Business Overview and History

GitLab Inc. (NASDAQ:GTLB) is a technology company that has pioneered the DevSecOps platform, a comprehensive solution that integrates the entire software development lifecycle into a single application. The company's mission is to help organizations become better software-led businesses by accelerating innovation and broadening the distribution of its platform globally.

GitLab was founded in 2011 as an open-source project and was incorporated in Delaware on September 12, 2014. The company operates on an all-remote model, with team members located around the world. GitLab's primary offering is the GitLab platform, which provides a complete DevSecOps solution that includes capabilities for code collaboration, continuous integration/continuous deployment (CI/CD), security, and monitoring.

In its early years, GitLab focused on building out its open-source community and expanding its platform capabilities. The company's open-core business model, which enables customers and contributors to add functionality to the platform, helped drive rapid innovation and build trust with customers. By operating with a high degree of transparency, GitLab was able to foster deeper engagement with its community of users and contributors.

As GitLab grew, the company faced some challenges related to managing its rapid expansion. The company had to work to improve its systems, processes, and controls to effectively handle the growth in its employee headcount and customer base. GitLab also encountered security and privacy concerns as it hosted increasing amounts of customer data and intellectual property on its platform. To address these issues, the company invested in enhancing its security measures and data protection capabilities.

Despite these challenges, GitLab continued to see strong demand for its DevSecOps platform. The company was able to expand its customer base, particularly among large enterprises, by demonstrating the productivity and efficiency gains that organizations could achieve by adopting GitLab's comprehensive, single-application approach. Key milestones for GitLab during this period included surpassing 40 million registered users and adding more than 50 of the Fortune 100 companies as customers.

In fiscal year 2025, the company saw strong financial results, with revenue increasing 31% year-over-year to $759.2 million. GitLab's non-GAAP operating margin also improved significantly, reaching 10.2% compared to -26.4% in the prior year.

One of the key drivers of GitLab's success has been the company's focus on its DevSecOps platform. The platform integrates development, security, and operations into a single application, allowing customers to streamline their software development workflows and improve overall efficiency. This approach has resonated with GitLab's customer base, which includes over 9,800 customers with more than $5,000 in annual recurring revenue (ARR) as of the end of fiscal year 2025.

Financial Performance and Ratios

GitLab's financial performance has been strong, with the company consistently growing its top-line while also improving profitability. In fiscal year 2025, the company reported total revenue of $759.2 million, up 31% from the prior year. Gross margin remained high at 89.8%, reflecting the scalability of GitLab's business model.

The company's operating margin has also improved significantly, reaching 10.2% on a non-GAAP basis in fiscal year 2025, compared to -26.4% in the prior year. This improvement was driven by increased operational efficiency and continued investment in R&D and sales and marketing.

Financials

GitLab's balance sheet remains healthy, with $1.04 billion in cash, cash equivalents, and short-term investments as of the end of fiscal year 2025. The company's current ratio stands at 1.93, indicating strong liquidity. GitLab's debt-to-equity ratio is 0.0, reflecting its debt-free capital structure.

In terms of profitability ratios, GitLab's return on assets (ROA) was -0.36 in fiscal year 2025, while its return on equity (ROE) was -0.74. These metrics have improved compared to the prior year, but the company still has work to do to achieve sustained profitability.

For fiscal year 2025, GitLab reported annual revenue of $759.2 million, with a net loss of $12.1 million. The company's annual operating cash flow was -$64.0 million, while its annual free cash flow reached $120.0 million.

In the most recent quarter (Q4 FY2025), GitLab's revenue grew 29% year-over-year to $211.4 million. The company achieved profitability in this quarter, with a net income of $10.8 million. Quarterly operating cash flow was $63.2 million, and quarterly free cash flow was $62.1 million.

GitLab generates the majority of its revenue from the United States, which accounted for 81% of total revenue in both the three and nine month periods ended October 31, 2024. No other individual country exceeded 10% of total revenue.

Liquidity

GitLab's liquidity position remains strong, as evidenced by its healthy balance sheet and positive cash flow generation. The company's current ratio of 1.93 indicates that it has sufficient short-term assets to cover its short-term liabilities. With $1.04 billion in cash and short-term investments, GitLab has ample resources to fund its operations and invest in growth initiatives.

As of October 31, 2024, GitLab had $176.6 million in cash and cash equivalents, and $740.3 million in short-term investments, totaling $916.9 million in liquid assets. The company's current ratio and quick ratio both stood at 2.47, further demonstrating its strong liquidity position. GitLab maintains a debt-free capital structure, with a debt-to-equity ratio of 0.

Product Offerings and Revenue Breakdown

GitLab's primary offering is The DevSecOps Platform, a comprehensive solution that covers the entire software development lifecycle, from planning and coding to testing, security, and operations. The platform is designed to enable all stakeholders, including development, security, and operations teams, to collaborate within a single tool with a unified data model.

The DevSecOps Platform is offered in two main delivery models: self-managed and software-as-a-service (SaaS). The self-managed offering allows customers to install and host the platform on their own on-premise or hybrid cloud infrastructure, while the SaaS offering is managed and hosted by GitLab, either in a public cloud or a private cloud based on the customer's preference.

For the nine months ended October 31, 2024, GitLab reported total revenue of $547.82 million, an increase of 32% year-over-year. The revenue was primarily generated from two main sources:

1. Subscription - self-managed and SaaS: This segment accounted for $489.62 million, or 89% of total revenue, and includes revenue from both self-managed and SaaS subscriptions. The self-managed subscription revenue was $333.74 million, while the SaaS subscription revenue was $155.87 million.

2. License - self-managed and other: This segment generated $58.20 million, or 11% of total revenue, and includes revenue from self-managed licenses, as well as revenue from professional services.

GitLab reported a gross margin of 89% for the nine months ended October 31, 2024, reflecting the high-margin nature of its subscription-based business model.

Growth Drivers and Catalysts

One of the key growth drivers for GitLab has been the increasing adoption of its DevSecOps platform. As organizations continue to prioritize digital transformation and the need for secure, efficient software development, GitLab's comprehensive solution has become increasingly attractive. The company's customer base has grown steadily, with the number of customers with more than $100,000 in ARR increasing by 29% year-over-year in fiscal year 2025.

Another important catalyst for GitLab's growth has been the integration of artificial intelligence (AI) capabilities into its platform. In fiscal year 2025, the company introduced GitLab Duo, an AI-powered suite of features that enhance the software development lifecycle. This has been well-received by customers, with GitLab Duo now representing a significant portion of the company's ARR.

As of October 31, 2024, GitLab had 9,520 Base Customers, which are customers with more than $5,000 in Annual Recurring Revenue (ARR). This represents a 16% increase from the 8,180 Base Customers as of October 31, 2023. GitLab's Dollar-Based Net Retention Rate, which measures the percentage change in ARR derived from its customer base, was 124% as of October 31, 2024, indicating strong customer retention and expansion.

Looking ahead, GitLab is well-positioned to continue its growth trajectory. The company has a strong competitive position in the DevSecOps market, and its focus on innovation and customer satisfaction has helped it maintain a high level of customer loyalty. Additionally, the broader trends towards digital transformation and the increasing importance of software development in all industries should continue to drive demand for GitLab's platform.

Guidance and Future Outlook

GitLab has provided guidance for the upcoming quarter and fiscal year, reflecting confidence in its continued growth and improving profitability. For Q1 FY2026, the company expects total revenue of $212 million to $213 million, representing 25% to 26% year-over-year growth. Non-GAAP operating income is expected to be between $21 million and $22 million.

For the full year FY2026, GitLab anticipates total revenue of $936 million to $942 million, representing approximately 24% year-over-year growth. The company expects non-GAAP operating income of $109 million to $114 million. GitLab has also provided non-GAAP net income per share guidance of $0.14 to $0.15 for Q1 FY2026 and $0.68 to $0.72 for the full year FY2026.

It's worth noting that GitLab's Q1 FY2026 non-GAAP operating margin is expected to be flat from Q2 FY2026 due to a one-time investment in Q1 FY2025 that will not recur. Additionally, the company will be applying a 22% long-term non-GAAP projected tax rate starting in FY2026 due to the conclusion of their bilateral advance pricing agreement (BAPA) with the IRS Netherlands' Dutch tax authority.

Risks and Challenges

While GitLab has demonstrated impressive growth and execution, the company faces several risks and challenges that investors should be aware of.

One key risk is the highly competitive nature of the DevSecOps market. GitLab competes with well-established players such as Microsoft, Atlassian, and various point solution providers. The company's ability to maintain its technological edge and continue to innovate will be crucial to its long-term success.

Another risk is GitLab's reliance on its open-source community. While the company's open-core business model has been a strength, it also means that GitLab's intellectual property is vulnerable to unauthorized distribution and sale by third parties. Maintaining the loyalty and engagement of the open-source community will be critical to GitLab's continued success.

Additionally, as GitLab continues to grow, the company will need to effectively manage its rapid expansion and scale its operations accordingly. Failure to do so could lead to operational challenges and negatively impact the company's financial performance.

Lastly, GitLab's international expansion efforts, particularly in China, come with their own set of risks and uncertainties related to regulatory environments, political stability, and cultural differences.

Conclusion

GitLab has established itself as a leading provider of DevSecOps solutions, leveraging its comprehensive platform and innovative AI-powered features to drive customer adoption and expansion. The company's strong financial performance, healthy balance sheet, and focus on growth catalysts like AI integration position it well for continued success.

With a robust product offering in The DevSecOps Platform, available in both self-managed and SaaS delivery models, GitLab has demonstrated its ability to meet the diverse needs of its customer base. The company's high gross margins and improving profitability metrics indicate the scalability of its business model and its potential for long-term value creation.

However, GitLab must navigate the challenges of a highly competitive market, maintain the loyalty of its open-source community, and effectively manage its rapid growth and international expansion. Investors should closely monitor the company's execution and ability to capitalize on the growing demand for DevSecOps solutions.

Overall, GitLab's unique value proposition, proven track record, and promising growth outlook make it a compelling investment opportunity in the software development and IT operations space. The company's strong guidance for the upcoming fiscal year further underscores its confidence in its ability to drive continued growth and profitability.