GitLab Continues to See Strong Revenue Growth Powered by AI, but Is the Stock a Buy?

Core Viewpoint - GitLab has demonstrated strong revenue growth despite market volatility, with a notable performance in its fourth-quarter results, making it a potential investment opportunity [1][12]. Revenue Growth - GitLab operates a DevSecOps platform that integrates software development and cybersecurity, benefiting from its AI-powered GitLab Duo add-on [2]. - The company achieved a 29% year-over-year revenue increase in Q4 fiscal 2025, reaching $211.4 million, surpassing previous forecasts [3]. - Subscription revenue rose by 31% to $185.6 million, while license revenue increased by 19% to $25.9 million [4]. Customer Metrics - GitLab's dollar-based net retention rate is 123%, indicating existing customers are increasing their spending [5]. - The number of customers generating $100,000 or more in annual recurring revenue (ARR) grew by 29% to 1,229, while those with $1 million or more in ARR reached 123 [6]. Product Performance - The Ultimate, Dedicated, and GitLab Duo solutions are driving growth, with Ultimate accounting for half of the ARR and Dedicated revenue surging approximately 90% year-over-year [7]. Future Outlook - Remaining performance obligations (RPO) increased by 40% to $945 million, while current RPO (cRPO) rose by 35% to $579.2 million, indicating strong future revenue potential [8]. - GitLab forecasts fiscal 2026 revenue between $936 million and $942 million, representing about 24% growth, with adjusted EPS expected between $0.68 and $0.72 [10]. Profitability - The company reported adjusted earnings per share (EPS) of $0.33, more than doubling from $0.15 a year ago, with a gross margin of 89% [8]. - GitLab generated $62.1 million in adjusted free cash flow for the quarter and $120 million for the year, ending with $992.3 million in cash and short-term investments and no debt [9]. Valuation - The stock is trading at a price-to-sales (P/S) multiple of 10 times fiscal year 2026 analyst estimates, with an enterprise value (EV)-to-sales ratio of about 9 times when excluding net cash [13]. - GitLab is considered a fast-growing SaaS company with a reasonable valuation and significant upside potential due to its AI integration [14].