GitLab GTLB shares have jumped 13.3% in a month, underperforming the Zacks Computer & Technology sector’s return of 0.7% and the Zacks Internet Software industry’s appreciation of 3%. 

The outperformance can be attributed to strong top-line growth expectations in fiscal 2025. Its expanding clientele has been a key catalyst. Solid adoption of its AI-powered DevSecOps platform is aiding prospects.

GTLB expects total revenues between $742 million and $744 million, indicating a growth rate of 28% over fiscal 2024. Earnings are expected between 45 cents and 47 cents per share.

For third-quarter fiscal 2025, GTLB expects total revenues between $187 million and $188 million, suggesting year-over-year growth rate in the 25-26% range. Earnings are pegged at 15 cents and 16 cents per share.

GTLB Shares Beat Sector, Industry

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GTLB’s FY25 Earnings Estimate Revisions Show Upward Trend

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $743.41 million, indicating year-over-year growth of 28.19%.

The consensus mark for earnings is pegged at 46 cents per share, unchanged over the past 30 days. GTLB reported earnings of 20 cents in the year-ago quarter.

The Zacks Consensus Estimate for fiscal third quarter revenues is pegged at $187.67 million, indicating year-over-year growth of 25.39%.

The consensus mark for earnings is pegged at 16 cents per share, up by a penny over the past 60 days. GTLB reported earnings of 9 cents per share in the year-ago quarter.
 

GTLB’s earnings beat the Zacks Consensus Estimate in all of the trailing four quarters, the average surprise being 328.13%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Technical indicator is bullish for GitLab as the shares trade above the 50-day and 200-day moving averages, which indicates upward momentum.

GTLB Trades Above 50-Day & 200-Day SMA

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Strong Portfolio Boosts GitLab Stocks Prospects

GitLab is leveraging AI to boost the potency of its portfolio. It has introduced AI throughout the entire software development cycle, improving productivity and security without sacrificing speed. 

Customers with more than $5K of Annual Recurring Revenues (ARR) increased 19% year over year to 9,314 in second-quarter fiscal 2025. Customers with more than $100K of ARR jumped 33% year over year to 1,076. Moreover, the dollar-based Net Retention Rate was 126% in the reported quarter.

GitLab’s robust portfolio has been driving clientele expansion. AI is helping GTLB win large deals from clients like Barclays, F5 FFIV, KeyBank, Lockheed Martin and others. Customers are fast adopting its AI offerings Gitlab Duo and GitLab Duo Pro.  

GitLab Duo’s features offer solid productivity and security benefits, including up to 90% reduction in time spent on toolchain operations, 50% faster lead time, and 50% faster vulnerability detection.

F5 is adopting GitLab Duo after seeing value from Ultimate in driving improved developer experience and productivity. F5 is rolling out GitLab Duo to all of its two thousand developers.

In second-quarter fiscal 2025, 7 of GiLab’s 10 largest deals were Ultimate purchases and 7 of GTLB’s top 10 first-order customers landed with Ultimate. At the end of second-quarter fiscal 2025, Ultimate is 47% of total ARR.

GitLab Dedicated is used by enterprises with highly complex security and compliance requirements and in regulated industries such as the public sector and financial services. Snowflake SNOW has migrated to GitLab Dedicated to source code management, CI, and security for its corporate environment.

GitLab’s strong partner base, which includes cloud service platforms like Alphabet GOOGL and Amazon, is helping the company rapidly expand its footprint among large enterprise customers.

GitLab Shares Overvalued

GTLB stock is overvalued at this moment, as suggested by the Value Score of F.

GitLab stock is trading at a significant premium with a forward 12-month Price/Sales (P/S) of 11.23X compared with the industry’s 2.94X.

P/S Ratio (F12M)

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Conclusion

GitLab’s strong portfolio and expanding partner base are noteworthy. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term. 

However, challenging macroeconomic conditions and a cautious spending environment are headwinds along with a stretched valuation.

GitLab currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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