Gitlab (GTLB) - 2026 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements and the inherent risks that could cause actual results to differ materially from expectations Summary of Forward-Looking Statements and Risks This section outlines forward-looking statements regarding future financial performance and business strategy, emphasizing inherent risks that could cause actual results to differ materially - Forward-looking statements cover future financial performance (revenue, costs, profitability), business plans, market opportunities, anticipated trends, market acceptance of The DevSecOps platform, customer base expansion, product development (including AI features), partner network growth, intellectual property, international expansion, competition, acquisitions, regulatory compliance, data breaches, and economic trends[10] - Key risks include the impact of macroeconomic conditions (inflation, interest rates, conflicts), challenges in managing rapid growth and sustaining revenue, a history of losses and anticipated increases in operating expenses, security and privacy breaches (especially with open-source and AI technologies), intense competition, inability to respond to rapid technological changes, and potential service failures[11][14][15][16] PART I. Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section provides GitLab Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, with explanatory notes Condensed Consolidated Balance Sheets This section details GitLab's financial position, presenting assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | :------- | | Assets | | | | | | Total current assets | $1,436,170 | $1,336,317 | $99,853 | 7.47% | | Total assets | $1,498,187 | $1,399,263 | $98,924 | 7.07% | | Liabilities | | | | | | Total current liabilities | $553,357 | $545,031 | $8,326 | 1.53% | | Total liabilities | $586,605 | $577,957 | $8,648 | 1.50% | | Stockholders' Equity | | | | | | Total GitLab stockholders' equity | $866,551 | $775,909 | $90,642 | 11.68% | | Total stockholders' equity | $911,582 | $821,306 | $90,276 | 10.99% | - As of July 31, 2025, current assets increased by $99.85 million (7.47%) to $1.44 billion, primarily driven by increases in cash and cash equivalents and short-term investments[20] - Total liabilities saw a modest increase of $8.65 million (1.50%) to $586.61 million[20] - Total stockholders' equity increased by $90.28 million (10.99%) to $911.58 million[20] Condensed Consolidated Statements of Operations This section presents GitLab's financial performance over specific periods, detailing revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations – Three Months Ended July 31 (in thousands) | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Total revenue | $235,960 | $182,584 | $53,376 | 29.23% | | Gross profit | $207,455 | $161,214 | $46,241 | 28.68% | | Loss from operations | $(18,351) | $(41,005) | $22,654 | -55.24% | | Net income (loss) attributable to GitLab | $(9,208) | $12,912 | $(22,120) | -171.31% | | Basic EPS | $(0.06) | $0.08 | $(0.14) | -175.00% | | Diluted EPS | $(0.06) | $0.08 | $(0.14) | -175.00% | Condensed Consolidated Statements of Operations – Six Months Ended July 31 (in thousands) | Metric | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Total revenue | $450,469 | $351,771 | $98,698 | 28.06% | | Gross profit | $396,929 | $311,625 | $85,304 | 27.37% | | Loss from operations | $(52,961) | $(94,645) | $41,684 | -44.04% | | Net income (loss) attributable to GitLab | $(45,083) | $(42,321) | $(2,762) | 6.53% | | Basic EPS | $(0.27) | $(0.27) | $0.00 | 0.00% | | Diluted EPS | $(0.27) | $(0.27) | $0.00 | 0.00% | - For the three months ended July 31, 2025, total revenue increased by 29% year-over-year to $236.0 million, while gross profit increased by 28.7% to $207.5 million[22] - The company reported a net loss attributable to GitLab of $(9.2) million, a significant decrease from the $12.9 million net income in the prior year, primarily due to a shift from an income tax benefit to a provision for income taxes[22] - For the six months ended July 31, 2025, total revenue grew by 28.1% to $450.5 million, and gross profit increased by 27.4% to $396.9 million[22] - The net loss attributable to GitLab slightly widened to $(45.1) million from $(42.3) million in the prior year, with basic and diluted EPS remaining at $(0.27)[22] Condensed Consolidated Statements of Comprehensive Income (Loss) This section details GitLab's comprehensive income or loss, including net income and other comprehensive income components, for specific periods Condensed Consolidated Statements of Comprehensive Income (Loss) – Three Months Ended July 31 (in thousands) | Metric | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------- | :------------------------------------ | :------------------------------------ | :-------------------- | :------- | | Net Income (loss) | $(9,996) | $12,237 | $(22,233) | -181.68% | | Foreign currency translation adjustments | $2,122 | $(5,363) | $7,485 | -139.57% | | Net change in unrealized gains (losses) on available-for-sale securities | $(1,582) | $1,620 | $(3,202) | -197.65% | | Comprehensive income (loss) including noncontrolling interest | $(9,456) | $8,494 | $(17,950) | -211.33% | | Comprehensive income (loss) attributable to GitLab | $(9,260) | $9,937 | $(19,197) | -193.19% | Condensed Consolidated Statements of Comprehensive Income (Loss) – Six Months Ended July 31 (in thousands) | Metric | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Net Income (loss) | $(46,254) | $(43,239) | $(3,015) | 6.97% | | Foreign currency translation adjustments | $8,319 | $(2,556) | $10,875 | -425.47% | | Net change in unrealized gains (losses) on available-for-sale securities | $(1,172) | $(101) | $(1,071) | 1060.40% | | Comprehensive income (loss) including noncontrolling interest | $(39,107) | $(45,896) | $6,789 | -14.79% | | Comprehensive income (loss) attributable to GitLab | $(38,086) | $(44,096) | $6,010 | -13.63% | - For the three months ended July 31, 2025, comprehensive loss attributable to GitLab was $(9.26) million, a significant decline from a comprehensive income of $9.94 million in the prior year, primarily driven by the net loss and negative changes in unrealized gains/losses on available-for-sale securities, despite positive foreign currency translation adjustments[25] - For the six months ended July 31, 2025, comprehensive loss attributable to GitLab improved to $(38.09) million from $(44.10) million in the prior year, mainly due to substantial positive foreign currency translation adjustments, partially offsetting the net loss and increased unrealized losses on available-for-sale securities[25] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in GitLab's stockholders' equity over specific periods, reflecting capital contributions, net income, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | Change (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Additional paid-in capital | $2,080,759 | $1,952,031 | $128,728 | | Accumulated deficit | $(1,212,697) | $(1,167,614) | $(45,083) | | Accumulated other comprehensive loss | $(1,511) | $(8,508) | $6,997 | | Total GitLab stockholders' equity | $866,551 | $775,909 | $90,642 | | Noncontrolling interests | $45,031 | $45,397 | $(366) | | Total Stockholders' Equity | $911,582 | $821,306 | $90,276 | - For the six months ended July 31, 2025, total stockholders' equity increased by $90.28 million to $911.58 million[31] - This was primarily driven by an increase in additional paid-in capital of $128.73 million, largely due to stock-based compensation expense ($110.1 million) and common stock issuances from ESPP and stock option exercises[31] - The accumulated deficit increased by $45.08 million due to net loss, while accumulated other comprehensive loss improved by $6.997 million[31] Condensed Consolidated Statements of Cash Flows This section presents GitLab's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows – Six Months Ended July 31 (in thousands) | Cash Flow Activity | Six Months Ended July 31, 2025 (in thousands) | Six Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $155,671 | $49,835 | $105,836 | 212.37% | | Net cash provided by (used in) investing activities | $(138,461) | $84,223 | $(222,684) | -264.40% | | Net cash provided by financing activities | $15,679 | $18,005 | $(2,326) | -12.92% | | Net increase in cash and cash equivalents | $33,722 | $150,620 | $(116,898) | -77.61% | | Cash and cash equivalents at end of period | $261,371 | $438,616 | $(177,245) | -40.41% | - For the six months ended July 31, 2025, net cash provided by operating activities significantly increased by 212.4% to $155.7 million, driven by improved operational performance and effective collections[33] - However, net cash used in investing activities was $(138.5) million, a substantial shift from $84.2 million provided in the prior year, primarily due to increased purchases of short-term investments[33] - Net cash from financing activities slightly decreased to $15.7 million[33] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, clarifying accounting policies and significant transactions 1. Organization and Description of Business This note describes GitLab Inc.'s business as an all-remote DevSecOps platform provider, focusing on global market expansion - GitLab Inc. operates as an all-remote technology company, offering a complete DevSecOps platform as a single application[35] - The company's primary markets are the United States, Europe, and Asia Pacific, with a focus on accelerating innovation and broadening platform distribution globally[35] 2. Basis of Presentation and Summary of Significant Accounting Policies This note outlines the basis for preparing the financial statements and summarizes the key accounting policies applied - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim reporting[37][38] - The fiscal year ends on January 31, and the company operates as one operating and reportable segment, with the CEO reviewing financial information on a consolidated basis[43] - Previously issued condensed consolidated financial statements for prior periods were revised to correct immaterial errors related to the understatement of certain tax liabilities associated with the formation of the JiHu joint venture in February 2021[46][47] 3. Revenues This note disaggregates revenue by type and geographic location, and details remaining performance obligations and customer concentrations Revenue by Type – Three Months Ended July 31 (in thousands) | Revenue Type | 3 Months Ended July 31, 2025 (in thousands) | % of Total Revenue | 3 Months Ended July 31, 2024 (in thousands) | % of Total Revenue | | :-------------------------- | :------------------------------------------ | :----------------- | :------------------------------------------ | :----------------- | | Subscription—self-managed and SaaS | $212,684 | 90% | $163,181 | 89% | | License—self-managed and other | $23,276 | 10% | $19,403 | 11% | | Total revenue | $235,960 | 100% | $182,584 | 100% | Revenue by Type – Six Months Ended July 31 (in thousands) | Revenue Type | 6 Months Ended July 31, 2025 (in thousands) | % of Total Revenue | 6 Months Ended July 31, 2024 (in thousands) | % of Total Revenue | | :-------------------------- | :------------------------------------------ | :----------------- | :------------------------------------------ | :----------------- | | Subscription—self-managed and SaaS | $407,165 | 90% | $314,360 | 89% | | License—self-managed and other | $43,304 | 10% | $37,411 | 11% | | Total revenue | $450,469 | 100% | $351,771 | 100% | Revenue by Geographic Location – Three Months Ended July 31 (in thousands) | Geographic Location | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | | :------------------ | :------------------------------------------ | :------------------------------------------ | | United States | $194,584 | $149,357 | | Europe | $36,161 | $28,889 | | Asia Pacific | $5,215 | $4,338 | | Total revenue | $235,960 | $182,584 | - As of July 31, 2025, remaining performance obligations totaled approximately $988.2 million, with 63% expected to be recognized over the next 12 months and 89% over the next 24 months[51] - Two channel partners represented 18% and 15% of accounts receivable as of July 31, 2025, compared to 11% and 12% as of January 31, 2025[54] - No individual customer accounted for more than 10% of total revenue during the six months ended July 31, 2025 and 2024[55] 4. Cash Equivalents and Short-Term Investments This note provides details on the composition and fair value of cash equivalents and short-term investments, including interest income and unrealized gains/losses Cash Equivalents and Short-Term Investments Fair Value (in thousands) | Category | July 31, 2025 Fair Value (in thousands) | January 31, 2025 Fair Value (in thousands) | | :-------------------------- | :-------------------------------------- | :--------------------------------------- | | Money market funds | $160,950 | $97,093 | | U.S. Treasury securities | $5,987 | $36,437 | | Commercial paper | $2,995 | — | | Total cash equivalents | $169,932 | $133,530 | | Short-term investments | $903,806 | $764,728 | | Total cash equivalents and short-term investments | $1,073,738 | $898,258 | - Interest income for the three and six months ended July 31, 2025, was $11.5 million and $22.4 million, respectively, including net amortization of premiums or discounts on short-term investments of $2.6 million and $5.6 million[59][184] - This represents a decrease from the prior year's interest income of $12.8 million and $24.9 million, respectively, primarily due to lower interest rates[59][184] Investment Type Gross Unrealized Losses (in thousands) | Investment Type | July 31, 2025 Gross Unrealized Losses (in thousands) | January 31, 2025 Gross Unrealized Losses (in thousands) | | :-------------------------- | :------------------------------------------------- | :-------------------------------------------------- | | U.S. Agency securities | $(81) | $(65) | | Commercial paper | $(11) | $(11) | | Corporate debt securities | $(224) | $(148) | | U.S. Treasury securities | $(505) | $(140) | | Total unrealized losses | $(821) | $(364) | 5. Supplemental Financial Statement Information This note provides additional details on other income and expense items, including foreign exchange gains and losses Other Income (Expense), Net – Three Months Ended July 31 (in thousands) | Item | Three Months Ended July 31, 2025 (in thousands) | Three Months Ended July 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Foreign exchange gains (losses), net | $(1,117) | $1,267 | | Other income (expense), net | $206 | $(7) | | Total other income (expense), net | $(911) | $1,260 | - Total other income (expense), net, shifted from a gain of $1.26 million in Q3 2024 to a loss of $(0.91) million in Q3 2025, primarily due to increased foreign exchange losses from the revaluation of non-functional currency denominated monetary assets and liabilities[63][185] 6. Acquisitions This note details recent acquisition activities, including the purchase of Oxeye Security Limited and related compensation expenses - In March 2024, GitLab acquired Oxeye Security Limited for $20.3 million, which included a $3.2 million founder holdback payable over three years, recognized as compensation expense[64][65] - Founder holdback compensation recorded was $0.3 million for the three months ended July 31, 2025, and $0.4 million for the six months ended July 31, 2025[65] 7. Goodwill and Intangible Assets, Net This note provides information on the carrying amounts and changes in goodwill and intangible assets, including amortization expense Goodwill and Intangible Assets, Net (in thousands) | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------ | | Goodwill | $16,634 | $16,139 | | Intangible assets, net | $13,804 | $17,834 | - Goodwill increased to $16.63 million as of July 31, 2025, from $16.14 million as of January 31, 2025, primarily due to foreign currency translation adjustments[66][67] - Intangible assets, net, decreased to $13.80 million from $17.83 million, with $6.2 million of fully amortized intangible assets written off due to obsolescence[67][68] - Amortization expense was $2.0 million and $4.0 million for the three and six months ended July 31, 2025, respectively[68] - Future amortization expense for intangible assets is expected to be $4.03 million for the remainder of fiscal year 2026, $8.06 million in 2027, and $1.72 million in 2028[69] 8. Team Member Benefit Plans This note details the company's contributions to defined contribution plans for its team members Total Contributions to Team Member Benefit Plans (in thousands) | Period | Total Contributions (in thousands) | | :-------------------------- | :------------------------------- | | Three Months Ended July 31, 2025 | $1,500 | | Six Months Ended July 31, 2025 | $3,800 | | Three Months Ended July 31, 2024 | $1,200 | | Six Months Ended July 31, 2024 | $3,000 | - GitLab contributes to defined contribution plans in various countries, including a 401(k) savings plan for U.S. team members[70] - Total contributions increased to $1.5 million for the three months and $3.8 million for the six months ended July 31, 2025, from $1.2 million and $3.0 million in the prior year periods, respectively[70] 9. Equity This note provides detailed information on stock options, RSUs, PSUs, ESPP, and stock-based compensation expense - As of July 31, 2025, 5.23 million stock options were outstanding with a weighted-average exercise price of $14.63 and an aggregate intrinsic value of $152.5 million[73] - Unrecognized stock-based compensation cost for stock options was approximately $12.2 million, expected to be recognized over 0.8 years[74] - RSU activity for the six months ended July 31, 2025, included 4.19 million granted, 1.75 million vested, and 1.33 million canceled/forfeited, resulting in 9.37 million shares outstanding[75][76] - Unrecognized RSU compensation cost was approximately $420.1 million, expected to be recognized over 2.8 years[77] - During the six months ended July 31, 2025, 0.3 million PSUs were granted to senior management[78] - Unrecognized PSU compensation expense was $5.3 million, expected to be recognized over 2.7 years[80] - The ESPP offering was reset in Q3 2025 due to a lower stock price, resulting in an incremental expense of $4.3 million[82] - Unrecognized ESPP compensation cost was approximately $20.7 million, expected to be recognized over 1.8 years[83] Stock-Based Compensation Expense – Three Months Ended July 31 (in thousands) | Expense Category | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Cost of revenue | $2,261 | $2,076 | | Sales and marketing | $19,950 | $19,881 | | Research and development | $19,197 | $16,114 | | General and administrative | $12,876 | $10,898 | | Total stock-based compensation expense | $54,284 | $48,969 | - Total stock-based compensation expense increased by $5.3 million (11%) to $54.3 million for the three months ended July 31, 2025, and by $18.9 million (21%) to $110.1 million for the six months ended July 31, 2025, primarily driven by RSU expenses[85][180][181] - GitLab donated 40,889 shares and 81,778 shares of Class A common stock to the GitLab Foundation for the three and six months ended July 31, 2025, respectively[87] - This resulted in donation expenses of $1.8 million and $3.5 million recorded in general and administrative expenses[88] 10. Joint Venture This note describes the JiHu joint venture in China, including its financial performance and stock-based compensation - GitLab Inc. established GitLab Information Technology (Hubei) Co., LTD ("JiHu") in February 2021 as a joint venture in China, which is consolidated as a variable interest entity with GitLab retaining approximately 54% equity stake[89] - JiHu recorded $1.0 million and $0.8 million in stock-based compensation expense (net of forfeitures) for the three and six months ended July 31, 2025, respectively[91] - Unrecognized compensation cost for JiHu ESOPs was $5.6 million, expected to be recognized over 2.8 years[92] JiHu Financials – Three Months Ended July 31 (in thousands) | JiHu Financials | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Revenue | $2,174 | $1,775 | | Net loss | $(47,367) | $(1,467) | | Net loss attributable to noncontrolling interest | $(788) | $(675) | JiHu Financials – Six Months Ended July 31 (in thousands) | JiHu Financials | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | | Revenue | $4,059 | $3,421 | | Net loss | $(48,196) | $(1,993) | | Net loss attributable to noncontrolling interest | $(1,171) | $(918) | 11. Income Taxes This note details the company's income tax provision or benefit, effective tax rates, and unrecognized tax benefits - For the three and six months ended July 31, 2025, GitLab recorded income tax expense of $2.2 million and $4.8 million, respectively, on pretax losses, primarily due to taxable income from certain foreign operations[97] - This contrasts with income tax benefits of $39.2 million and $26.2 million in the prior year periods, which were related to a decrease in unrecognized tax benefits and foreign/domestic operations[98] - The effective tax rate decreased by approximately 181.4% for the three months and 50.1% for the six months ended July 31, 2025, compared to the prior year, mainly due to the tax benefit recorded in 2024 related to Bilateral Advanced Pricing Agreement (BAPA) negotiations[189][190] - The recently enacted One Big Beautiful Bill Act (OBBBA) in July 2025, allowing immediate expensing of U.S. R&D expenditures, favorably impacted the company's domestic tax liability by significantly reducing U.S. taxable income to a loss position[96][188] - As of July 31, 2025, unrecognized tax benefits were $28.8 million, with $10.2 million affecting the effective tax rate if recognized[102] - Accrued interest and penalties related to unrecognized tax benefits were $6.0 million[103] 12. Net Income (Loss) per Share This note presents basic and diluted net income or loss per share, along with the weighted-average shares outstanding Net Income (Loss) per Share – Three Months Ended July 31 | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) attributable to GitLab (in thousands) | $(9,208) | $12,912 | | Basic EPS | $(0.06) | $0.08 | | Diluted EPS | $(0.06) | $0.08 | | Weighted-average shares (Basic) (in thousands) | 165,953 | 159,677 | | Weighted-average shares (Diluted) (in thousands) | 165,953 | 166,346 | Net Income (Loss) per Share – Six Months Ended July 31 | Metric | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) attributable to GitLab (in thousands) | $(45,083) | $(42,321) | | Basic EPS | $(0.27) | $(0.27) | | Diluted EPS | $(0.27) | $(0.27) | | Weighted-average shares (Basic) (in thousands) | 165,233 | 158,973 | | Weighted-average shares (Diluted) (in thousands) | 165,233 | 158,973 | - As of July 31, 2025, potentially dilutive securities totaling 15.24 million shares (including stock options, RSUs, PSUs, and ESPP shares) were anti-dilutive and thus excluded from diluted EPS calculations due to the net loss[106] 13. Commitments and Contingencies This note discloses significant contractual obligations, legal proceedings, and their potential financial and operational impacts - As of July 31, 2025, GitLab had $226.9 million in purchase obligations, including a new $130 million five-year cloud infrastructure agreement[107] - The estimated liability for labor matters related to contractors in foreign countries was $1.5 million[108] - The company is involved in a securities class action lawsuit (Dolly v. GitLab et al.) and three shareholder derivative cases, alleging material misrepresentations regarding AI features and monetization[112] - The court granted the company's motion to dismiss the class action but allowed the plaintiff to amend and refile[113] - The derivative cases are stayed pending the class action outcome[114] - The outcomes of these legal proceedings are uncertain, and the company cannot estimate their potential impact on its business or financial statements at this time[115] - Defending such proceedings is costly and can divert management resources[117] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section offers management's analysis of GitLab's financial condition and operational results, covering performance drivers, liquidity, capital resources, and critical accounting estimates Overview This section provides a high-level description of GitLab's DevSecOps platform, business model, and market presence - GitLab offers a complete DevSecOps platform as a single application, unifying development, operations, and security teams to accelerate software development, improve security, and enhance operational efficiency[121][122] - The platform supports digital transformation by shortening the idea-to-customer-value cycle[123] - The company has over 50 million registered users, with more than 50% of Fortune 100 companies as customers[124] - GitLab operates on an open-core business model, enabling community contributions and fostering innovation, with nearly 900 people contributing over 3,000 merge requests in calendar year 2024[125] - GitLab offers flexible deployment models, including self-managed, SaaS, and GitLab Dedicated (single-tenant SaaS) for organizations with complex security and compliance needs[127] Factors Affecting Our Performance This section discusses key drivers influencing GitLab's performance, including innovation, customer acquisition, retention, and strategic partnerships - GitLab aims to sustain innovation and technology leadership through continuous R&D investment, monthly platform enhancements (166 consecutive months as of July 31, 2025), and leveraging its open-source community to expand functionality and range of the DevSecOps platform[128][129][130] - Customer acquisition is a key growth driver, with Base Customers (>$5K ARR) increasing by 11% to 10,338 and $100K ARR customers increasing by 25% to 1,344 as of July 31, 2025, compared to July 31, 2024[131] - The company employs a 'land and expand' strategy, focusing on retaining and growing existing customers[133] - The Dollar-Based Net Retention Rate was 121% as of July 31, 2025, down from 126% as of July 31, 2024[140] - GitLab is investing in partnerships, alliances, channels, and integrations to broaden its distribution footprint and drive brand awareness, expecting these investments to lead to long-term growth despite potential short-term profitability impacts[135] Key Business Metrics This section presents key performance indicators used to evaluate GitLab's business growth and customer engagement Key Business Metrics | Metric | As of July 31, 2025 | As of July 31, 2024 | | :-------------------------- | :------------------ | :------------------ | | Dollar-Based Net Retention Rate | 121% | 126% | | $100,000 ARR customers | 1,344 | 1,076 | - The Dollar-Based Net Retention Rate, which measures revenue expansion from existing customers, was 121% as of July 31, 2025, a decrease from 126% in the prior year[140] - The number of customers with Annual Recurring Revenue (ARR) of $100,000 or more increased by 25% year-over-year, reaching 1,344 as of July 31, 2025[142] Components of Our Results of Operations This section explains the primary components of GitLab's financial results, including revenue, cost of revenue, and operating expenses - Revenue is primarily derived from subscription services (self-managed and SaaS), recognized ratably over contract periods (typically 1-3 years), and license sales (self-managed), recognized upfront[143][145] - Professional services revenue is recognized as services are performed[146] - Cost of revenue for subscriptions includes cloud-hosting, customer support personnel costs, and payment processing fees[147] - License and other cost of revenue primarily consists of professional services personnel costs[148] - Both are expected to increase with revenue, with SaaS growth potentially impacting gross margins due to increased cloud costs[148] - Operating expenses (sales & marketing, R&D, G&A) are largely personnel-related[149] - Sales & marketing expenses are expected to increase in absolute dollars but decrease as a percentage of revenue over time[151] - R&D expenses are also expected to increase in absolute dollars due to continued investment in products and services[153] - General and administrative expenses are expected to increase in absolute dollars due to public company costs but decrease as a percentage of total revenue over time[155] - Interest income is from cash and investments, while other income/expense primarily reflects foreign currency fluctuations[156] - Income tax provision/benefit is based on worldwide estimated effective tax rates[157] Results of Operations This section provides a detailed analysis of GitLab's financial performance across key revenue and expense categories for the reporting periods Revenue This section analyzes total revenue and its components, highlighting growth drivers for the reporting periods Revenue by Type – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Subscription—self-managed and SaaS | $212,684 | $163,181 | $49,503 | 30% | | License—self-managed and other | $23,276 | $19,403 | $3,873 | 20% | | Total revenue | $235,960 | $182,584 | $53,376 | 29% | Revenue by Type – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Subscription—self-managed and SaaS | $407,165 | $314,360 | $92,805 | 30% | | License—self-managed and other | $43,304 | $37,411 | $5,893 | 16% | | Total revenue | $450,469 | $351,771 | $98,698 | 28% | - Total revenue increased by 29% to $236.0 million for the three months ended July 31, 2025, and by 28% to $450.5 million for the six months ended July 31, 2025, driven by ongoing demand for The DevSecOps platform, new customer additions, and expansion within existing paid customers[160] - Revenue from the JiHu joint venture was $2.2 million and $4.1 million for the three and six months ended July 31, 2025, respectively[162] Cost of Revenue, Gross Profit, and Gross Margin This section examines the cost of revenue, gross profit, and gross margin trends for the reporting periods Cost of Revenue, Gross Profit, and Gross Margin – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Cost of revenue | $28,505 | $21,370 | $7,135 | 33% | | Gross profit | $207,455 | $161,214 | $46,241 | 29% | | Gross margin | 88% | 88% | 0% | 0% | Cost of Revenue, Gross Profit, and Gross Margin – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Cost of revenue | $53,540 | $40,146 | $13,394 | 33% | | Gross profit | $396,929 | $311,625 | $85,304 | 27% | | Gross margin | 88% | 89% | -1% | -1.12% | - Cost of revenue increased by 33% for both the three and six months ended July 31, 2025, primarily due to higher hosting expenses for increased SaaS and cloud usage, as well as increased personnel-related expenses and professional services delivery fees[165] - Gross margin remained stable at 88% for the three-month period but slightly decreased by 1% to 88% for the six-month period[166] Sales and Marketing This section analyzes sales and marketing expenses, detailing the factors contributing to their changes Sales and Marketing Expenses – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Sales and marketing expenses | $109,583 | $97,778 | $11,805 | 12% | Sales and Marketing Expenses – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Sales and marketing expenses | $217,170 | $190,202 | $26,968 | 14% | - Sales and marketing expenses increased by 12% to $109.6 million for the three months and by 14% to $217.2 million for the six months ended July 31, 2025[169] - This was primarily driven by increases in personnel-related expenses (including headcount and stock-based compensation), commissions, marketing spend, and hosting expenses[170] Research and Development This section examines research and development expenses, outlining investments in product and service enhancements Research and Development Expenses – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Research and development expenses | $71,488 | $61,273 | $10,215 | 17% | Research and Development Expenses – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Research and development expenses | $136,898 | $115,413 | $21,485 | 19% | - Research and development expenses increased by 17% to $71.5 million for the three months and by 19% to $136.9 million for the six months ended July 31, 2025[172] - This growth was mainly due to increased personnel-related expenses (headcount and stock-based compensation) and higher hosting expenses to support internal development efforts[173][174] General and Administrative This section analyzes general and administrative expenses, detailing factors influencing their changes for the reporting periods General and Administrative Expenses – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | General and administrative expenses | $44,735 | $43,168 | $1,567 | 4% | General and Administrative Expenses – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | General and administrative expenses | $95,822 | $100,655 | $(4,833) | -5% | - General and administrative expenses increased by 4% to $44.7 million for the three months ended July 31, 2025, driven by higher personnel-related expenses and software/consulting costs, partially offset by a decrease in acquisition-related contingent consideration remeasurement expense[176] - For the six months, G&A decreased by 5% to $95.8 million, mainly due to the absence of a prior-year company-wide event expense and reduced acquisition-related contingent consideration, despite increased personnel and consulting costs[177] Stock-Based Compensation Expense This section details the total stock-based compensation expense and its allocation across various functional areas Stock-Based Compensation Expense – Three Months Ended July 31 (in thousands) | Expense Category | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Cost of revenue | $2,261 | $2,076 | $185 | 9% | | Sales and marketing | $19,950 | $19,881 | $69 | 0% | | Research and development | $19,197 | $16,114 | $3,083 | 19% | | General and administrative | $12,876 | $10,898 | $1,978 | 18% | | Total stock-based compensation expense | $54,284 | $48,969 | $5,315 | 11% | Stock-Based Compensation Expense – Six Months Ended July 31 (in thousands) | Expense Category | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Cost of revenue | $4,190 | $3,931 | $259 | 7% | | Sales and marketing | $42,041 | $37,278 | $4,763 | 13% | | Research and development | $33,469 | $28,450 | $5,019 | 18% | | General and administrative | $30,411 | $21,562 | $8,849 | 41% | | Total stock-based compensation expense | $110,111 | $91,221 | $18,890 | 21% | - Total stock-based compensation expense increased by 11% to $54.3 million for the three months and by 21% to $110.1 million for the six months ended July 31, 2025, primarily driven by increased RSU expenses and stock options[180][181] Interest Income and Other Income (Expense), Net This section analyzes interest income and other non-operating income or expense, including foreign exchange fluctuations Interest Income and Other Income (Expense), Net – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Interest income | $11,511 | $12,827 | $(1,316) | -10% | | Foreign exchange gains (losses), net | $(1,117) | $1,267 | $(2,384) | -188% | | Other income (expense), net | $(911) | $1,260 | $(2,171) | -172% | Interest Income and Other Income (Expense), Net – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Interest income | $22,373 | $24,857 | $(2,484) | -10% | | Foreign exchange gains (losses), net | $(11,071) | $482 | $(11,553) | -2397% | | Other income (expense), net | $(10,882) | $371 | $(11,253) | -3033% | - Interest income decreased by 10% for both the three and six months ended July 31, 2025, primarily due to lower interest rates[184] - Other income (expense), net, shifted from a gain to a significant loss, mainly driven by increased foreign exchange losses from the revaluation of non-functional currency denominated monetary assets and liabilities[185] Provision for (Benefit from) Income Taxes This section discusses the income tax provision or benefit and the effective tax rate, explaining key influencing factors Provision for (Benefit from) Income Taxes – Three Months Ended July 31 (in thousands) | Metric | 3 Months Ended July 31, 2025 (in thousands) | 3 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Provision for (benefit from) income taxes | $2,245 | $(39,155) | $41,400 | -105.7% | | Effective tax rate | -32.2% | 149.2% | -181.4% | -121.58% | Provision for (Benefit from) Income Taxes – Six Months Ended July 31 (in thousands) | Metric | 6 Months Ended July 31, 2025 (in thousands) | 6 Months Ended July 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Provision for (benefit from) income taxes | $4,784 | $(26,178) | $30,962 | -118.3% | | Effective tax rate | -11.9% | 38.2% | -50.1% | -131.15% | - The company recorded an income tax expense of $2.2 million for the three months and $4.8 million for the six months ended July 31, 2025, a significant shift from tax benefits in the prior year periods[188][189] - This change was primarily due to the tax benefit recorded in 2024 related to BAPA negotiations and the impact of the OBBBA allowing immediate expensing of U.S. R&D expenditures, which reduced U.S. taxable income to a loss position[188][189][190] - The effective tax rate for the three and six months ended July 31, 2025, was negative due to pretax losses and differed from the U.S. federal statutory rate of 21% primarily due to foreign and domestic operations and unbenefited losses[191] Liquidity and Capital Resources This section analyzes GitLab's liquidity position, sources of capital, and cash flow trends from operating, investing, and financing activities - As of July 31, 2025, GitLab's principal liquidity sources were cash, cash equivalents, and short-term investments totaling $1.2 billion, up from $992.4 million as of January 31, 2025[195] - These funds are held for working capital and strategic investment purposes[195] - Net cash provided by operating activities significantly increased to $155.7 million for the six months ended July 31, 2025, from $49.8 million in the prior year, driven by improved operational performance, lower accounts receivable, and increased deferred revenue[197][199] - Net cash used in investing activities was $(138.5) million for the six months ended July 31, 2025, a substantial shift from $84.2 million provided in the prior year, primarily due to increased purchases of short-term investments[197][201] - Adjusted free cash flow for the six months ended July 31, 2025, was $150.6 million, a significant increase from $48.3 million in the prior year, indicating strong cash generation from operations after capital expenditures and tax adjustments[206] Critical Accounting Estimates This section highlights key accounting estimates and assumptions that require significant management judgment and could materially impact financial results - The preparation of financial statements requires management to make significant estimates and assumptions, including those related to revenue recognition, allowance for doubtful accounts, deferred contract acquisition costs, income taxes, business combinations, and goodwill impairment[208] - Inaccurate estimates could adversely affect operating results[208] Recently Issued Accounting Pronouncements This section discusses the impact of new accounting pronouncements on GitLab's condensed consolidated financial statements - There were no additional new accounting pronouncements issued or effective during the period that would materially affect GitLab's condensed consolidated financial statements, beyond those already discussed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2025[210] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details GitLab's exposure to market risks, primarily from interest rate and foreign currency fluctuations, and their potential impact on financial results - As of July 31, 2025, GitLab held $1.2 billion in cash, cash equivalents, and short-term investments[213] - A hypothetical 1% change in interest rates would result in an approximate $6.0 million change in the fair value of its investment portfolio, which has a weighted-average life of about 7 months[213] - GitLab is exposed to foreign currency exchange risk as operating expenses outside the U.S. are denominated in local currencies, and its foreign subsidiaries' financial results are translated into U.S. dollars[214] - A hypothetical 10% change in foreign currency exchange rates could materially impact the condensed consolidated financial statements, especially given $51.2 million in non-USD cash and cash equivalents[215] - The company has not engaged in foreign currency hedging activities to date but may consider doing so in the future[216] Item 4. Controls and Procedures This section evaluates the effectiveness of GitLab's disclosure controls and internal control over financial reporting, confirming no material changes during the quarter - As of July 31, 2025, management, including the CEO and CFO, concluded that GitLab's disclosure controls and procedures were effective at a reasonable assurance level[217] - There were no changes to internal control over financial reporting during the quarter ended July 31, 2025, that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting[218] - The company acknowledges that no control system can provide absolute assurance against all errors and fraud, only reasonable assurance[219] PART II. Other Information This part provides additional information not included in the financial statements, such as legal proceedings, risk factors, and other disclosures Item 1. Legal Proceedings This section details ongoing legal proceedings, including a securities class action and shareholder derivative cases, and their potential impact on the company - GitLab is a defendant in a securities class action lawsuit (Dolly v. GitLab et al.) filed on September 4, 2024, alleging material misrepresentations regarding AI features and monetization during the period of June 5, 2023, to June 3, 2024[221] - The court granted the company's motion to dismiss but allowed the plaintiff to amend and refile by September 15, 2025[221] - Three putative shareholder derivative cases (Preciado, Jones, and Lianto) have been filed with similar allegations, naming the company as a nominal defendant and certain officers/directors[222] - These cases are stayed pending the outcome of the Dolly matter[222] - The outcomes of these actions are uncertain, and the company cannot estimate their potential impact on its business or financial statements[223] - Litigation is costly, can divert management resources, and may adversely affect the company's reputation[225] Item 1A. Risk Factors This section comprehensively details various risks, categorized by business, people, international operations, financial, and stock ownership, that could adversely affect GitLab's performance Risks Related to Our Business and Financial Position This section outlines risks concerning GitLab's operations, financial performance, and market position, including growth management and profitability - Rapid growth poses challenges in managing operations, improving systems, and maintaining controls, which could adversely affect business and financial results[227] - The company's recent growth rate of 28% for the six months ended July 31, 2025, may not be indicative of future performance, and sustaining it is difficult[229] - GitLab has a history of losses, with net losses of $45.1 million for the six months ended July 31, 2025, and an accumulated deficit of $1.2 billion[234][235] - Future profitability is not assured due to anticipated increases in operating expenses for growth initiatives, including AI development and market expansion[236] - Security and privacy breaches, including those stemming from third-party open-source technologies and AI features, pose significant risks of litigation, regulatory actions, reputational harm, and financial liabilities due to unauthorized access, data loss, or non-compliance with data protection laws[238][239][240][241][246] - The company faces intense competition from established providers and new entrants across the DevSecOps lifecycle[247][248] - Failure to innovate, respond to technological changes, or maintain competitive pricing could lead to market share loss and adversely affect operating results[249][250][251][255] - The implementation of AI and machine learning technologies introduces regulatory, litigation, ethical, reputational, and financial risks, including potential intellectual property infringement claims, data privacy concerns, and high computing costs[278][279][280][281][282][285] Risks Related to our People and Culture This section addresses risks associated with GitLab's human capital, including key personnel retention, corporate culture, and remote-only operational challenges - The company's success depends on its management team and key personnel[354] - The loss of key team members, including the recent CEO transition, or inability to hire and retain qualified personnel, especially in AI and machine learning, could disrupt operations and harm business growth[355][356] - Maintaining GitLab's corporate culture, which emphasizes transparency, is crucial for innovation and teamwork[286][287] - However, transparency can lead to unintended negative consequences, such as competitors gaining access to sensitive information or increased scrutiny[359] - As a remote-only company, GitLab faces operational risks related to technology reliability, maintaining corporate culture, and fostering collaboration[365] - Dependence on technology means system failures could disrupt operations[365] Risks Related to Our International Operations This section details risks arising from GitLab's international expansion, including regulatory compliance, currency fluctuations, and geopolitical factors - Expanding international operations, with team members in over 60 countries and a joint venture in China, exposes GitLab to significant costs and risks, including compliance with foreign laws, increased competition, currency fluctuations, and political instability[368][369] - Operating in China through the JiHu joint venture presents unique legal, political, economic, and social uncertainties, including limited intellectual property enforcement and evolving data privacy laws like PIPL[371][372][373] - These factors could limit monetization and expose GitLab to reputational and brand risks[374] - GitLab is exposed to fluctuations in currency exchange rates, as revenue is primarily in USD while international expenses are in local currencies[375] - The company does not currently hedge against these risks, which could adversely affect financial results[375] Risks Related to Financial and Accounting Matters This section covers risks related to GitLab's financial reporting, capital management, and the impact of tax law changes - Failure to maintain effective internal controls over financial reporting (ICFR) and disclosure controls could materially harm the business, operating results, and financial condition[377][378] - As a public company, GitLab incurs significant costs and management resources for compliance[379][381] - GitLab may need to raise additional capital to support growth, but there is no assurance it can do so on acceptable terms, potentially leading to dilution for existing stockholders or restrictive debt covenants[384][385] - Changes in tax laws or interpretations, such as the OBBBA and OECD's Pillar 2, could adversely affect GitLab's effective tax rates, financial condition, and results of operations, potentially increasing tax liabilities or requiring business structure changes[386][388][390]