Date: December 3, 2025
Ticker: GitLab Inc (NASDAQ: GTLB)
GitLab Inc. (GTLB) is having a volatile session on Wednesday as Wall Street digests a classic “good quarter, cautious guide” story.
After reporting better‑than‑expected third‑quarter fiscal 2026 results on December 2, GitLab shares dropped roughly 9–11% in after‑hours and pre‑market trading, touching the high‑$30s before recovering toward the low‑$40s. [1] Around midday on December 3, the stock was trading near $43.37, giving the DevSecOps platform a market value in the mid‑single‑digit billions of dollars. [2]
Before this week’s earnings, GitLab stock was already down in the mid‑20% range year to date in 2025, and options traders were pricing in a double‑digit move around the print. [3] The latest results delivered exactly that — just not in the direction many bulls had hoped.
Q3 FY26: Strong Growth, Improved Margins, and a Small GAAP Loss
GitLab’s third fiscal quarter of 2026 (three months ended October 31, 2025) showed the company still growing briskly while steadily improving profitability.
Headline numbers
According to the company’s corrected earnings release:
- Revenue: $244.4 million, up 25% year over year from $196.0 million. [4]
- GAAP operating margin:–5%, an improvement from –15% a year earlier. [5]
- Non‑GAAP operating margin:18%, up from 13% in the prior‑year quarter. [6]
- GAAP net loss: about $8.3 million, or –$0.05 per share, versus a GAAP profit in the prior year. [7]
- Non‑GAAP EPS:$0.25, ahead of analyst expectations around $0.20. [8]
- Operating cash flow: $31.4 million; adjusted free cash flow: $27.2 million. [9]
From a pure P&L standpoint, this is exactly the kind of quarter growth investors like to see: fast top‑line expansion, improving margins, and positive cash generation.
Customer and platform metrics
Under the hood, GitLab continues to deepen its presence with larger customers and expand its platform usage:
- Customers with >$5,000 ARR: 10,475, up 10% year over year. [10]
- Customers with >$100,000 ARR: 1,405, up 23% year over year. [11]
- Dollar‑based net retention (DBNRR): 119%, meaning existing customers spent 19% more than a year ago on average — strong, but down slightly from 121% in the prior quarter. [12]
- Remaining performance obligations (RPO): grew 27% to $1.0 billion; current RPO up 28% to $659.1 million. [13]
Management highlighted continued momentum in the Ultimate tier, which now represents more than half of annual recurring revenue and was a key driver in most of the quarter’s largest deals. [14] Usage metrics tied to CI pipelines and deployments rose roughly 35–45% year over year, underscoring how AI‑driven code generation is translating into more activity on the platform. [15]
On the product side, GitLab reiterated its positioning as an “intelligent DevSecOps platform,” emphasizing AI features via the Duo Agent platform, which is rolling out with support for external AI agents and a richer AI catalog. [16] The company also called out fresh recognition as a Leader in Gartner Magic Quadrants for both DevOps Platforms and AI Code Assistants. [17]
Leadership transition: new CFO incoming
GitLab announced that Jessica Ross will join as Chief Financial Officer effective January 15, 2026. Ross previously served as CFO at Frontdoor and has held senior finance roles at Salesforce and Stitch Fix, giving GitLab a seasoned public‑company finance leader as it scales. [18]
If the Quarter Was So Good, Why Is GitLab Stock Under Pressure?
The short version: guidance and growth trajectory.
Guidance that “fails to impress”
For Q4 FY26, GitLab guided to:
- Revenue: $251.0–$252.0 million
- Non‑GAAP operating income: $38–$39 million
- Non‑GAAP EPS: $0.22–$0.23
For the full fiscal year 2026, management now expects:
- Revenue: $946–$947 million
- Non‑GAAP diluted EPS:$0.88–$0.89, after a correction from an earlier, higher figure. [19]
The problem is not that these numbers are bad; it’s that they barely exceed — and in some cases trail — prior Street expectations. Independent estimates had called for around $257.7 million in Q4 revenue and roughly $959.9 million for the full year, meaning GitLab’s revenue outlook implies a modest under‑shoot of consensus despite the Q3 beat. [20]
Reuters summed up the Street’s reaction bluntly: shares fell about 8.5% in pre‑market trading after the company offered guidance that was largely in line with analyst estimates, prompting at least six brokerages to trim price targets. [21] ChartMill and other outlets similarly noted that the stock’s post‑earnings slide was driven mainly by conservative forward guidance, not the quarter that was just reported. [22]
Macro and end‑market headwinds
Behind that cautious tone are several pressure points:
- U.S. public sector softness: Management flagged slower decision‑making and deal delays in U.S. government accounts, which represent roughly 12% of ARR. Recent government shutdowns and restrictions related to the Department of Government Efficiency have weighed on bookings and are expected to remain a drag into Q4. [23]
- SMB weakness: The small and mid‑sized business segment, about 8% of ARR, continues to soften. Interim CFO James Shen indicated that this weakness is baked into Q4 assumptions rather than expected to recover quickly. [24]
- Slowing expansion metrics: While dollar‑based net retention at 119% remains robust, it has moved lower over several quarters. Wells Fargo also highlighted decelerating RPO and current RPO growth (27% and 28% year over year), which, while still elevated, raise questions about the starting point for next year’s revenue guide. [25]
A detailed breakdown from StockStory pointed out that investors are wrestling with lagging contract‑backlog growth, slower subscription revenue expansion, and a conservative framework for next year, even as AI adoption and Ultimate‑tier upgrades remain strong. [26]
The net result: the fundamentals look objectively solid, but the slope of the growth curve is flattening compared with GitLab’s earlier hyper‑growth years, and management is not signaling a near‑term re‑acceleration.
December 3, 2025: Wave of Analyst Target Cuts for GitLab Stock
Wall Street didn’t abandon GitLab on Wednesday, but it did mark down expectations.
Fresh rating and target updates
Among the notable moves on December 3:
- Needham
- Rating: Buy / Strong Buy maintained
- Price target: cut from $55 to $50
- Rationale: acknowledges a 2.2% revenue beat and strong margin execution, but warns of continued growth deceleration until new go‑to‑market initiatives gain traction. [27]
- Rosenblatt Securities
- Rating: Buy maintained
- Price target: cut from $58 to $55 (about 27% upside from ~$43). [28]
- Wells Fargo
- Rating: Equal Weight maintained
- Price target: cut from $50 to $45
- Rationale: describes the quarter as “lower than investor expectations” once prior pricing tailwinds fade; highlights SMB and U.S. federal softness, weaker new‑customer additions (only 956 net new customers, the lowest in four years), and decelerating backlog growth. [29]
- Barclays
- Rating: still positive, but
- Price target: cut from $44 to $42
- Rationale: sees long‑term potential in enterprise and Ultimate‑tier subscriptions but doesn’t expect the new go‑to‑market model to move the needle in the near term. [30]
- Goldman Sachs & UBS
- Goldman: cut target from $48 to $42 and maintained a Neutral stance, citing decelerating subscription growth and multiple quarters of declining expansion rates.
- UBS: trimmed its target from $60 to $51 but retained a Buy rating, reflecting lower long‑term growth assumptions. [31]
Earlier in November, Truist downgraded GitLab from Buy to Hold and cut its target from $55 to $44, anticipating exactly the type of deceleration that is now playing out. [32]
In short: targets are down, but most ratings remain positive.
Consensus still leans bullish
Despite the target trimming, GitLab’s analyst backdrop remains supportive:
- Out of 30 analysts tracked by LSEG, 22 rate the stock “Strong Buy” or “Buy,” and 8 rate it “Hold”; the median price target is $55. [33]
- StockAnalysis, aggregating 26 analysts, pegs the average 12‑month target at $57.38, implying about 32% upside from ~$43. The target range runs from $44 on the low end to $76 at the high end. [34]
- GuruFocus data similarly shows an average target near $58 and an overall consensus rating equivalent to “Outperform.” [35]
On the earnings front, analysts expect:
- FY26 revenue around $960 million, up ~26% from the prior year.
- FY27 revenue near $1.15 billion, roughly 20% growth.
- A swing from a small loss to EPS of about $0.85 in FY26, rising to around $1.03 in FY27. [36]
Those estimates are a bit more optimistic than management’s own revenue guidance, emphasising the gap between what GitLab is willing to guide to and what the Street is still hoping for.
Strategy and Long‑Term Story: AI, Platform Expansion, and New Pricing
Beyond the near‑term numbers, the Q3 commentary fleshed out GitLab’s medium‑term narrative.
AI as a growth amplifier
Management sees the explosion in AI‑generated code as a structural tailwind for GitLab:
- Activity metrics like CI pipelines and deployments are rising sharply, driven by developers shipping more code faster. [37]
- The Duo Agent platform is designed to orchestrate AI across the software lifecycle, not just generate snippets of code, positioning GitLab as a central “control plane” for modern software delivery. [38]
If that vision plays out, GitLab stands to benefit not only from more users but from more usage per user, which is where the pricing model becomes important.
Shift toward usage‑based pricing
Historically, GitLab has charged primarily per seat. The Duo Agent rollout and new AI‑driven workflows open the door to hybrid pricing models, combining seats with usage‑based elements.
Management described this as a way to better monetize the rising intensity of platform usage — particularly appealing in large enterprises where developer headcount may be stable, but automation and AI are dramatically increasing the volume of work pushed through GitLab. [39]
That potential is part of why many analysts remain bullish even as they trim near‑term price targets.
Risks, Opportunities, and What to Watch Next for GTLB
From the vantage point of December 3, 2025, GitLab is a profitable (on a non‑GAAP basis), fast‑growing infrastructure software company trading at a rich but not outrageous multiple — roughly the high‑single‑digits times trailing 12‑month revenue, depending on which market‑cap figure and revenue base one uses. [40]
Bullish case: durable platform and AI upside
Supporters of the stock tend to emphasize:
- Consistent 20–25%+ revenue growth on a ~$1 billion run‑rate. [41]
- High gross margins in the high‑80% range and improving operating leverage. [42]
- A sticky, mission‑critical platform with 119% net retention and growing large‑customer counts. [43]
- Significant AI‑driven upside as Duo Agent and usage‑based pricing mature. [44]
Some valuation models, such as GuruFocus’s “GF Value,” even suggest fair value estimates in the $90+ per share range, though those are based on historical multiples and aggressive growth assumptions and should be treated as one data point among many, not a forecast. [45]
Bearish case: deceleration, competition, and macro sensitivity
Skeptics focus on:
- Visible deceleration in key metrics like DBNRR and backlog growth, even if the absolute levels remain high. [46]
- Ongoing SMB softness and U.S. federal headwinds, which introduce forecasting uncertainty. [47]
- Intense competition from Microsoft’s GitHub and other DevOps platforms, which could compress pricing power over time. [48]
- A valuation that still embeds meaningful growth expectations; if GitLab’s revenue settles closer to the high‑teens than the mid‑20s, multiples could compress further.
Key questions going into 2026
Over the next few quarters, investors in GTLB will likely focus on:
- Does revenue growth stabilize?
A re‑acceleration isn’t baked into guidance, but even holding growth in the low‑ to mid‑20% range would help support the current valuation. - Does net retention stop drifting lower?
A plateau in DBNRR — or any re‑acceleration — would signal that expansion motions (especially around Ultimate and AI features) are offsetting macro and federal headwinds. - How quickly does Duo Agent monetization ramp?
Early signs that usage‑based pricing can meaningfully lift ARPU (average revenue per user) would strengthen the long‑term bull thesis. - What does the new CFO do with the income statement?
Jessica Ross’s arrival gives GitLab an opportunity to refine its balance between growth investments and profitability. Any shift in margin targets will be watched closely. [49]
Bottom Line
As of December 3, 2025, GitLab stock is caught between strong current execution and rising skepticism about its forward trajectory. The company is growing revenue about 25% year over year with expanding margins and solid cash flow, yet multiple analysts are trimming price targets on concerns about slowing expansion metrics, cautious guidance, and sector‑specific headwinds.
Consensus still points to healthy double‑digit growth and more than 30% potential upside over the next 12 months, but the bar for future quarters has shifted. For investors tracking GTLB, the story from here is less about whether GitLab is a “good company” — that seems relatively settled — and more about how fast it can grow into the ambitious expectations that the market has already priced in.
References
1. www.chartmill.com, 2. stockanalysis.com, 3. www.tipranks.com, 4. ir.gitlab.com, 5. ir.gitlab.com, 6. ir.gitlab.com, 7. ir.gitlab.com, 8. www.chartmill.com, 9. ir.gitlab.com, 10. ir.gitlab.com, 11. ir.gitlab.com, 12. ir.gitlab.com, 13. ir.gitlab.com, 14. markets.financialcontent.com, 15. markets.financialcontent.com, 16. ir.gitlab.com, 17. ir.gitlab.com, 18. ir.gitlab.com, 19. ir.gitlab.com, 20. www.chartmill.com, 21. www.tradingview.com, 22. www.chartmill.com, 23. markets.financialcontent.com, 24. markets.financialcontent.com, 25. www.investing.com, 26. markets.financialcontent.com, 27. www.gurufocus.com, 28. www.gurufocus.com, 29. www.investing.com, 30. stocktwits.com, 31. www.investing.com, 32. stockanalysis.com, 33. www.tradingview.com, 34. stockanalysis.com, 35. www.gurufocus.com, 36. stockanalysis.com, 37. markets.financialcontent.com, 38. ir.gitlab.com, 39. ir.gitlab.com, 40. markets.financialcontent.com, 41. ir.gitlab.com, 42. ir.gitlab.com, 43. ir.gitlab.com, 44. ir.gitlab.com, 45. www.gurufocus.com, 46. ir.gitlab.com, 47. markets.financialcontent.com, 48. www.gurufocus.com, 49. ir.gitlab.com
