GitLab Stock Sinks After Earnings Beat. What’s Driving Shares Lower.

GitLab swung to a loss in its fiscal third quarter, even as adjusted earnings and revenue topped expectations. (Rafael Henrique/Dreamstime)

Key Points

• GitLab reports a third-quarter loss of $8.3 million, or 5 cents a share. Revenue rises 25% to $244.4 million.
• GitLab is continuing to see weakness within its public sector segment.
• GitLab raises its fiscal 2026 adjusted earnings guidance to 88 cents to 89 cents a share and revenue guidance to $946 million to $947 million.

GitLab stock slumped Wednesday as a double-digit percentage jump in revenue failed to offset a loss in the third fiscal quarter.

The software company posted a loss of $8.3 million, or 5 cents a share, in the period, compared with a year-earlier profit of $29.1 million, or 18 cents.

GitLab swung to a loss in the quarter even as other metrics topped expectations. Adjusted earnings came in at 25 cents a share, outstripping the 20 cents Wall Street had forecast. Notably, revenue surged 25% to $244.4 million, beating the $239.3 million consensus among analysts polled by FactSet.

Shares sank 16% to $36.54, on pace for their lowest close since June 5, 2023, when they ended the session at $35.40. The S&P 500 and tech-heavy Nasdaq Composite were down 0.1% and 0.4%, respectively.

Mizuho analyst Gregg Moskowitz pointed out that the top-line beat was “more modest than expected amid public sector softness.” GitLab conceded it was continuing to see weakness within its public sector segment, which includes customers at the state and federal levels, as a result of the record-long U.S. government shutdown.

Moskowitz maintained a Neutral rating on the stock and trimmed his price target to $47 from $52. While GitLab offers a “strategically important” platform within the world of software development, security, and operations, artificial intelligence remains a threat to its core business, he said. In addition to escalating competition from AI-native start-ups, it remains to be seen whether AI will eat into GitLab’s developer-heavy seat model.

For fiscal 2026, the company guided for adjusted earnings in the range of 88 cents to 89 a share, up from its prior guidance of 82 cents to 83 cents. Analysts were looking for 88 cents.

GitLab also forecast revenue between $946 million and $947 million for the fiscal year, versus a prior outlook of $936 million to $942 million. Wall Street was expecting $945.6 million, below the midpoint of the range.

Jason Celino, an analyst with KeyBanc Capital Markets, noted that the company’s third-quarter beat flowed through to its fiscal-year outlook. The company “has embedded a similar level of prudence into the guide” to account for softness in small and medium-sized businesses and its go-to-market evolution, in addition to “incremental weakness” in the public sector, he wrote.

Celino, too, lowered his price target on the shares. The analyst rates GitLab at Overweight with a $49 price target, down from $53.

In conjunction with the release of third-quarter results, the company named Jessica Ross its next chief financial officer, effective Jan. 15. Ross is joining GitLab from Frontdoor, where she also served as financial chief. She succeeds Interim Chief Financial Officer James Shen, who will return to his role as vice president of finance.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com