What happened
Shares of GitLab (GTLB -2.08%) were up 23.7% as of 10:56 a.m. ET on Tuesday after the company announced better-than-expected results for the fiscal first quarter, ending in April. Revenue grew 75% year over year, while adjusted net loss per share narrowed from $0.44 in the year-ago quarter to $0.18 this year.
In a press release, CEO Sid Sijbrandij said: "We have seen a substantial shift in how enterprises are developing, operating, and securing software by moving to a platform strategy. As a result, our One DevOps Platform is gaining momentum and broader adoption."
So what
Year to date, software-as-a-service (SaaS) stocks have been crushed over fears of slowing economic growth. But the market is missing how SaaS companies like GitLab could experience even more demand, as companies try to improve efficiency and productivity amid labor shortages.
GitLab's top-line growth was impressive, but most importantly, management is proving it can deliver strong revenue growth while showing improvement in profitability. Adjusted gross margin improved 3 percentage points to 90% in the quarter. Moving down the income statement, adjusted operating margin improved a whopping 17 percentage points.
Management reported growth across all customer segments despite the macroeconomic environment and is committed to "responsible growth," alluding to the improving margins.
Image source: Getty Images.
Now what
The company guided for fiscal second-quarter revenue to grow 7.6% sequentially at the midpoint between $93.5 million to $94.5 million. Full-year revenue is expected to grow 58% to reach between $398 million to $402 million.
GTLB percent off all-time high. Data by YCharts.
Strong operating results are the perfect antidote to a falling stock price. Investors can't know for certain whether the stock has hit bottom after falling 70% from its all-time high, but with a long-term addressable market of $40 billion, GitLab is just getting started.
