Shares of GitLab (GTLB 5.34%), 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.
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.
