William Blair upgraded GitLab to Market Perform from Underperform, citing a stronger-than-expected second quarter and an improving operating trajectory that the firm said balances risk and reward.
GitLab reported second-quarter revenue of $286.3 million, a 21.3% increase year-over-year and $13.1 million above the consensus estimate of $273.1 million. Adjusted operating income reached $42.6 million, compared with a forecast of $31.3 million, while adjusted earnings per share totaled 24 cents, topping the 18-cent consensus.
Customer and product metrics showed broad-based strength. Deals worth at least $500,000 rose more than 150% year-over-year. Ultimate-tier annual recurring revenue, which accounted for 59% of total ARR, grew about 35%, while SaaS revenue increased 36% and represented 34% of total revenue. First-order counts more than doubled to roughly 1,700, with first-order net ARR up 39%. Sales capacity expanded about 30%, and productivity per representative improved roughly 10%. Net dollar retention showed its first sequential improvement since 2024.
GitLab’s AI initiatives contributed to growth, with paid consumption on the Duo Agent Platform up about 50% sequentially. Secure repositories increased 60%, code pushes rose 50%, and CI/CD pipelines grew roughly 40%.
For the full fiscal year 2027, GitLab raised its revenue outlook to $1.131 billion, an 18.4% increase from the prior year. Adjusted operating margin is forecast at 13.3%, with adjusted EPS projected at 86 cents. Third-quarter revenue guidance was set at $282 million, with adjusted EPS guidance at 20 cents.
William Blair noted risks including the need to validate the durability of newer growth initiatives and the sustainability of recent bookings strength. The firm also highlighted questions about whether the Flex offering will drive incremental growth or primarily shift existing customer commitments, alongside competitive pressures and potential pressure on seat-based pricing.
