GitLab's AI-native DevSecOps Platform Drives Strong Adoption and Financial Momentum, Trades at Reasonable Valuation

GitLab's AI-native DevSecOps platform is driving strong customer adoption, with weekly usage rising sixfold in 2025. The company is seeing strong financial momentum, but shares trade at a reasonable valuation, down 63% from its all-time high. Despite a cautious investor sentiment, GitLab's push in AI, security, regulated industries, and public sector can drive share prices up in the coming months.

GitLab's AI-native DevSecOps platform has been a significant driver of strong customer adoption, with weekly usage rising sixfold in 2025 1 Growth Stock Down Over 60% to Buy Right Now^[1]. Despite a recent technology sell-off, the company's stock has shown signs of recovery, driven by the rising adoption of its artificial intelligence (AI)-powered DevSecOps platform. However, shares still trade at about 63% below their all-time high, indicating a cautious investor sentiment.

GitLab has positioned itself as an AI-native DevSecOps company, embedding AI across the entire software lifecycle. The company's AI-powered suite, GitLab Duo, has seen rapid traction, with weekly usage rising sixfold in 2025. Approximately 25% of this usage can be attributed to new customers who subscribed to either the GitLab Premium or Ultimate tiers. Recently, GitLab launched Duo Agent Platform, now in public beta, to target large enterprises. This platform allows engineers to work with AI agents to build, test, secure, and deploy software, automating many tasks to boost productivity and shorten delivery times.

GitLab's recent financial performance has been healthy. Revenues rose 29% year over year to $236 million in the second quarter of fiscal 2026, while non-GAAP operating margin was 17%. Adjusted free cash flow hit $46 million, a dramatic improvement from $10.8 million in the same quarter of the prior year. The company boasts a solid balance sheet with $1.2 billion in cash at the end of the second quarter, providing flexibility for innovation in AI capabilities, platform enhancements, and go-to-market strategy.

However, GitLab's fiscal 2026 revenue guidance seems to have disappointed investors. Management expects fiscal 2026 revenues between $936 million and $942 million, despite surpassing consensus revenue targets in the second quarter. The company attributed this conservative stance to the ongoing changes in its go-to-market strategy and tightening budgets in the small and medium business (SMB) segment.

Despite these challenges, GitLab's main edge lies in its unified platform, which tracks and monitors every step of the software development process. This full lifecycle context helps improve the accuracy and reliability of AI recommendations and tools on the platform. Additionally, being the only independent DevSecOps company that works across all clouds and AI vendors, GitLab gives enterprises and government clients flexibility to choose vendors and tools most fitted for their use cases, thereby avoiding vendor lock-in.

Increasing shifts of clients toward GitLab Ultimate, its highest-value tier, have also become a key driver for the company. This has been driven by customers wanting robust security capabilities with code development. Ultimate contributed 53% of annual recurring revenues (ARR) at the end of the second quarter, while 8 of the 10 largest deals in the second quarter also included Ultimate.

GitLab is also seeing strong adoption of GitLab Dedicated, its single-tenant software-as-a-service (SaaS) version of its enterprise DevSecOps platform. ARR grew 92% year over year to $50 million, with strong demand from financial services and the public sector. FedRAMP authorization for "GitLab Dedicated for Government" has also opened U.S. federal contracts, making regulated and sovereign workloads a major growth frontier.

The number of clients contributing ARR over $100,000 grew 25% year over year to 1,344 at the end of the second quarter. The company is also proving successful in cross-selling and upselling to existing clients, as evidenced by its dollar-based net retention rate of 121%.

Despite these strengths, GitLab is trading at 9.4 times sales, lower than its three-year average price-to-sales (P/S) ratio of 13.7x. With growing AI opportunities, an expanding client base, and strong financials, GitLab looks inexpensive relative to its potential. Investors willing to tolerate near-term volatility should consider picking a small stake in this stock now.