Gitlab (US:GTLB)2025-12-02 22:30Financial Data and Key Metrics Changes - Revenue grew 25% year over year to $244 million, exceeding Q3 guidance by two points [4] - Non-GAAP operating margin reached 18%, five points above Q3 guidance [4] - Non-GAAP gross margin was 89% for the quarter, with a non-GAAP operating income of $43.7 million compared to $25.9 million in Q3 of the previous year [22] - Dollar-based net retention rate (DBNRR) was 119%, with total remaining performance obligations (RPO) growing 27% year over year to $1 billion [21][22] 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 [11] - SaaS revenue grew 36% year over year, now representing approximately 31% of total revenue [22] - The larger customer cohort of $100,000 plus in ARR increased 23% year over year, reaching 1,405 [21] Market Data and Key Metrics Changes - Engagement metrics across GitLab.com SaaS customer base increased significantly, with CI pipelines, deployments, and releases up about 35%-45% year over year [8] - The company experienced stronger international results, although there was softness in the U.S. public sector due to slower decision-making related to the government shutdown [12] 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 [12] - GitLab is focused on a cohesive workflow across developer, security, and operations teams, enhancing its platform to provide intelligent orchestration across the software lifecycle [10][12] - The Duo Agent platform is positioned as a solution to the AI paradox, aiming to drive new revenue streams beyond traditional seat-based models [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver high-quality, secure software, emphasizing the critical nature of their offerings in a rapidly evolving AI landscape [5][6] - The lingering effects of the U.S. government shutdown are expected to impact deal dynamics in the federal business into Q4, but the long-term public sector thesis remains intact [24][32] - The company is optimistic about its growth trajectory, with a forecast of total revenue for FY26 expected to be between $946-$947 million, representing a growth rate of approximately 25% year over year [24] Other Important Information - GitLab was named a Leader in the 2025 Gartner Magic Quadrant for DevOps Platforms and AI Code Assistants for the third and second consecutive years, respectively [12] - The company ended the quarter with $1.2 billion in cash and investments, providing flexibility for continued investment in AI capabilities and platform enhancements [23] Q&A Session Summary Question: Subscription revenue growth guidance for Q4 - Management acknowledged the deceleration in subscription revenue growth from 30% to 27% and discussed the impact of public sector softness and the government shutdown on the demand environment [27][28] Question: Progress on first-order business - Management noted that while progress is being made, it is still not at the desired level, with a new global leader hired to focus on acquiring new business [29][30] Question: Impact of federal sector on license line and retention rate - Management confirmed that public sector remains a significant part of ARR and acknowledged disruptions from the government shutdown affecting deal dynamics [32] Question: AI tool usage among customers - Management indicated that AI tool usage is pervasive across the customer base, with many implementing multiple AI tools as part of their strategy [57] Question: SMB market weakness - Management stated that SMB represents a small portion of revenue and highlighted price sensitivity and scrutiny during renewals as contributing factors to the observed weakness [56]