Gitlab (GTLB) is "well positioned" to become the central platform in the Development, Security, and Operations, or DevSecOps ecosystem by streamlining and consolidating software development tools in a large and expanding market, RBC Capital Markets said in a report Friday.

The software company is strategically focused on artificial intelligence, as highlighted in a recent virtual fireside chat with Chief Executive Bill Staples and Chief Financial Officer Brian Robins, RBC said, adding that Gitlab's Q1 demonstrated "good performance from underlying metrics," including 27% revenue growth and "substantial" operating margin expansion.

A key focus for GitLab is its upcoming GitLab 18 launch, expected to introduce numerous innovations and further integrate AI capabilities. Staples noted his commitment to "accelerating the AI strategy to make sure that the company is positioned to capture the mid to long-term opportunity," according to the note.

Despite some "pressures and price sensitivity at the lower end of the market," GitLab's management is satisfied with renewal rates and sees potential in its generative AI strategy. The company emphasized that it complements, rather than competes with, AI coding assistants, with GitLab providing essential context, version control, and security for generated code, the note said.

GitLab plans to evolve its pricing model to include usage-based elements, particularly with the growth of AI. The company believes this "could be key in addressing the bear argument that with AI, fewer seats could be needed," RBC said.

GitLab 18 is anticipated to be generally available by winter, following a summer beta release, which will allow the company to unlock new monetization opportunities through usage, the report said.

RBC has an outperform rating on Gitlab with a $62 price target.

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