GitLab's Q2 2026 Earnings Call: Contradictions Emerge in AI Strategy, SMB Revenue, and Organizational Shifts

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $236.0M, up 29% YOY
• Gross Margin: 90% for the quarter
• Operating Margin: 16.8%, compared to 10.0% in the prior year (up ~680 bps YOY)

Guidance:

• Q3 FY26 revenue expected at $238M–$239M (~23% YOY).
• Q3 FY26 non-GAAP operating income expected at $31M–$32M; non-GAAP EPS $0.19–$0.20 (171M diluted shares).
• FY26 revenue maintained at $936M–$942M (~24% YOY).
• FY26 non-GAAP operating income raised to $133M–$136M; non-GAAP EPS $0.82–$0.83 (171M diluted shares).
• Holding full-year revenue outlook amid GTM changes; expecting SMB softness to persist through FY26.
• GTM initiatives ramping in H2; benefits targeted for FY27.

Business Commentary:

* Revenue and Operating Margin Growth: - GitLab reported a revenue increase to $236 million, up 29% year-over-year, with a non-GAAP operating margin reaching 17%. - This growth was driven by an increased customer focus on new customer acquisition and a dual strategy of sales-led and product-led growth.

• Customer Expansion and Seat Growth:
• GitLab's total paid seats grew at an accelerating double-digit rate, contributing over 70% of revenue growth in FY 2026.

• This growth was driven by a significant increase in the number of new startups joining the program and strategic initiatives to focus on new customer acquisition.

• AI and Duo Agent Platform:

• GitLab's Duo Agent platform saw a 6x increase in weekly active usage in the first half of 2026, with plans for general availability by the end of the year.

• The platform aims to monetize autonomous work done, shifting GitLab's business model to a hybrid seat-based and usage-based model.

• Leadership and Organizational Changes:

• GitLab appointed Manav Khurana as the new chief product and marketing officer, focusing on product-led growth and marketing.
• The changes are aimed at complementing existing initiatives and enhancing customer acquisition, adoption, and innovation velocity.

Sentiment Analysis:

• Management highlighted “strong second quarter results” with revenue up 29% YOY and non-GAAP operating margin at 16.8%, and raised full-year profit outlook. However, they maintained full-year revenue guidance due to go-to-market changes and cited “incremental softness in SMB” expected to persist. Q2 outperformance benefited from favorable linearity and mix effects.

Q&A:

• Question from Rob Owens (Piper Sandler): How should we view leadership changes and the apparent 1H vs 2H growth deceleration—extra conservatism due to GTM changes/SMB softness?
  Response: Management held FY revenue guidance despite a Q2 beat to be prudent amid GTM changes and SMB softness; Q2 strength benefited from favorable linearity and mix.

• Question from Matt Hedberg (RBC): Timeline and impact of GTM changes aimed at accelerating new customer lands and Duo consumption elements?
  Response: New business division, enhanced enterprise plays, and capacity updates ramp through H2; expect initial benefits in FY27 while maintaining FY26 guidance.

• Question from Kash Rangan (Goldman Sachs): What does GTM transition aim to accomplish and how do you define success?
  Response: Create a first-order focused new-business team, deepen enterprise sales plays and pipeline coverage, and optimize capacity/verticalization; ramp in H2 to position for scale beyond $1B in FY27.

• Question from Koji Ikeda (Bank of America): What’s driving SMB softness, how big is SMB, and how long could softness persist?
  Response: SMB is ~8% of revenue; it’s more price sensitive and underperformed despite promos; GitLab will keep tweaking pricing/packaging, and softness is expected to persist this year.

• Question from Derrick Wood (TD Cowen): Risk of AI coding vendors moving beyond IDE into GitLab’s lifecycle—platform defensibility?
  Response: GitLab focuses on lifecycle change management, integrating code-gen tools rather than competing with them; partnerships make these tools additive, not a threat.

• Question from Sanjit Singh (Morgan Stanley): Causes of slowing new-logo adds and timeline to reaccelerate?
  Response: Past incentives favored expansion over first orders; GitLab is adding specialized new-business sellers and PLG motions, ramping H2 with early impact in FY27.

• Question from Brian Essex (JPMorgan): How will appointing a CPO/CMO with PLG expertise affect growth and investment?
  Response: Combining PLG with enterprise sales should speed Duo adoption and feedback while sustaining top-down wins, improving growth dynamics without disrupting the model.

• Question from Gray Powell (BTIG): Will GTM changes disrupt 2H (territories or comp), and are you moving to a hunter/farmer model?
  Response: No territory or comp changes; focus is on hiring/enablement and refined plays. New-business teams will focus on acquisition while account teams drive expansion (hunter/farmer-like).

• Question from Mike Kikos (Needham): How will comp drive new-logo behavior, and what’s the ramp time for new sellers?
  Response: Comp is largely unchanged with light new-logo incentives; the bigger shift is specialization by motion/vertical. Enterprise seller ramp is 6–9 months.

• Question from Jonathan Rockhaver (Cantor Fitzgerald): Early signals from Duo Agent Platform and innovation cadence?
  Response: Monthly releases since 18.2; strong interest due to rich context, open ecosystem, and custom agents; targeting GA by year-end pending quality/readiness.

• Question from Damon Coggin for Raimo Lenschow (Barclays): What drove 39% SaaS growth, any one-time items, and how to think about implied growth?
  Response: Q2 benefited from strong month-one linearity and higher self-managed recognition; GitLab is deployment-agnostic, with Dedicated up 92% YOY. FY guide held; Q2 beat spread across Q3/Q4.