competitive edge. Its AI-powered tools, such as GitLab Duo and GitLab Duo Self-Hosted, are designed to accelerate development cycles, enhance security, and reduce operational friction. The company's recent recognition as a Gartner Peer Insights “Customers' Choice” in DevOps Platforms validates its position as an AI leader in its niche.

Moreover, GitLab's AI initiatives are not speculative. The company's 2025 results included a 31% revenue increase, with AI-driven offerings contributing to margin expansion. By embedding AI into its platform, GitLab is future-proofing its value proposition, ensuring it remains relevant in an increasingly automated development landscape.

Balance Sheet Strength and Conservative Guidance

GitLab's balance sheet provides additional comfort. As of January 31, 2025, it held $227.6 million in cash and cash equivalents, with total shareholders' equity of $825.2 million. Non-GAAP adjusted free cash flow for 2025 reached $120 million, demonstrating the company's ability to generate liquidity despite ongoing investments in R&D and sales.

Some investors question the conservativism of GitLab's guidance, particularly its 24% revenue growth for 2026. However, this caution appears prudent given the volatile macroeconomic environment and the competitive DevSecOps market. GitLab has historically exceeded expectations (e.g., 2025 full-year revenue of $759.2 million vs. guidance of $742–$744 million), suggesting its targets are achievable and conservative.

Valuation: A Compelling Entry Point

At a market capitalization of $7.9 billion (as of July 28, 2025), GitLab trades at a price-to-sales (P/S) ratio of approximately 10.4x, significantly below the SaaS sector average of 15–20x. This discount reflects short-term market jitters around AI disruption and macroeconomic risks, but it overlooks the company's strong fundamentals.

The 15% YTD decline has created a valuation gap. For value investors, this represents an opportunity to buy a high-quality SaaS company at a price that does not fully reflect its long-term potential. GitLab's 2026 guidance implies a P/S ratio of 9.9x if the stock remains at current levels, a discount to peers like Atlassian (ASND) and GitHub (GH), which trade at 12–14x.

Addressing the Risks

No investment is without risk. GitLab's non-GAAP operating margins, while improved, still face pressure from R&D and sales expenses. Additionally, the DevSecOps market is highly competitive, with players like GitHub and Microsoft's Azure DevOps vying for market share. However, GitLab's first-mover advantage in AI integration and its sticky, all-in-one platform provide a durable moat.

The key risk lies in execution. If GitLab fails to scale its AI offerings or loses traction in enterprise markets, its growth could falter. But the company's leadership changes—such as the appointment of Ian Steward as CRO—signal a focus on disciplined growth and customer retention, mitigating this risk.

Conclusion: A Strategic Buy for Long-Term Investors

GitLab's 15% YTD decline is a buying opportunity for patient investors who recognize the company's long-term potential. Its revenue growth, margin expansion, AI-driven differentiation, and strong balance sheet position it as a compelling play in the DevSecOps space. While the market's caution is understandable, the valuation discount offers a margin of safety that aligns with value investing principles.

For those willing to look beyond short-term volatility, GitLab represents a rare combination of growth and affordability in the SaaS sector. As AI reshapes software development, GitLab is not just keeping pace—it's leading the charge. Now may be the time to act before the market catches up.