GitLab Analysts Review Beat And Raise Quarter: Seat Contraction 'Remains A Headwind'

Shares of GitLab Inc GTLB climbed in early trading on Wednesday, after reporting its second-quarter results.

The results came amid an exciting earnings season. Here are some key analyst takeaways from Asana’s earnings release.

• Truist Securities analyst Joel Fishbein maintained a Buy rating, while raising the price target from $60 to $65.
• RBC Capital Markets analyst Matthew Hedberg reiterated an Outperform rating, while lifting the price target from $60 to $62.
• William Blair analyst Jason Ader reiterated an Outperform rating on the stock.
• Needham analyst Mike Cikos maintained a Hold rating on the stock.

Check out other analyst stock ratings.

Truist Securities: GitLab reported “impressive” quarterly results across the board, “driven by strong execution and an improving demand backdrop,” Fishbein said. “The company noted a change in buying behavior that led to better than expected seat expansion and renewals in their Premium tier and continued strength in their Ultimate tier,” he added.

While GitLab has raised its full-year guidance for both revenue and profitability, “it may prove conservative as management called out stabilizing trends during the quarter that may set the company up for a solid 2H24 renewal season,” the analyst further stated.

RBC Capital Markets: “Gitlab delivered a strong beat-and-raise quarter as macros seem to have stabilized compared to Q4/23,” Hedberg wrote in a note.
“Key growth drivers continue to track well including in-line/positive customer response to the Premium price increase, solid adoption of Dedicated, strong growth from Ultimate, fee to paid conversion, and its Code Suggestion add-on module due out later this year,” he added.

Needham: Seat contraction could “remain a headwind to NRR (which is a trailing 12-month metric) for the next 1-2 quarters (due to average contract duration of ~14 months),” Cikos said. “However, after two quarters of elevated seat contraction, management discussed a stabilization in trends."

Management commentary regarding the company’s AI features and enhanced compliance frameworks “gave investors a view of packaging as a lever” for ARR growth, the analyst stated.

William Blair: GitLab reported strong second-quarter results and raised its full-year guidance, “despite ongoing macro pressure on seat growth from cost-conscious customers,” Ader said in a note.

The analyst noted the positives as:

• Impact of the Premium tier price hike on revenue growth for most clients
• Availability of GitLab Duo, with “the AI add-on SKU priced at $9/month/user”
• Release of GitLab Dedicated
• Continued demand to consolidate the DevOps toolchain.

GTLB Price Action: Shares of GitLab had risen by 4.83% to $51.92 at the time of publication Wednesday.