There has been some significant market volatility this earnings season, with disappointing reports spooking some investors. One stock that got a reprieve following its earnings was DevSecOps platform GitLab(NASDAQ: GTLB), largely because investors liked its continued strong growth. Nonetheless, the stock still trades down about 25% over the past year.
Let's take a closer look at GitLab's fourth-quarter results and outlook to see if this is a good time to buy the stock.
Strong revenue growth
GitLab operates a DevSecOps (development, security, and operations) platform that helps customers with their software development while also integrating cybersecurity into all stages of the process. The company has seen strong revenue growth helped by its artificial intelligence (AI)-powered GitLab Duo add-on offering, which can help programmers complete their assignments by offering coding suggestions and automation.
The company has been able to consistently grow its revenue by around 30% in recent quarters, and Q4 was no different. For fiscal 2025's Q4, ended Jan. 31, revenue climbed 29% year over year to $211.4 million. That was well ahead of the company's prior forecast for revenue between $205 million and $206 million.
Metric
Q1 FY24
Q2 FY24
Q3 FY24
Q4 FY24
Q1 FY25
Q1 FY25
Q3 FY25
Q4 FY25
Revenue growth
45%
38%
32%
33%
33%
31%
31%
29%
Source: GitLab earnings reports.
Subscription revenue climbed 31% to $185.6 million, while license revenue increased 19% to $25.9 million.
Existing customers continue to increase their spending with GitLab, with its dollar-based net retention coming in at 123%. This metric measures the spending of existing customers who have been with the company for at least a year minus any customer churn. A number over 100% means existing customers increased their spending over the past 12 months. GitLab said seat expansion accounted for 75% of the increase, improved customer yields contributed 15%, and upgrades to higher-tier platforms 10%.
Meanwhile, GitLab continues to see strong growth with its enterprise customers. The number of customers with $100,000 or more in annual recurring revenue (ARR) climbed 29% to 1,229, while customers with $1 million or more in ARR jumped to 123 customers.
The strong growth continues to be powered by its Ultimate, Dedicated, and GitLab Duo solutions. Ultimate is GitLab's higher-tier platform and now accounts for half its ARR, while Dedicated includes additional features such as data isolation and regional data residency. Dedicated revenue surged approximately 90% year over year in the quarter.
Remaining performance obligations (RPO) soared 40% to $945 million, while cRPO (current RPO) increased 35% to $579.2 million. RPO includes both revenue received from upfront payments that have yet to be recognized as revenue as well as revenue from un-cancellable contracts. It tends to help predict future revenue growth.
On the profitability front, GitLab's adjusted earnings per share (EPS) more than doubled to $0.33 from $0.15 a year ago. It had a gross margin of 89% in the quarter.
The company generated $62.1 million in adjusted free cash flow in the quarter and $120 million for the year. It ended the year with $992.3 million in cash and short-term investments and no debt.
GitLab forecast fiscal 2026 revenue to range between $936 million and $942 million, representing about 24% growth. It is looking for adjusted EPS of between $0.68 and $0.72. For fiscal Q1, it guided for revenue of $212 million to $213 million, representing growth of 25% to 26%. It forecast adjusted EPS of $0.14 to $0.15.
Image source: Getty Images.
Is GitLab a buy?
GitLab continues to steadily grow its revenue, while also seeing nice operating leverage in its business, which has been leading to strong profitability growth. Its guidance, meanwhile, seems conservative, setting the company up for some nice beat-and-raise results throughout the year. Last year, the company exceeded the top end of its forecast by about 4%. If it follows a similar pattern, I'd expect revenue closer to $980 million in fiscal year 2026, which would be around 29% revenue growth versus its 24% growth forecast.
The stock is reasonably valued, trading at a price-to-sales (P/S) multiple of 10 times fiscal year 2026 analyst estimates. Meanwhile, excluding its net cash, its enterprise value (EV)-to-sales ratio is about 9 times. That's a pretty attractive valuation for a software-as-as-service (SaaS) company with a high gross margin growing its revenue in the mid-20% plus range.
Overall, GitLab is a fast-growing SaaS company trading a reasonable valuation that is nicely benefiting from AI. The stock should have plenty of upside over the long term.
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