Shares of GitLab (GTLB 0.04%), the cloud-based DevSecOps platform, were pulling back today after the company delivered a solid second-quarter earnings report but offered weak guidance.
At 10:39 a.m. ET, the stock was down 9.1% on the news.
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Solid Q2 numbers
GitLab continued to deliver strong growth with revenue up 29% to $236 million, which topped estimates at $227.2 million.
Gross margin remained strong at 88% per generally accepted accounting principles (GAAP), and adjusted operating income more than doubled from $18.2 billion to $39.6 billion.
On the bottom line, the company reported adjusted earnings per share of $0.24, up from $0.15 in the year-ago quarter and ahead of the consensus at $0.16.
Remaining performance obligations (RPO) rose 32% to $988.2 million, showing stable growth in the backlog, and the dollar-based net retention rate was 121%, meaning existing customers increased their spend by 21% over the last four quarters.
CEO Bill Staples said the company's new artificial intelligence (AI) agent was performing well, noting, "This quarter's results demonstrate the strength of GitLab's AI-native DevSecOps platform as we continue to drive customer-focused innovation. GitLab Duo Agent Platform represents our vision for human-AI collaboration across the software development lifecycle."
Duo is now in beta and integrates with a wide range of large language models such as Anthropic's Claude and Google's Gemini.
NASDAQ: GTLB
Key Data Points
But weak guidance
Looking ahead, GitLab called for basically flat sequential growth in the third quarter, forecasting revenue of $238 million to $239 million, or a 21.7% increase from the quarter a year ago, which was below estimates at $239.7 million.
Full-year revenue guidance was also below the mark as the company called for revenue of $936 million to $942 million, below the consensus at $942.9 million.
Given that guidance, the sell-off is understandable, but the long-term picture still looks promising. The price-to-sales ratio is also much more attractive than it was before, now at just around 7 based on forward guidance.
