Mixed Outlook
As a public company, GitLab has reported sales growth every quarter and improved its bottom-line performance, but it is yet to become profitable. Meanwhile, longer-than-usual sales cycles and the general slowdown in enterprise spending could be a drag on the company’s near-term performance. Earlier this year, the company announced a 7% reduction in its workforce, citing economic uncertainties.
GitLab’s revenues jumped 45% annually to $126.9 million in the April quarter from $87.4 million last year. As a result, the adjusted loss narrowed sharply to $0.06 per share in Q1 from $0.18 per share in the first quarter of 2023. Both numbers beat Wall Street’s projections. Margins benefitted from the recent increase in subscription prices. On a reported basis, net loss was $52.5 million or $0.35 per share, compared to a loss of $26.1 million or $0.18 per share last year.
AI Push
As part of its strategy to better align the business with emerging market trends and provide secure AI offerings to customers, the company recently entered into a partnership with Google Cloud. The association will help it leverage the latter’s customizable foundation models and open generative AI infrastructure and provide customers with AI-assisted features directly within the enterprise DevSecOps platform.
“We continue to focus on incorporating AI throughout our DevSecOps platform. We are innovating at a fast pace. In 1Q we delivered 5 new AI features. And, in the first half of May alone, we delivered 5 additional features. All of these are available to customers now. We continued to iterate on Code Suggestions. This feature allows developers to write code more efficiently by receiving code suggestions as they type. Code Suggestions is available on GitLab.com for all users while in beta. We expect Code Suggestions will be generally available later this year,” said GitLab’s CEO Sid Sijbrandij at the earnings call.
Guidance
Considering the new opportunities and uptick in annual recurring revenues, the GitLab leadership expects full-year adjusted loss to decline year-over-year and came in the range of $0.18 per share to $0.14 per share. Revenues are expected to be between $541 million and $543 million in fiscal 2024. The forecast is better than analysts’ consensus estimates.
GTLB maintained the post-earnings strength in the following sessions but traded slightly lower on Thursday. Currently, the stock is trading close to where it was six months ago.