GitLab (GTLB, Financial) is experiencing pressure despite reporting an EPS beat in its Q1 report. The software development tools provider noted a revenue increase of 26.8% year-over-year to $214.5 million, surpassing analyst expectations. GitLab's Q2 EPS and revenue guidance were in line, and it raised its FY26 EPS guidance while reaffirming revenue projections.
- This quarter marked GitLab's smallest EPS upside since its IPO in October 2021. Although revenue exceeded expectations, the margin was smaller than in previous quarters, raising concerns among analysts during the Q&A session.
- Customers with more than $5,000 in Annual Recurring Revenue (ARR) increased by 13% year-over-year to 10,104, a slowdown from 15% in Q4. Those with over $100,000 in ARR grew by 26% to 1,288, down from 29% in Q4. Total Remaining Performance Obligations (RPO) rose 40% year-over-year to $955.1 million, with current RPO (cRPO) up 34% to $584.8 million, aligning with Q4's growth rates.
- GitLab addressed the slight deceleration in customer growth, citing price sensitivity in the SMB market, which affected new customer additions but not financials. The company remains unconcerned.
- Two factors influenced customer metrics: a revenue mix favoring SaaS, which recognizes more upfront revenue, and a backend-weighted linearity. Despite macroeconomic caution, customers continue to purchase GitLab's offerings, with strong Federal sector performance exceeding expectations.
Overall, the smaller-than-usual upside and deceleration in new customer metrics weigh on GitLab shares. Investors may need to adjust expectations for future quarters. The company’s ability to return to its historical beats will be closely monitored in Q2. Maintaining robust new customer acquisition is vital for sustained growth.
