MSFT

GitLab's Upcoming Financial Results

• Second-Quarter Fiscal 2026 Expectations: GitLab is set to announce its second-quarter fiscal 2026 results on September 3, 2025, with anticipated revenues between $226 million and $227 million, reflecting a year-over-year growth of approximately 24%. Non-GAAP earnings are expected to range from 16 to 17 cents per share.
• Consensus Estimates: The Zacks Consensus Estimate for revenues stands at $226.57 million, indicating a 24.09% increase from the previous year. The earnings consensus has remained stable at 16 cents per share, compared to 15 cents per share reported in the same quarter last year.

Performance Insights

• Earnings Surprise History: GitLab has consistently exceeded the Zacks Consensus Estimate in the last four quarters, achieving an average earnings surprise of 37.64%.
• Growth Drivers: The upcoming quarter's performance is expected to benefit from investments in innovation within its DevOps platform, security, and AI solutions. The adoption of GitLab Duo and the expansion of GitLab Dedicated are likely to contribute positively to revenue growth.

Customer Growth and Retention

• Retention Rate: GitLab reported a strong dollar-based net retention rate of 122% in the first quarter of fiscal 2026, indicating robust growth potential from existing customers.
• Clientele Expansion: The number of customers generating over $5K in Annual Recurring Revenue (ARR) rose to 10,104, a 13% increase year-over-year, while those with over $100K in ARR grew by 26% to 1,288, showcasing GitLab's ability to attract large enterprise clients.

Market Position and Challenges

• Stock Performance: GitLab shares have declined by 14.8% year-to-date, underperforming the broader technology sector and peers like Microsoft, which has seen a 20.2% increase.
• Valuation Concerns: GitLab's current valuation is considered stretched, with a forward Price/Sales ratio of 7.55X compared to the industry average of 5.71X.

Strategic Partnerships

• Collaborations with Major Cloud Providers: GitLab's partnerships with Amazon Web Services (AWS) and Google Cloud are expected to enhance customer engagement and adoption. The collaboration with AWS aims to facilitate compliance for organizations in regulated industries, while the integration with Google Cloud is designed to improve developer productivity.

Competitive Landscape

• Macroeconomic and Competitive Pressures: GitLab faces challenges from macroeconomic uncertainties and increased competition, particularly from larger players like Microsoft in the AI-enabled DevSecOps space. Additionally, one-time expenses and ongoing costs related to its China joint venture are putting pressure on margins.

Investment Outlook

• Current Zacks Rank: GitLab holds a Zacks Rank of #5 (Strong Sell), suggesting that investors should be cautious about investing in the stock at this time.

Meta Platforms' Capital Expenditures and Infrastructure Developments

• Aggressive Spending: In Q2 2025, Meta Platforms reported capital expenditures of $17 billion, with expectations to spend between $66 billion and $72 billion throughout 2025 to bolster its core business and AI initiatives.
• New Data Center: The Kansas City data center is now operational, utilizing 100% clean and renewable energy. Meta is also planning to open AI-optimized data centers, with the first set to launch in 2026.

Renewable Energy Commitment

• Corporate Energy Purchases: Meta is recognized as one of the largest corporate buyers of clean energy globally, having acquired over 15 gigawatts across six countries.
• Nuclear Energy Agreement: A 20-year agreement with Constellation Energy for nuclear energy at the Clinton Clean Energy Center is set to begin in 2027.

Competitive Landscape

• Rivalry with Microsoft and Amazon: Meta faces stiff competition from Microsoft and Amazon in the AI-data center sector. Microsoft is projected to spend $30 billion on AI infrastructure in Q1 2026, while Amazon anticipates over $100 billion in capital expenditures for 2025, including a significant project in Indiana.

Stock Performance and Financial Outlook

• Stock Growth: Meta's shares have increased by 26.2% year-to-date, outperforming the Zacks Computer and Technology sector's 12.9% return.
• Valuation Metrics: The stock trades at a forward price/sales ratio of 8.57, higher than the sector average of 6.66, and holds a Zacks Rank of #3 (Hold).
• Earnings Projections: The Zacks Consensus Estimate for 2025 earnings is $28.13 per share, reflecting a 9.4% increase over the past month and suggesting an 18% year-over-year growth.

September's Historical Performance

• Bearish Reputation: September is historically the weakest month for U.S. equities, with the SPDR S&P 500 ETF Trust (SPY) averaging losses of 0.98% over the last 20 years, 0.96% over 30 years, and 1.04% over 40 years.
• Recent Trends: In the last five years, the S&P 500 has only closed higher once in September, with an average monthly drop of 1.4%. Since 1928, the index has declined in September 56% of the time, averaging a 1.17% drop.

Sector Performance in September

• Real Estate Sector: This sector typically suffers the most, averaging a 1.78% decline with gains only 39% of the time. The latter half of September is usually worse.
• Other Sectors: Technology, financials, and discretionary sectors also tend to underperform, with discretionary stocks often flipping from strength to weakness mid-month.

Performance of Major Tech Stocks

• Nvidia Corp. (NVDA): Average return of +0.87% with a 65% win rate.
• Microsoft Corp. (MSFT): Average return of -0.96% with a 50% win rate.
• Apple Inc. (AAPL): Average return of -0.17% with a 45% win rate.
• Amazon.com Inc. (AMZN): Average return of +2.12% with a 50% win rate.
• Meta Platforms Inc. (META): Average return of +0.9% with a 54% win rate.
• Alphabet Inc. (GOOGL): Average return of +0.93% with a 60% win rate.
• Tesla Inc. (TSLA): Average return of +0.24% with a 40% win rate.

Notable Underperformers in September

• American International Group Inc. (AIG): Average return of -4.52%, with a worst September loss of -84.5% in 2008.
• DexCom Inc. (DXCM): Average return of -3.89%, with a win rate of 30%.
• The Mosaic Co. (MOS): Average return of -3.72%, with a worst September loss of -36.28% in 2008.
• Morgan Stanley (MS): Average return of -2.73%, with a worst September loss of -43.67% in 2008.
• Old Dominion Freight Line Inc. (ODFL): Average return of -2.42%, negative in 4 of the last 5 years.
• Newmont Corp. (NEM): Average return of -1.93%, with only three positive closes in the last 12 years.
• Schlumberger Ltd. (SLB): Average return of -1.66%, negative in 4 of the last 5 years.
• UnitedHealth Group Inc. (UNH): Average return of -1.40%, negative in 7 of the last 8 years.
• Deere & Co. (DE): Average return of -1.39%, with a worst September loss of -29.86% in 2008.
• Adobe Inc. (ADBE): Average return of -1.37%, with no positive September since 2018.