Shares of GitLab rose after the software developer behind the DevSecOps platform reported a strong quarter and increased full-year guidance. The company also showed improving momentum in key subscription and customer metrics, with annual recurring revenue growing at its fastest pace in several years and deal activity accelerating in its largest accounts.
Key takeaways
- Price move: GitLab shares climbed following its earnings update.
- Catalyst: Results topped expectations and guidance was raised, supported by faster ARR growth and stronger enterprise deal flow.
- Customer momentum: Deals of $500,000 or more surged by more than 150% in the quarter.
- Forward focus: A new Flex pricing model is expected to support retention and growth, though it may affect revenue recognition timing.
- Implication: The update suggests the company’s growth trajectory may be reaccelerating after a period of investor skepticism.
What drove the move
GitLab’s third-quarter operating indicators pointed to improving demand across its platform and services. According to the company, new annual recurring revenue (ARR) increased 42% year over year, described as the second-highest growth rate in the past four years. Management also reported that its calculated billings rate rose 24%, which it said was double the growth rate it recorded in the prior quarter.
Customer acquisition and expansion metrics also strengthened. The company said its first-order count more than doubled to 1,700, while first-order ARR rose 39%. Dollar-based net retention remained solid at 117% over the past 12 months and improved sequentially for the first time since 2024, according to GitLab.
The firm attributed part of the demand environment to artificial intelligence reducing the practical barrier to software development, which in turn expands the pool of teams needing tooling across the software lifecycle. GitLab also suggested AI is creating more opportunities to monetize work being shifted earlier and more broadly across development, security, and operations workflows.
ARR acceleration, billings strength, and deal activity
Beyond ARR growth, GitLab emphasized progress in sales execution and large-customer traction. The company said its sales team delivered its largest gross bookings ever. It also highlighted that deals of $500,000 or more grew by more than 150% during the quarter.
In its highest tier offering, the Ultimate plan, sales jumped 35%. GitLab reported that Ultimate now represents 59% of ARR, reflecting continued mix shift toward larger, higher-value deployments.
On the public sector, management said there was a rebound after a period of softness. That improvement, combined with strong large-deal expansion, likely contributed to investors’ comfort that enterprise demand is not only stable but strengthening.
Financial results and guidance raised
On the headline numbers, GitLab reported overall revenue rising 21% year over year to $286.3 million. The company said that figure exceeded its guidance range, which called for sales of $272 million to $274 million.
Subscription revenue increased 21% year over year to $258.3 million, while license revenue rose 20% to $27.9 million, according to the company’s results.
GitLab also lifted its full-year fiscal 2027 outlook. The company now expects revenue between $1.129 billion and $1.133 billion, implying growth of 18% to 19%. Adjusted earnings per share (EPS) are guided to $0.85 to $0.87. That compares with a prior forecast for revenue of $1.112 billion to $1.118 billion and adjusted EPS of $0.79 to $0.82.
For fiscal third-quarter revenue, GitLab forecast $281 million to $283 million, representing 15% to 16% growth, alongside adjusted EPS of $0.19 to $0.20. The company said it had not yet adjusted guidance for any potential growth impact from its newly introduced Flex model.
The Flex model and what investors will monitor
GitLab introduced its Flex model, which allows customers to commit to an annual dollar rate that can shift between seats, consumption credits, and new capabilities. Management said it expects the approach to improve retention and drive growth, but it also noted revenue-recognition effects that could create timing distortions for reported results.
According to GitLab, for every $50 million converted to Flex, it expects $5 million of revenue to be recognized in future periods. The company said that since Flex launched about six weeks prior to the report, customers had already committed more than $20 million to the program.
For investors, the key question is how Flex affects both bookings momentum and the timing of revenue recognition. While the company is pointing to retention and growth benefits, the near-term investor focus will likely include how management’s guidance aligns with the revenue-recognition cadence under Flex.
Market reaction and what it signals
With shares off their lows, the stock reaction suggests investors are increasingly willing to pay for reacceleration indicators. The company’s update paired strong topline results with multiple improving metrics—especially ARR growth rates, billings expansion, and rapid growth in larger deals—at a time when enterprise software buyers remain sensitive to durable demand and software spend visibility.
Bigger-picture, investors also appear attentive to the way AI is changing the software development workflow. GitLab’s management framed AI as lowering the bar for building software and broadening use cases, which could expand the addressable market for its DevSecOps platform. Whether that translates into sustained growth will become clearer as future quarters reflect both Flex adoption and continued enterprise deal flow.
Looking ahead, investors will likely watch the company’s next quarter performance for evidence that underlying billings and ARR momentum persist as Flex adoption scales. Additional market catalysts include further guidance updates and upcoming macro data that can influence software valuations, particularly signals around interest rates and enterprise spending trends.
