GitLab's (GTLB) strong fiscal Q2 execution and raised fiscal 2027 outlook were offset by uncertainty around the company's Flex model transition and its ability to sustain 20% or higher growth, BofA Securities said in a Wednesday note.

GitLab's fiscal Q3 revenue guidance implies growth deceleration to 15.4%, from 21.3% in Q2, which likely reflects management conservatism, but could also question the company's ability to sustain 20% and above growth during the Flex model transition, according to the note.

With more than 130 customers representing over $20 million of commitments in the first six weeks, BofA said it is too early to determine whether Flex will accelerate platform adoption or simply introduce revenue volatility. The firm said it sees balanced risk/reward until there is clearer evidence that Flex can accelerate durable growth rather than introduce revenue timing complexity.

Additionally, the company's Q2 commentary on Duo Agent Platform was a positive signpost, with paid consumption run rate rising to $40 million from $15 million previously and management targeting $100 million in paid consumption run rate in fiscal 2027, according to the note.

BofA raised its price target to $54 from $45 and maintained its neutral rating.

Shares of GitLab were up more than 13% in Wednesday trading.

Price: 51.16, Change: +6.07, Percent Change: +13.46