GitLab shares attempt to breakout following beat and raise report

Jay's InsightWednesday, Sep 4, 2024 8:40 am ET

1min read

GitLab (GTLB) reported strong Q2 results, exceeding both revenue and earnings expectations. The company posted revenue of $182.6 million, up 31% year-over-year, surpassing the consensus estimate of $176.9 million. Adjusted EPS came in at $0.15, also beating the analyst expectation of $0.10. GitLab’s adjusted gross margin remained solid at 91%. The company’s outperformance on key metrics, such as revenue and EPS, reflects its ability to navigate a challenging macro environment while maintaining impressive growth.

Key metrics such as Remaining Performance Obligations (RPO) and Current RPO (cRPO) showed accelerated growth. RPO grew 51% year-over-year, up from 48% last quarter, while cRPO increased by 42%, compared to 34% in the previous quarter. This improvement, coupled with significant new business wins, indicates strong demand for GitLab's products, especially in the enterprise sector. The company noted that its "Ultimate" tier accounted for 65% of new ARR in the $100k+ cohort, driving continued growth.

GitLab raised its guidance for FY25, reflecting strong momentum. The company now expects full-year revenue to be between $742 million and $744 million, up from its previous range of $733 million to $737 million. FY25 adjusted EPS is now projected at $0.45 to $0.47, well above the prior estimate of $0.36. Additionally, GitLab raised its Q3 revenue guidance to $187-$188 million, slightly above analyst estimates of $187.7 million, with adjusted EPS guidance of $0.15-$0.16, exceeding the consensus of $0.11.

Several key drivers contributed to GitLab's strong performance. The company highlighted its comprehensive AI DevSecOps solution and its ability to meet customer demands with new functionalities. Add-on products and new SKUs, such as the "Dedicated" offering, which grew 150% year-over-year, also contributed to growth. GitLab’s vision of consolidating the DevOps stack continues to resonate with customers, positioning the company as a leader in the space.

In terms of valuation, multiple analysts have raised their price targets for GitLab following the strong earnings report. Scotia raised its price target to $65 (from $59), while Cantor and BTIG raised their targets to $60 and $63, respectively. These increases reflect confidence in GitLab’s ability to sustain high growth rates and capitalize on its expanding market opportunities. GitLab's valuation, based on its strong growth trajectory and improving margins, remains attractive in the high-growth software space.

Overall, GitLab delivered a strong quarter, surpassing expectations and raising its guidance for FY25. While the macro environment remains cautious, GitLab’s ability to accelerate RPO and cRPO growth, win large enterprise deals, and expand its product portfolio has positioned it well for continued success. Analysts remain bullish, with most viewing the raised guidance as conservative, setting the stage for potential upside as the year progresses.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.