Gitlab (US:GTLB)2025-12-02 22:32Financial Data and Key Metrics Changes - Revenue for Q3 FY26 grew 25% year over year to $244 million, exceeding guidance by two points [5][25] - Non-GAAP operating margin reached 18%, five points above guidance [5] - Non-GAAP gross margin was 89% for the quarter, with non-GAAP operating income of $43.7 million compared to $25.9 million in Q3 of the previous year [26][27] - Dollar-based net retention rate (DBNRR) was 119%, with total remaining performance obligations (RPO) growing 27% year over year to $1 billion [25][26] 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 [14] - SaaS revenue grew 36% year over year, now representing approximately 31% of total revenue [26] - The larger customer cohort of $100,000+ in ARR increased 23% year over year, reaching 1,405 [25] Market Data and Key Metrics Changes - Stronger international results were noted, although there was softness in the U.S. public sector due to slower decision-making related to the government shutdown [15] - GitLab was recognized as a Leader in the 2025 Gartner Magic Quadrant for DevOps Platforms and AI Code Assistants [15] 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 [15][18] - GitLab is focusing on a hybrid seat plus usage-based business model with the introduction of the Duo Agent platform [49][50] - The company is investing in core DevOps, security, and AI to accelerate customer-focused innovation [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position to capitalize on the growing importance of AI in software development [6][7] - The lingering effects of the U.S. government shutdown are expected to impact deal dynamics in the federal business into Q4 [29][66] - The company anticipates total revenue of $251-$252 million for Q4 FY26, representing a year-over-year growth rate of approximately 19% [29] Other Important Information - The company ended the quarter with $1.2 billion in cash and investments, providing flexibility for continued investment in AI capabilities and platform enhancements [28] - A new Chief Financial Officer, Jessica Ross, will join the company in January [24] Q&A Session Summary Question: Insights on fourth quarter guidance and subscription revenue growth - Management acknowledged the deceleration in subscription revenue growth and the impact of public sector softness on guidance [33][35] Question: Progress on first-order business and expected timeline for results - Management indicated that a new global leader focused on acquiring new business has been hired, with results expected in the latter half of FY27 [39][40] Question: Impact of federal sector on revenue and retention rates - Management confirmed that public sector remains a significant part of ARR, with ongoing challenges due to the government shutdown affecting deal dynamics [44][66] Question: Convergence of platform activity and revenue growth - Management noted that the shift to a hybrid business model with Duo Agent platform is expected to help align activity with revenue growth [49][50] Question: SMB market weakness and potential strategies - Management stated that SMB represents a small portion of revenue, with ongoing scrutiny affecting renewals, but emphasized the importance of a strong free offering [95] Question: Customer usage of AI tools and its impact on growth - Management confirmed that AI tool usage is widespread among customers, with many implementing multiple AI tools alongside GitLab [99]