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01/11 14:01
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong SaaS revenue growth and improved cash flow, which are positive indicators. The Q&A reveals cautious optimism with ongoing challenges in the SMB sector and public sector headwinds. However, the introduction of the Duo Agent platform and a shift to a usage-based model are promising for future growth. The overall sentiment is positive, reflecting strong financial performance and strategic plans to address existing challenges.
Revenue Revenue grew 25% year-over-year to $244 million, 2 points above Q3 guidance. The growth was attributed to strong performance in GitLab Ultimate and international results, despite softness in the U.S. public sector.
Non-GAAP Operating Margin Non-GAAP operating margin reached 18%, a full 5 points above Q3 guidance. This improvement was due to operating efficiencies and the growing SaaS business.
Dollar-Based Net Retention Rate (DBNRR) DBNRR was 119%, indicating strong customer retention and expansion. This reflects the value customers find in GitLab's platform.
Total Remaining Performance Obligations (RPO) Total RPO grew 27% year-over-year to $1 billion, driven by strong customer commitments and growth in SaaS revenue.
Current Remaining Performance Obligations (CRPO) CRPO grew 28% year-over-year to $659 million, reflecting healthy growth in short-term customer commitments.
Non-GAAP Gross Margin Non-GAAP gross margin was 89%, supported by operating efficiencies and the increasing mix of SaaS revenue.
Adjusted Free Cash Flow Adjusted free cash flow was $27.2 million, with a margin of 11.1%, compared to $9.7 million in the prior year. This improvement was driven by strong revenue growth and operational efficiency.
SaaS Revenue SaaS revenue now represents approximately 31% of total revenue and grew 36% year-over-year, driven by the strength in GitLab Dedicated and Duo.
GitLab Duo Agent platform: On track for general availability in the coming weeks. It extends the platform to provide intelligent orchestration across the software life cycle, enabling partners, customers, and GitLab to solve engineering problems across the life cycle. It also includes an AI Catalog for foundational and custom-built agents.
GitLab Ultimate: Now represents 54% of total ARR and was involved in 7 of the top 10 net ARR deals this quarter. It drove expansions at customers like Indeed, SBI Securities, and Currys.
New security capabilities: Introduced static reachability analysis, secret validity checks, and diff-based scanning to bring security directly into the development process.
AI-driven market expansion: AI is expanding GitLab's total addressable market by reducing barriers to software creation and driving the marginal cost of code generation towards zero.
International growth: Stronger international results were observed, although U.S. public sector performance was impacted by slower decision-making due to a government shutdown.
Revenue growth: Revenue grew 25% year-over-year to $244 million, exceeding Q3 guidance by 2 points.
Non-GAAP operating margin: Reached 18%, 5 points above Q3 guidance.
SaaS growth: SaaS now represents 31% of total revenue and grew 36% year-over-year.
Focus on new customer acquisition: GitLab is expanding its go-to-market capacity and has hired a new business leader to build out a global first-order team focused on acquiring new logos.
AI innovation: Investing in AI capabilities, including the GitLab Duo Agent platform, to address the AI Paradox and provide intelligent orchestration across the software life cycle.
Softness in U.S. Public Sector: Slower decision-making related to the recent government shutdown created headwinds, impacting performance in the U.S. public sector.
SMB Softness: Continued softness in the small and medium-sized business (SMB) segment, which persists as a challenge for growth.
China Joint Venture (JiHu) Expenses: Ongoing expenses related to the JiHu joint venture in China, with no clear timeline for deconsolidation, leading to continued financial impact.
U.S. Federal Business Dynamics: Lingering effects of the U.S. government shutdown are likely to impact deal dynamics in the U.S. federal business into Q4.
First Order Team Build-Out: Building out a dedicated first order team and increasing quota-carrying capacity will take time, delaying potential growth benefits.
Pricing and Packaging Iteration for AI Platform: Pricing and packaging for the new GitLab Duo agent platform will likely require iterative adjustments, creating uncertainty in revenue realization.
Revenue Expectations: For Q4 FY '26, GitLab expects total revenue of $251 million to $252 million, representing a year-over-year growth rate of approximately 19%. For the full year FY '26, total revenue is expected to be $946 million to $947 million, representing a growth rate of approximately 25% year-over-year.
Non-GAAP Operating Income: For Q4 FY '26, GitLab expects a non-GAAP operating income of $38 million to $39 million. For the full year FY '26, non-GAAP operating income is expected to be $147 million to $148 million.
Non-GAAP Net Income Per Share: For Q4 FY '26, GitLab expects a non-GAAP net income per share of $0.22 to $0.23, assuming 172 million weighted average diluted shares outstanding. For the full year FY '26, non-GAAP net income per share is expected to be $0.95 to $0.96, assuming 171 million weighted average diluted shares outstanding.
Market Trends and Business Segment Performance: GitLab anticipates continued growth in its SaaS business, which now represents approximately 31% of total revenue and grew 36% year-over-year. However, the company expects lingering effects of the recent U.S. government shutdown to impact deal dynamics in its U.S. federal business into Q4. SMB softness is also expected to persist.
Strategic Plans and Product Launches: GitLab plans to launch the Duo Agent platform for general availability in the coming weeks, which is expected to drive new revenue streams beyond seats. The company is also expanding its go-to-market capacity and building out a dedicated first-order team to acquire new customers, particularly in the mid-market and enterprise segments.
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The earnings call highlights strong SaaS revenue growth and improved cash flow, which are positive indicators. The Q&A reveals cautious optimism with ongoing challenges in the SMB sector and public sector headwinds. However, the introduction of the Duo Agent platform and a shift to a usage-based model are promising for future growth. The overall sentiment is positive, reflecting strong financial performance and strategic plans to address existing challenges.
The earnings call summary shows positive aspects such as AI integration, strategic partnerships, and revenue growth, but there are concerns about declining net income and cash reserves. The Q&A reveals optimism about nuclear certification and acquisitions, yet there is uncertainty around tariffs and lack of clarity on synergies. The guidance is strong, but financial health concerns and limited shareholder returns due to CapEx needs balance the sentiment to neutral.
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