Gitlab (GTLB) posted a smaller fiscal Q3 revenue beat as the government shutdown delayed decision making on Federal deals, Morgan Stanley said in a Wednesday note.

The company reported a fiscal Q3 non-GAAP net income of $0.25 per diluted share, up from $0.23 a year earlier, as revenue rose to $244.4 million from $196.0 million. Analysts surveyed by FactSet expected non-GAAP EPS of $0.20 on revenue of $239.3 million.

Apart from the government shutdown, weaker performance in small and medium-sized businesses also weighed on the Gitlab Q3 revenue growth, Morgan Stanley said. These factors were carried over into the company's fiscal Q4 revenue outlook, the investment firm noted.

Gitlab expects fiscal Q4 revenue of $251 million to $252 million.

Morgan Stanley said it sees the upcoming general availability of the Gitlab Duo Agent Platform as a "positive" driver for the company that will support its transition to hybrid pricing from its current seat-based pricing.

Morgan Stanley cut its price target on Gitlab to $55 from $60, while maintaining its overweight rating.

Shares of Gitlab were down more than 14% in recent Wednesday trading.

Price: 37.28, Change: -6.09, Percent Change: -14.04