What happened

Shares of Gitlab (GTLB 0.54%) jumped today after the cloud-based DevOps platform beat estimates and raised guidance in its third-quarter earnings report.

As a result, the stock closed up 9.4%.  

So what

Gitlab, which provides companies tools to develop software and run IT faster and more efficiently, said that revenue in the quarter jumped 69% to $113 million, which beat the consensus at $106 million and its own guidance.

Gitlab's net retention rate in the quarter was 130%, showing existing customers increased spending by 30% over the last four quarters, and the number of customers with annual recurring revenue above $100,000 increased 49%, showing it continued to gain traction with its largest customers.

The company also saw strong improvement in its margins with GAAP gross margin increasing from 87% to 89%. Its adjusted operating loss widened only slightly from $21.6 million to $23.9 million. On the bottom line, it posted an adjusted loss per share of $0.10, which was better than analyst estimates at a loss of $0.15 per share.

"Companies cannot afford to slow down their software innovation in today's turbulent economic climate," CEO Sid Sijbrandij said. "They are turning to solutions like GitLab to reduce costs, drive efficiencies, fuel a fast pace of innovation, and meet customer demands. Our Q3 business results demonstrate GitLab's value proposition as a mission critical DevSecOps platform for software innovation is resonating."

Now what

Gitlab also raised its guidance for the year, calling for revenue of $420.5 million-$421.5 million, or 67% revenue growth. For the fourth quarter, it called for revenue of $119 million-$120 million, or 54% growth at the midpoint, which is even with analyst estimates.

On the earnings call, the company also "soft-guided" to the fiscal 2024 (next year) analyst consensus at $586.8 million, which represents 42% revenue growth, and said it expected to be free-cash-flow breakeven by fiscal 2025.

With strong growth and improving margins in a difficult environment, it's not surprising that Gitlab stock gained today.