GitLab Inc. (NASDAQ:GTLB) is one of Cathie Wood’s 10 stock picks with huge upside potential. GitLab (GTLB) Seen as Potential Buyout Candidate As Tech Valuations Reset On January 23, 2026, TipRanks reported that speculation around potential technology-sector consolidation is emerging. Citing Barron’s column by Jacob Sonenshine, the source cited a batch of software companies that could emerge as buyout candidates. With investors looking for opportunities to benefit from deal-related upside, GitLab Inc. (NA ...

Core Viewpoint - GitLab Inc. (GTLB) shares experienced a significant rally of 12.8%, closing at $37.4, driven by strong enterprise demand for its AI-native DevSecOps platform, despite a prior 11.6% loss over the past four weeks [1]. Company Summary - GitLab is expected to report quarterly earnings of $0.23 per share, reflecting a year-over-year decline of 30.3%, while revenues are projected to reach $251.41 million, an increase of 18.9% from the same quarter last year [1]. - The consensus EPS estimate for GitLab has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [3]. Industry Context - GitLab operates within the Zacks Internet - Software industry, where another company, Affirm Holdings (AFRM), saw a 1.5% increase in its stock price, closing at $72.84, but has returned -5.6% over the past month [3]. - Affirm Holdings' consensus EPS estimate has decreased by 8.7% over the past month to $0.28, which is a 21.7% increase compared to the previous year [4].

Core Viewpoint - The software-as-a-service (SaaS) sector is experiencing significant turmoil due to fears of disruption from artificial intelligence (AI), but these fears may be exaggerated, presenting potential investment opportunities in select software stocks. Group 1: AppLovin - AppLovin has seen a stock price increase of 71% over the past year, yet it currently trades nearly 22% below its 52-week high [2][3] - The company is experiencing rapid revenue growth, particularly from its AI-powered Axon-2 adtech platform, which grew 68% year over year last quarter, enhancing gross margins and profitability [3] - Management plans to expand the platform beyond mobile gaming and introduce a self-serve ad manager, which are expected to be growth catalysts [3] Group 2: Salesforce - Salesforce aims to lead in agentic AI by launching Data Cloud (now Data 360) and acquiring Informatica, positioning itself as the master record of organizational data [4][5] - The stock has decreased by about 28% over the past year, attributed to concerns over slowing core growth and increased competition, making it relatively cheap with a forward P/S multiple below 5 and a forward P/E ratio of 18 [5] Group 3: Workday - Workday claims to have the "largest and cleanest" human resource and finance database, which is crucial in the AI era [6] - The company is introducing AI agents and tools for finance, legal, and HR, and has acquired Paradox to enhance its hiring process [7] - Workday's stock has fallen nearly 24% over the past year, but it is trading at a forward P/S ratio below 5 and a forward P/E of 18, indicating it is undervalued [7] Group 4: GitLab - GitLab operates a DevSecOps platform and has seen its stock decline about 45% over the past year due to fears that AI may reduce the need for coders [9] - Despite these concerns, the company has consistently grown its revenue by 25% or more, driven by an increasing enterprise customer count [10] - The launch of its Duo Agent solution and a new hybrid pricing model could serve as growth catalysts, with the stock trading at a forward P/S multiple under 5.5 [10] Group 5: UiPath - UiPath's stock has decreased about 24% from its 52-week high, but the company is transitioning to become an AI orchestration platform [11] - The Maestro platform is designed to manage AI agents and software bots, addressing the need for governance and compliance as AI agents proliferate [13] - The stock is attractively valued, with a forward P/S multiple below 5 and a forward P/E around 20 [14]

Summary of JFrog Conference Call Company Overview - **Company**: JFrog - **Industry**: Cybersecurity and Infrastructure Software - **Founded**: 15 years ago - **Core Offering**: Manages software supply chain assets, including hosting, managing, storing, securing, and distributing software packages and binaries. [2][3] Key Financial Highlights - **Q3 Performance**: - 50% growth in cloud services driven by increased usage and larger customer commitments [4] - 54% growth in customers spending over $1 million annually, with 10 new customers added [4] - 39% year-over-year growth in revenue from the full platform subscription (E+) [5] - Strong free cash flow and operating margin maintained [5] Market Trends and Customer Insights - **Cloud Adoption**: - Increased investment in AI technologies by developers, leading to higher demand for cloud services [7][10] - Shift in discussions from cloud migration to AI adoption among CIOs and CISOs [10][11] - **Data Transfer and AI**: - AI generates more code, leading to increased creation of binaries, which benefits JFrog's services [13][14] - Automation of AI in DevOps is driving significant data transfer and storage needs [17] Go-to-Market Strategy - **Sales Strategy**: - Investments in security training for sales teams and incentivizing sales targets focused on security [20][22] - Transitioning to serve enterprise customers with a holistic platform approach rather than point solutions [23][27] - **Customer Engagement**: - Focus on understanding the value provided to different customer segments, particularly enterprises [26][27] Competitive Landscape - **Competition**: - Competing against point solutions in the DevSecOps space, with a focus on providing a holistic solution that integrates security, governance, and artifact management [29][30] - Increasing demand for comprehensive solutions over best-of-breed point solutions [30] Security and Market Demand - **Security Concerns**: - Recent high-profile vulnerabilities have heightened awareness among CISOs about the need for comprehensive security solutions [31][32] - JFrog's offerings provide a full security solution for the software supply chain, addressing vulnerabilities and compliance [32][33] Partnerships and Integrations - **GitHub Partnership**: - Integration with GitHub enhances the value proposition by combining source code management with binary management [34][36] - The partnership has evolved to include security features and a unified experience for developers [38] MLOps Development - **MLOps Capabilities**: - JFrog has integrated MLOps capabilities into its platform, acquired Qwak AI to enhance offerings [40][49] - Market maturity for MLOps is still developing, with security and trust being key concerns for customers [41][48] Financial Discipline and Capital Allocation - **Financial Strategy**: - Focus on maintaining efficiency and disciplined spending, with a significant margin expansion of over 1,600 basis points [51] - Strong free cash flow allows for potential M&A opportunities to fill product gaps [52][54] Conclusion - JFrog is positioned well in the cybersecurity and infrastructure software market, with strong growth in cloud services and a focus on AI and security. The company is adapting its go-to-market strategy to better serve enterprise customers and is actively investing in MLOps capabilities and partnerships to enhance its offerings.

Core Viewpoint - GitLab Inc. (NASDAQ:GTLB) is recognized as a promising AI stock under $50, but recent downgrades indicate caution regarding its near-term execution risks despite its long-term potential in AI [1][2]. Group 1: Analyst Ratings and Price Targets - Keybanc downgraded GTLB from Overweight to Sector Weight, maintaining the price target, reflecting concerns about execution risks [1]. - Analysts on Wall Street have a consensus "Buy" rating for GTLB, with an average price target of $52.50, suggesting a potential upside of 37.47%. The highest target of $72 indicates an upside of 88.53% [4]. Group 2: Company Performance and Market Position - GitLab is recognized for its comprehensive, AI-powered DevSecOps platform that integrates planning, building, securing, and deploying software [4]. - The transition to a hybrid model with consumption-based elements may introduce additional execution risks for the company [2]. Group 3: Market Trends and Challenges - The rise of AI code generation is expected to impact developer headcount growth negatively, particularly for seat-based models [3]. - Analysts express a balanced view on the risk-reward profile of GTLB at current levels, acknowledging its platform's potential for driving consolidation opportunities [3].

Group 1 - GitLab Inc (NASDAQ:GTLB) is viewed as a potentially strong investment opportunity despite mixed analyst ratings, with BTIG initiating coverage with a Buy rating and a target price of $52, while Morgan Stanley maintains an Overweight rating but lowers its target to $55 from $60 [1][2] - GitLab reported Q3 revenue of $244.4 million, reflecting a 25% year-over-year increase, and provided its first guidance increase of the year, although concerns were raised about weakening demand from federal and small business sectors [2][3] - The company's customer remaining performance obligations growth has slowed, decreasing to 28% from 34% in the third quarter, indicating potential challenges ahead [2] Group 2 - GitLab operates a comprehensive, AI-powered DevSecOps platform that facilitates collaboration among development, security, and operations teams, aiming to enhance software delivery speed and security [4] - Despite the potential of GitLab as an investment, some analysts suggest that other AI stocks may offer better upside potential with less downside risk [5]

Core Insights - Cloudfresh has been awarded the 2025 EMEA GitLab Partner of the Year for Emerging Markets in Eastern Europe and Israel, highlighting its leadership in multi-vendor cloud solutions [1] - The award reflects the collective effort of Cloudfresh's organization in promoting modern DevSecOps and AI practices [1] Company Summary - Cloudfresh is recognized as a certified GitLab Select and Professional Services Partner, indicating its expertise and commitment in the cloud solutions sector [1] - The company focuses on supporting organizations in the development and expansion of advanced technological practices [1]

Core Thesis - GitLab Inc. is viewed as an attractive investment opportunity due to its positioning to benefit from AI-driven development, despite a broader sell-off in software companies [2][8] Valuation and Financial Metrics - As of December 1st, GitLab's share price was $41.15, with trailing and forward P/E ratios of 485.56 and 40.32 respectively [1] - The company is trading at approximately 7x EV/ARR, indicating a valuation discount compared to high-quality peers [3] Growth Potential - GitLab's revenue has more than tripled since its IPO, and management anticipates around 25% growth in ARR for the current fiscal year [3][5] - The addressable market for GitLab is projected to be $40 billion, driven by the increasing adoption of integrated DevOps platforms by enterprises [5] Competitive Advantage - GitLab employs a land-and-expand strategy, maintaining net revenue retention above 120%, and is enhancing upsell opportunities through its AI agent, Duo [4] - The company's moat is characterized by its integrated, enterprise-grade security and compliance capabilities, which are challenging for competitors to replicate [6] Market Positioning - GitLab serves large, regulated enterprises that require robust security and governance, differentiating itself from competitors like GitHub and Bitbucket that focus on open-source and smaller teams [5] - The rise of AI-generated code increases the importance of GitLab's platform capabilities, particularly in governance, security, and deployment [3][6] Profitability Outlook - With gross margins near 90% and a capital-light model, GitLab is positioned to achieve EPS and free cash flow profitability within 12 to 24 months [6] Risks and Considerations - Noted risks include leadership transition, stock-based compensation, and potential acquisition speculation [7]

Summary of GitLab Conference Call Company Overview - **Company**: GitLab - **Industry**: Software Development and DevSecOps Key Points and Arguments Company Performance and Strategy - GitLab has made significant progress in the past year, with a focus on developer tools and platforms, particularly in the DevSecOps space, which is dominated by few players like Microsoft and GitHub [5][7] - GitLab's unified platform approach is a key strength, providing a comprehensive solution from planning to deployment, resulting in a payback period of six months and an ROI of over 480% over three years [8][10] - The company serves over 10,000 paying customers, including large organizations like UBS, and has a strong presence in both self-managed and cloud environments [9][10] AI Integration and Market Impact - AI is expected to expand GitLab's Total Addressable Market (TAM) and enhance human-AI collaboration in software engineering [12][14] - AI coding tools are creating more demand for GitLab's platform, with CI/CD deployments growing over 35% year-over-year [20] - Despite increased code generation through AI, software innovation has not accelerated, leading to the identification of an "AI paradox" [22] - GitLab is launching the Duo Agent Platform to address the software lifecycle tasks with an agentic approach, allowing engineers to delegate work to agents [22][36] Market Position and Competitive Landscape - GitLab competes with major players like Microsoft and has successfully maintained its position despite the entry and exit of other hyperscalers [25][29] - The company emphasizes the importance of context and capability in achieving high-quality outcomes with AI, leveraging its comprehensive platform to integrate security and compliance into the software development pipeline [31][68] Financial Metrics and Growth - GitLab reported a net dollar retention rate of 119%, indicating strong customer value and expansion [54] - In Q3, seat contribution to revenue growth was slightly over 80%, reflecting continued strength in enterprise seat expansions [55] - The company plans to introduce a hybrid pricing model with the Duo Agent Platform, transitioning to a usage-based billing model alongside existing seat-based subscriptions [57][60] Challenges and Future Outlook - GitLab faces challenges from SMB budget pressures and disruptions in the go-to-market strategy, particularly in the public sector due to the U.S. government shutdown [82][84] - The company anticipates a backlog in renewals and deals as government agencies resume operations [85] - GitLab is focused on long-term growth in gross profit dollars while balancing investments in R&D and sales capacity [92][100] Consolidation in the Developer Tool Market - There is potential for further consolidation in the developer tool market, with GitLab positioned to leverage its integrated platform advantage over niche players [66][68] Additional Important Insights - GitLab's approach to AI and software development emphasizes the need for human oversight to ensure quality and security, as AI-generated code can still contain bugs and vulnerabilities [16][18] - The company is optimistic about the future of software development, believing that AI will enhance rather than reduce the need for developers [40][52] - GitLab's Duo Agent Platform is expected to unlock new capabilities for both human and AI agents across the software lifecycle, enhancing overall productivity [36][76]

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]