Microsoft Faces AI Demand Questions as GitLab Posts Eighth Straight Beat

Core Insights - GitLab reported strong Q3 FY2026 results with 25% revenue growth and expanding margins, while Microsoft faces scrutiny over its AI demand and infrastructure spending [2][3][5] GitLab Performance - GitLab achieved $244.4 million in revenue for Q3 FY2026, surpassing the $239.3 million estimate, with a non-GAAP EPS of $0.25 compared to the expected $0.20 [3] - This marks the eighth consecutive quarter of earnings beats, with an average surprise of 56% over the past two years [3] - Operating margin improved to 18% non-GAAP, a significant increase from negative margins a year ago [3] - Free cash flow reached $27.2 million, a turnaround from negative $177 million in the same quarter last year [3] - Customers spending over $100,000 annually grew by 23% year over year, and dollar-based net retention stands at 119%, indicating existing customers are increasing their usage [4] Microsoft Performance - Microsoft reported $77.7 billion in Q1 FY2026 revenue, an 18.4% increase, exceeding the $75.4 billion estimate [5] - Azure revenue grew by 40%, contributing to the Intelligent Cloud segment's $30.9 billion revenue [5] - Operating margin was reported at 48.9%, with operating cash flow of $45.1 billion, up 31.8% [5] - However, a report indicated that Microsoft cut sales quotas for some AI software offerings, raising concerns about the demand for AI products and the performance of sales representatives in Azure's AI unit [6][7] - The report suggested that sales reps struggled to meet last year's growth targets, particularly for the Foundry product, which may indicate slower AI adoption among large companies [6]