Core Viewpoint - GitLab's stock dropped 10.6% in pre-market trading, reflecting concerns over its conservative revenue guidance for Q4, influenced by U.S. government shutdown and related efficiency measures [1] Financial Performance - GitLab expects Q4 revenue to be between $251 million and $252 million, with earnings per share projected at 22 to 23 cents, aligning closely with analyst expectations [1]

Core Insights - The software company is experiencing ongoing weakness in its public sector segment [1] Group 1 - The company continues to see challenges in its public sector business [1]

Market Overview - U.S. stock futures were higher, with Dow futures gaining around 0.1% on Wednesday [1] GitLab Inc (NASDAQ:GTLB) - GitLab reported quarterly earnings of $0.25 per share, beating the analyst estimate of $0.20 [2] - Quarterly revenue was $244.35 million, surpassing the Street estimate of $239.63 million [2] - Despite the positive earnings and revenue, GitLab shares fell 8% to $39.90 in pre-market trading due to fourth-quarter sales guidance being below estimates [2] Acadia Healthcare Company Inc (NASDAQ:ACHC) - Acadia Healthcare's shares fell 22.7% to $12.74 in pre-market trading after the company cut its full-year 2025 guidance [4] - The reduction in guidance was attributed to larger expenses related to patient-related litigation [4] TryHard Holdings Limited (NASDAQ:THH) - TryHard Holdings experienced a decline of 16.6% to $18.70 in pre-market trading after a significant increase of 50% on Tuesday [4] Pure Storage Inc (NYSE:PSTG) - Pure Storage shares fell 11.8% to $83.50 in pre-market trading following the release of quarterly results [4] Box Inc (NYSE:BOX) - Box's shares decreased by 7.1% to $28.05 in pre-market trading after posting in-line earnings for the third quarter but issuing fiscal 2026 EPS guidance below analyst estimates [4] Okta, Inc. (NASDAQ:OKTA) - Okta's shares declined 3.5% to $79.03 in pre-market trading after the company reported third-quarter results [4] Erasca, Inc. (NASDAQ:ERAS) - Erasca's shares fell 2.8% to $2.81 in pre-market trading after a 4% decline on Tuesday [4] CrowdStrike Holdings, Inc. (NASDAQ:CRWD) - CrowdStrike reported better-than-expected financial results for the third quarter and raised its full-year guidance, but shares slipped 2.1% to $505.79 in pre-market trading [4]

Market Overview - U.S. stock futures are higher, with Dow futures gaining approximately 0.1% on Wednesday [1] GitLab Inc (NASDAQ:GTLB) - GitLab reported quarterly earnings of $0.25 per share, surpassing the analyst estimate of $0.20 [2] - Quarterly revenue reached $244.35 million, exceeding the Street estimate of $239.63 million [2] - Despite the positive earnings and revenue, GitLab shares fell 8% to $39.90 in pre-market trading due to fourth-quarter sales guidance being below estimates [2] Acadia Healthcare Company Inc (NASDAQ:ACHC) - Acadia Healthcare's shares dropped 22.7% to $12.74 in pre-market trading after the company reduced its full-year 2025 guidance [4] - The reduction was attributed to increased expenses related to patient-related litigation, leading to updates in professional and general liability reserves [4] TryHard Holdings Limited (NASDAQ:THH) - TryHard Holdings experienced a decline of 16.6% to $18.70 in pre-market trading after a significant increase of 50% on the previous day [4] Pure Storage Inc (NYSE:PSTG) - Pure Storage shares fell 11.8% to $83.50 in pre-market trading following the release of its quarterly results [4] Box Inc (NYSE:BOX) - Box's shares decreased by 7.1% to $28.05 in pre-market trading after posting in-line earnings for the third quarter but providing fiscal 2026 EPS guidance below analyst estimates [4] Okta, Inc. (NASDAQ:OKTA) - Okta's shares declined 3.5% to $79.03 in pre-market trading after the company reported third-quarter results [4] Erasca, Inc. (NASDAQ:ERAS) - Erasca's shares fell 2.8% to $2.81 in pre-market trading, following a 4% decline on the previous day [4] CrowdStrike Holdings, Inc. (NASDAQ:CRWD) - CrowdStrike's shares slipped 2.1% to $505.79 in pre-market trading despite reporting better-than-expected financial results for the third quarter and raising its full-year guidance [4]

Group 1 - GitLab reported total revenues of $244.4 million for its fiscal 2026 third quarter, reflecting a 25% year-over-year increase [3] - The appointment of Jessica Ross as the new CFO is part of a series of senior management changes at GitLab under CEO Bill Staples [3][7] - Ross will replace James Shen, who served as interim CFO since September, and will return to his role as vice president of finance [7] Group 2 - Jessica Ross will receive an initial annual base salary of $505,000 and a signing cash bonus of $150,000 [5] - Ross has over 25 years of experience in finance and operational leadership, previously serving as CFO at Frontdoor and holding senior roles at Salesforce [5][6] - GitLab's leadership emphasizes the company's readiness to assist organizations in navigating complexities related to AI, security, and modern software delivery [5][7]

Core Insights - GitLab reported strong financial results for the third quarter of fiscal year 2026, achieving a 25% year-over-year revenue growth, totaling $244.4 million [2][3][4] - The company is focused on sustainable growth and strategic investments while maintaining positive cash flow [2][3] - GitLab's non-GAAP operating margin improved to 18%, compared to a loss of 5% in GAAP terms [3][5] Financial Highlights - Total revenue reached $244.4 million, up 25% from $196.0 million in the same quarter last year [3][4] - GAAP operating margin was (5)%, while non-GAAP operating margin was 18% [3][5] - Non-GAAP net income attributable to GitLab was $43.5 million, compared to $39.1 million a year ago, reflecting a 4.4 million increase [5] - Operating cash flow was $31.4 million, with non-GAAP adjusted free cash flow at $27.2 million [3][4] Customer Metrics - Customers with more than $5,000 of Annual Recurring Revenue (ARR) increased by 10% year-over-year, reaching 10,475 [9] - Customers with more than $100,000 of ARR grew by 23% year-over-year, totaling 1,405 [9] - The Dollar-Based Net Retention Rate was reported at 119% [9] Business Developments - GitLab appointed Jessica Ross as Chief Financial Officer, effective January 15, 2026, bringing over 25 years of experience [6][10] - The company was recognized as a leader in the Gartner Magic Quadrant for DevOps Platforms for the third consecutive year [10] - GitLab expanded its Duo Agent Platform with new AI capabilities and enhanced application security features [10]

Core Insights - GitLab Inc. reported quarterly earnings of $0.25 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and showing an increase from $0.23 per share a year ago, resulting in an earnings surprise of +25.00% [1] - The company achieved revenues of $244.35 million for the quarter ended October 2025, surpassing the Zacks Consensus Estimate by 2.41% and reflecting a year-over-year increase from $196.05 million [2] - GitLab has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] Earnings Outlook - The sustainability of GitLab's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.22 on revenues of $251.67 million, and for the current fiscal year, it is $0.83 on revenues of $940.15 million [7] Industry Context - The Internet - Software industry, to which GitLab belongs, is currently ranked in the top 28% of over 250 Zacks industries, indicating a favorable outlook for stocks within this sector [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] Stock Performance - GitLab shares have underperformed the market, losing about 27% since the beginning of the year, while the S&P 500 has gained 15.8% [3] - The estimate revisions trend for GitLab was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expectations of outperformance in the near future [6]

User Growth and Customer Base - GitLab has over 50 million registered users, with more than 50% of Fortune 100 companies as customers[126] - Base Customers increased to 10,475 as of October 31, 2025, from 9,519 as of October 31, 2024, representing a 10% increase[133] - Customers with ARR of $100,000 or more rose to 1,405 as of October 31, 2025, up from 1,144 as of October 31, 2024, a 23% increase[144] Financial Performance - Total revenue for the three months ended October 31, 2025, increased by $48.3 million, or 25%, to $244.4 million compared to $196.0 million for the same period in 2024[162] - Subscription revenue from self-managed and SaaS increased by $48.0 million, or 27%, to $223.3 million for the three months ended October 31, 2025, compared to $175.3 million for the same period in 2024[162] - Gross profit for the three months ended October 31, 2025, was $212.1 million, representing a gross margin of 87%, down from 89% in the same period of 2024[167] - The company reported a net loss attributable to GitLab of $8.3 million for the three months ended October 31, 2025, compared to a net income of $29.1 million for the same period in 2024[160] Expenses and Investments - GitLab plans to continue investing in research and development, expecting R&D expenses to increase in absolute terms in future periods[132] - GitLab's operating expenses are expected to rise due to increased investments in sales and marketing, R&D, and general administrative costs[138] - Research and development expenses for the three months ended October 31, 2025, were $68.7 million, an increase from $61.4 million in the same period of 2024[160] - General and administrative expenses for the three months ended October 31, 2025, were $50.8 million, compared to $46.0 million for the same period in 2024[160] - Sales and marketing expenses increased by $9.6 million, reaching $105.0 million for the three months ended October 31, 2025, a 10% increase from $95.3 million in the same period of 2024[171] Cash Flow and Liquidity - As of October 31, 2025, the principal source of liquidity was cash, cash equivalents, and short-term investments totaling $1.2 billion, up from $992.4 million as of January 31, 2025[196] - Cash provided by operating activities for the nine months ended October 31, 2025, was $187.1 million, compared to a cash outflow of $127.2 million for the same period in 2024[200][201] - Adjusted free cash flow for the nine months ended October 31, 2025, was $177.8 million, compared to $57.9 million for the same period in 2024[207] - The company believes existing cash and investments will support working capital and capital expenditure requirements for at least the next 12 months[197] Tax and Interest - The effective tax rate decreased by approximately 417.6% for the three months ended October 31, 2025, compared to the same period in 2024, primarily due to a pretax loss[191] - Interest income decreased by $882,000 to $11.7 million for the three months ended October 31, 2025, a 7% decline from $12.6 million in the same period of 2024[185] Foreign Exchange and Investments - The company has $59.1 million in cash and cash equivalents denominated in currencies other than the U.S. dollar, which may be affected by fluctuations in foreign exchange rates[215] - The company has not engaged in hedging foreign currency transactions to date but may consider it in the future[216]

Financial Data and Key Metrics Changes - Revenue for Q3 FY26 reached $244 million, representing a 25% year-over-year growth, exceeding guidance by two points [5][25] - Non-GAAP operating margin improved to 18%, five points above Q3 guidance [5] - Non-GAAP gross margin was reported at 89% for the quarter [26] - Dollar-based net retention rate (DBNRR) stood at 119% [25] - Total remaining performance obligations (RPO) grew 27% year-over-year to $1 billion [25] - Cash and investments at the end of the quarter totaled $1.2 billion [28] Business Line Data and Key Metrics Changes - GitLab Ultimate now accounts for 54% of total annual recurring revenue (ARR) and was involved in seven of the top ten net ARR deals this quarter [14] - SaaS revenue represented approximately 31% of total revenue, growing 36% year-over-year [26] - The larger customer cohort (ARR of $100,000+) increased by 23% year-over-year, reaching 1,405 [25] Market Data and Key Metrics Changes - Strong international results were noted, although there was softness in the U.S. public sector due to slower decision-making related to the government shutdown [15] - GitLab was recognized as a Leader in the 2025 Gartner Magic Quadrant for DevOps Platforms and AI Code Assistants [15] Company Strategy and Development Direction - The company aims to expand its customer base, particularly in mid-market and enterprise segments, leveraging AI mandates to attract new clients [15][18] - GitLab is focusing on enhancing its platform capabilities, particularly through the Duo Agent platform, which is expected to drive new revenue streams [12][14] - The strategy includes transitioning from a pure seat-based model to a hybrid model that incorporates usage-based pricing [49][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to capitalize on the growing demand for AI in software development [6][18] - The lingering effects of the U.S. government shutdown are anticipated to impact deal dynamics in the federal business into Q4 [29] - The company remains optimistic about long-term growth despite current market challenges, particularly in the SMB segment [28][95] Other Important Information - The company is preparing for the general availability of the Duo Agent platform, which is expected to enhance customer engagement and operational efficiency [14][72] - A new Chief Financial Officer, Jessica Ross, will join the company in January [24] Q&A Session Summary Question: Insights on fourth quarter guidance and subscription revenue growth - Management acknowledged a deceleration in subscription revenue growth and highlighted ongoing challenges in the public sector impacting guidance [33][35] Question: Progress on first-order business and expected timeline for results - Management indicated that hiring a global leader for new business acquisition is underway, with expected results in the latter half of FY 2027 [39][40] Question: Impact of federal sector challenges on revenue retention - Management confirmed that public sector challenges are ongoing but emphasized the long-term potential of their public sector strategy [44][45] Question: Customer activity and AI tool usage - Management noted that AI tool usage is widespread among customers, enhancing their overall engagement with GitLab [98] Question: SMB segment performance and strategies - Management highlighted that SMB weakness is a small part of their overall revenue and attributed it to price sensitivity and scrutiny during renewals [95]

Financial Data and Key Metrics Changes - Revenue for Q3 FY26 grew 25% year over year to $244 million, exceeding guidance by two points [5][25] - Non-GAAP operating margin reached 18%, five points above guidance [5] - Non-GAAP gross margin was 89% for the quarter, with non-GAAP operating income of $43.7 million compared to $25.9 million in Q3 of the previous year [26][27] - Dollar-based net retention rate (DBNRR) was 119%, with total remaining performance obligations (RPO) growing 27% year over year to $1 billion [25][26] Business Line Data and Key Metrics Changes - GitLab Ultimate now represents 54% of total annual recurring revenue (ARR) and was involved in seven of the top ten net ARR deals this quarter [14] - SaaS revenue grew 36% year over year, now representing approximately 31% of total revenue [26] - The larger customer cohort of $100,000+ in ARR increased 23% year over year, reaching 1,405 [25] Market Data and Key Metrics Changes - Stronger international results were noted, although there was softness in the U.S. public sector due to slower decision-making related to the government shutdown [15] - GitLab was recognized as a Leader in the 2025 Gartner Magic Quadrant for DevOps Platforms and AI Code Assistants [15] Company Strategy and Development Direction - The company aims to add more new paying customers, particularly in the mid-market and enterprise segments, leveraging AI mandates to drive demand [15][18] - GitLab is focusing on a hybrid seat plus usage-based business model with the introduction of the Duo Agent platform [49][50] - The company is investing in core DevOps, security, and AI to accelerate customer-focused innovation [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to capitalize on the growing importance of AI in software development [6][7] - The lingering effects of the U.S. government shutdown are expected to impact deal dynamics in the federal business into Q4 [29][66] - The company anticipates total revenue of $251-$252 million for Q4 FY26, representing a year-over-year growth rate of approximately 19% [29] Other Important Information - The company ended the quarter with $1.2 billion in cash and investments, providing flexibility for continued investment in AI capabilities and platform enhancements [28] - A new Chief Financial Officer, Jessica Ross, will join the company in January [24] Q&A Session Summary Question: Insights on fourth quarter guidance and subscription revenue growth - Management acknowledged the deceleration in subscription revenue growth and the impact of public sector softness on guidance [33][35] Question: Progress on first-order business and expected timeline for results - Management indicated that a new global leader focused on acquiring new business has been hired, with results expected in the latter half of FY27 [39][40] Question: Impact of federal sector on revenue and retention rates - Management confirmed that public sector remains a significant part of ARR, with ongoing challenges due to the government shutdown affecting deal dynamics [44][66] Question: Convergence of platform activity and revenue growth - Management noted that the shift to a hybrid business model with Duo Agent platform is expected to help align activity with revenue growth [49][50] Question: SMB market weakness and potential strategies - Management stated that SMB represents a small portion of revenue, with ongoing scrutiny affecting renewals, but emphasized the importance of a strong free offering [95] Question: Customer usage of AI tools and its impact on growth - Management confirmed that AI tool usage is widespread among customers, with many implementing multiple AI tools alongside GitLab [99]