By Adam Clark

GitLab stock was falling early Wednesday after the provider of software development tools gave underwhelming guidance. It's a reminder that despite recent signs of life, the software sector is still vulnerable to any indication of artificial intelligence eating into companies' business.

The shares were down 7.2% in premarket trading after GitLab's earnings report late Tuesday. That was set to add to a 57% drop in the past 12 months as investors fret that customer use of AI-driven code generation is hampering the company's growth.

"GitLab reported solid fourth-quarter results, but fiscal 2027 guidance came in short of consensus expectations as management reset the bar and acknowledged that GitLab is going through a pivotal transition period where product and GTM [go-to-market] execution will need to be sharp," wrote William Blair analyst Jackson Ader in a research note.

GitLab projected revenue of $1.10 billion to $1.12 billion in fiscal 2027. Analysts polled by FactSet were looking for $1.12 billion, or growth of about 17%. That compares with 26% growth last year.

For its January quarter, GitLab reported adjusted earnings of 30 cents a share. Revenue climbed 23% to $260.4 million, topping the $252.2 million that Wall Street forecast, according to FactSet.

In common with many software companies, GitLab is hoping to make AI a strength rather than a weakness. Its own Duo Agent Platform is designed to allow humans to work alongside AI agents, or programs that can perform multistep tasks. However, executives told analysts the company doesn't anticipate the Duo Agent Platform to provide a significant contribution to revenue this year.

Investors are punishing any signs of software companies not moving swiftly enough to react to AI. Database company MongoDB tumbled 22% on Tuesday after giving disappointing first-quarter guidance and noting that AI wasn't a material business driver yet.

But some analysts are still hopeful GitLab can turn things round.

"Although the developer tools competitive landscape is only getting noisier amid the rise of AI-coding agents, we remain positive on the GitLab story given its strong enterprise footprint and the broader TAM [total addressable market] expansion that AI is driving," William Blair's Ader wrote.

Ader has an Outperform rating with no target price on the stock.

Write to Adam Clark at adam.clark@barrons.com

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March 04, 2026 07:19 ET (12:19 GMT)

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