TradingKey - GitLab (GTLB) saw a strong market reaction after reporting its second-quarter fiscal 2027 financial results. Both revenue and adjusted profit exceeded market expectations, sending its stock up more than 24% in pre-market trading on September 2. As of press time, GTLB was still up over 14% intraday.

[Source: TradingView]

Revenue Up 21% YoY, Non-GAAP Operating Margin Reaches 15%

For the second quarter of fiscal 2027 ended July 31, GitLab's revenue was $286.3 million, up 21% year-over-year; Non-GAAP operating income was $42.6 million, with an operating margin of 15%; and Non-GAAP diluted earnings per share was $0.24.

The market had previously expected GitLab's revenue to be approximately $273.3 million and adjusted EPS to be around $0.18, with the company's actual performance exceeding both expectations.

The company stated that gross bookings reached a record high in the quarter, with net ARR increasing 42% year-over-year; the dollar-based net retention rate rose to 117%, marking the first quarter-over-quarter improvement since 2024.

Customer growth was also quite strong. First orders in the quarter totaled approximately 1,700, up over 100% year-over-year; net ARR from new customers grew 39% year-over-year. The number of large deals worth at least $500,000 increased by more than 150% year-over-year.

Flex Gains Rapid Customer Adoption as AI Becomes Key Growth Driver

GitLab's recently introduced Flex model has also made early progress. About six weeks after its launch, more than 130 customers have committed to Flex, with committed amounts exceeding $20 million.

Meanwhile, as of the end of the second quarter, GitLab's Paid Consumption Run Rate exceeded $40 million, up from $15 million at the end of the first quarter.

The company also stated that SaaS revenue grew 36% year-over-year, accounting for 34% of total revenue, while Ultimate product ARR increased 35% year-over-year, representing 59% of total ARR.

GitLab is accelerating its deployment of AI-related products. In June this year, the company launched the public beta of Orbit. As of the second-quarter earnings call, over 2,200 organizations have enabled Orbit indexing.

The company disclosed that the number of secure repositories grew 60% year-over-year, code pushes increased 50%, and CI/CD pipelines rose 40%. GitLab CEO Bill Staples stated that as AI drives the expansion of software development, the importance of code context, security, governance, and control is also increasing.

Wall Street Swiftly Raises Price Targets as Full-Year Revenue and Profit Guidance Lifted

GitLab expects third-quarter fiscal 2027 revenue of $281 million to $283 million and non-GAAP operating income of $35 million to $37 million.

The company also raised its full-year guidance, projecting fiscal 2027 revenue of $1.129 billion to $1.133 billion, non-GAAP operating income of $148 million to $152 million, and non-GAAP diluted earnings per share of $0.85 to $0.87.

Following the earnings report, several Wall Street institutions raised their price targets for GitLab. Among them, Canaccord Genuity raised its price target to $70, RBC Capital raised its target from $46 to $60, Baird raised its target from $47 to $59, Morgan Stanley (MS) raised its target from $30 to $57, and BofA Securities raised its target to $54.

According to StockAnalysis data, as of pre-market on September 2, the average price target for GitLab among 27 analysts was $52.14.

[Source: StockAnalysis]

Overall, GitLab demonstrated strong performance in revenue, adjusted profit, net ARR, and customer expansion this quarter. Record gross bookings, early adoption of Flex, and growth in AI-related products provided fresh support for the company's future growth.

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