GitLab stock rises 13% as AI coding boosts demand

GitLab’s stock rose 13% on Wednesday after the company reported second-quarter results that beat analyst estimates, raised its full-year revenue and profit guidance and linked rising use of AI in software development to stronger demand for its DevSecOps platform.

For the quarter, GitLab reported revenue of $286.3 million, a 20% increase from a year earlier. Adjusted earnings were $0.24 per share. The company also reported a record quarter for gross bookings and upgraded its full-year revenue and profit outlook.

CEO Bill Staples described the increasing use of AI to write code as a “significant opportunity” for GitLab to expand sales. Company executives said higher code volumes and new types of software builders driven by AI are likely to raise demand for tools that handle source code control, security, governance, context and orchestration across the development lifecycle.

Management reported that paid committed recurring revenue rose to $40 million from $15 million in the previous quarter and is targeting $100 million by fiscal 2027.

Customer traction metrics included more than 1,700 first orders during the quarter, more than double the prior year, and a 39% increase in first-order net-new annual recurring revenue.

Analysts reacted with a mix of rating moves and higher price targets. William Blair moved GitLab to Market Perform from Underperform, pointing to an improvement in gross net retention and better go-to-market execution. Needham raised its Buy rating and lifted its target, noting a 30% year-over-year increase in account executive capacity and a 10% gain in productivity per representative.

UBS kept a Neutral rating and raised its price target to $50 from $40, while Bank of America maintained a Neutral stance and increased its target to $54 from $45. Piper Sandler retained a Neutral rating and raised its target to $52 from $28, calling the quarter GitLab’s largest beat since the third quarter of 2024 but noting that headline revenue growth remains on a slowing trend.

UBS analyst Radi Sultan cautioned that GitLab’s transition to a Flex pricing model, which moves parts of the business away from a purely seat-based structure, could add volatility to reported revenue over the next two quarters. UBS estimated the Flex transition will take more than three fiscal years and put the maximum near-term revenue headwind from the self-managed renewal cohort at about $13 million. Bank of America analyst Koji Ikeda flagged the question of whether GitLab can gain market share as AI agents increasingly write software.

Piper Sandler said further valuation expansion would likely depend on a clear acceleration in total revenue growth, which the firm does not expect before fiscal 2028.

The results prompted a range of analyst responses, with some raising price targets and others urging caution about the short-term effects of the Flex transition and the timing of broader revenue acceleration.