GitLab Q2 Earnings: Strong Growth, Mixed Margins, and a Bullish Outlook

GitLab reported solid Q2 earnings with 29.2% revenue growth and a 121% net retention rate. The company's margin improved despite a slight contraction in gross margin, and net income grew by 67%. While guidance was tepid, the results suggest caution may be warranted. The stock is undervalued, trading at 55x its 2025 earnings outlook, and analysts predict a 35% upside and a 50% price increase.

GitLab Inc. (GTLB) reported solid second-quarter (Q2) fiscal year 2026 earnings, showcasing a robust performance in the DevSecOps market. The company reported revenue of $236 million, a 29.2% year-over-year (YoY) increase, surpassing Wall Street estimates [1]. This growth was driven by a 25% increase in the number of large customers (ARR over $100,000) to 1,344, and a dollar-based net retention rate (DBNRR) of 121% for the quarter [2].

Despite the strong revenue growth, GitLab's gross margin contracted by 100 basis points in the first quarter of fiscal 2026, which may have contributed to the company's cautious guidance for the rest of the year. However, the company's non-GAAP operating margin improved to 17%, indicating enhanced operational efficiency [3]. Non-GAAP operating income reached $39.6 million, up from $18.2 million in the same period last year, while adjusted free cash flow was $46 million [4].

One notable event during the quarter was the resignation of CFO Brian Robins, effective September 19, 2025. This transition introduced uncertainty, but GitLab's interim CFO James Shen will take the helm, aiming to maintain operational discipline [5]. The company's guidance for Q3 FY26 revenue was $238 million to $239 million, representing approximately 23% YoY growth, and for full-year FY26 revenue was $936 million to $942 million, indicating a 24% YoY growth [6].

GitLab's AI integration initiatives, such as the GitLab Duo Agent Platform, are positioning the company to capitalize on the $750 billion value pool expected from AI-driven innovation. However, concerns about code quality, cybersecurity, and skills gaps remain unaddressed, and the transition to a hybrid monetization model may require further refinement [7].

Investors should closely monitor GitLab's ability to balance innovation with profitability as the company continues to grow. Despite the stock's recent decline of over 9% post-earnings, analysts predict a 35% upside and a 50% price increase, suggesting the stock may be undervalued, trading at 55x its 2025 earnings outlook [8].

References:
[1] https://finance.yahoo.com/news/gitlab-inc-gtlb-q2-2026-070335039.html
[2] https://www.ainvest.com/news/gitlab-q2-fy26-236mln-revenue-29-yoy-growth-17-gaap-operating-margin-2509/
[3] https://www.ainvest.com/news/gitlab-q2-earnings-outperformance-strategic-shifts-share-price-decline-2509/
[4] https://finance.yahoo.com/news/gitlab-inc-gtlb-q2-2026-070335039.html
[5] https://www.ainvest.com/news/gitlab-q2-fy26-236mln-revenue-29-yoy-growth-17-gaap-operating-margin-2509/
[6] https://www.ainvest.com/news/gitlab-q2-earnings-outperformance-strategic-shifts-share-price-decline-2509/
[7] https://www.ainvest.com/news/gitlab-q2-earnings-outperformance-strategic-shifts-share-price-decline-2509/
[8] https://www.ainvest.com/news/gitlab-q2-earnings-outperformance-strategic-shifts-share-price-decline-2509/