One of the most beleaguered artificial intelligence (AI) stocks over the past two years has been GitLab (GTLB 1.47%). The share price fell more than 10% in 2024 and another 33% in 2025. However, 2026 could be the year the company proves the bears wrong.
NASDAQ: GTLB
Key Data Points
Strong results, but poor stock performance
GitLab runs a DevSecOps (development, security, and operations) platform, which is a secure ecosystem for organizations to design software. More recently, it has been transforming itself more into an end-to-end software development life cycle (SDLC) platform that uses AI agents to not only help developers write code, but also help them throughout the entire software development process. Given that coders only spend about 20% of their time writing code, this is highly valuable.
Its Duo agent platform is also generally an add-on, which helps boost average revenue per user (ARPU). The added value that the company's platform is providing is also one reason why it is switching to a new hybrid seat-plus-usage-based model.
Image source: Getty Images.
GitLab has been seeing strong growth, with revenue growth consistently between 25% and 35% for the past two years. The company's growth has come from both adding new customers and existing customers expanding. Over the past 12 months, it's had a 119% dollar-based net retention, led mostly by seat expansion, and to a lesser extent, customers upgrading to high-tier services. Overall, it's a fast-growing, sticky, high-gross-margin (around 80%) business.
So, what has been the issue? The bears believe that AI in general is going to lead to fewer programmers, hurting GitLab's business model. And while GitLab's new pricing model will also help address this, investors are wary that with less price uncertainty, customers will push back. However, as a secure depository of important source code and data that you won't want generic AI agents having access to, GitLab has a sticky platform.
At the same time, AI is leading to more coding and software creation, and more people who can write software. Investors have been fearful of the impact of vibe-coding (writing code using natural language) on software-as-a-service (SaaS) companies, but GitLab would also likely be a beneficiary of this trend, as no matter who writes code, it still needs to be written and stored in a secure environment like GitLab's platform. Even AI agents would need to write code in a secure environment that would need to be reviewed, since, like humans, AI agents do make errors.
Time to buy the stock
GitLab's strong growth and poor stock performance have left it at a cheap valuation, trading at a forward price-to-sales (P/S) multiple of around 5.5 times and a forward price-to-earnings (P/E) ratio of 24.5. With AI likely more of an opportunity than a risk, this looks like a cheap stock with a lot of potential upside that will prove the bears wrong.
