TLDR
- GitLab shares declined approximately 8% during premarket hours following disappointing fiscal 2027 projections
- Earnings per share guidance of 76–80 cents significantly undershot Wall Street’s $1.05 estimate
- Revenue forecast of $1.10–$1.12 billion missed the consensus target of $1.12 billion
- Management indicated the Duo Agent Platform won’t materially impact revenue in the current fiscal year
- Multiple Wall Street firms lowered their price targets on the stock after the earnings release
Shares of GitLab have plummeted approximately 57% over the trailing 12-month period, with Wednesday’s premarket decline extending the sell-off after the company delivered fiscal 2027 guidance that underwhelmed investors.
For its January quarter, the company reported adjusted earnings of 30 cents per share. Revenue climbed 23% from the prior-year period to $260.4 million, surpassing the Street’s $252.2 million expectation. The quarterly performance wasn’t where things went wrong.
The disconnect came from forward-looking projections.
For fiscal 2027, GitLab forecasts revenue between $1.10 billion and $1.12 billion. Wall Street had anticipated $1.12 billion, implying approximately 17% year-over-year expansion. That growth rate marks a significant deceleration from the 26% increase the company achieved in the previous year.
The earnings guidance gap proved even more pronounced. GitLab’s outlook calls for adjusted EPS ranging from 76 to 80 cents. Analysts had modeled $1.05. Such a substantial shortfall is difficult to rationalize away.
No fewer than five brokerage firms responded by reducing their price objectives on GitLab shares.
AI: Friend or Threat?
The core issue revolves around artificial intelligence. GitLab’s Duo Agent Platform is designed around collaborative workflows between human developers and AI agents. However, during the earnings call, executives warned analysts against expecting the platform to generate significant revenue during fiscal 2027.
Delivering that message proves particularly challenging given how closely investors are scrutinizing software companies for evidence that AI capabilities are enhancing—rather than eroding—their business models.
Analysts at TD Cowen highlighted the rapidly evolving AI environment as a critical factor to monitor. They emphasized that GitLab must demonstrate its competitive standing in what they described as the “AI 2.0 era,” as AI-native development tools increasingly penetrate the market.
The broader software industry has faced comparable headwinds. MongoDB experienced a 22% drop on Tuesday following its own conservative guidance and acknowledgment that AI had yet to become a meaningful revenue contributor. GitLab’s announcement arrives amid this anxious market backdrop.
Analysts Still See a Path
Not all analysts are abandoning their optimistic stance. William Blair analyst Jackson Ader maintained an Outperform rating, arguing that GitLab maintains a robust enterprise customer base and that artificial intelligence is expanding the company’s addressable market opportunity over the long term.
Ader conceded that the guidance fell short of expectations and that management essentially “reset the bar.” Nevertheless, he highlighted the Q4 results as fundamentally sound, noting that successful execution on product development and sales strategy will determine the company’s trajectory.
GitLab’s stock traded down 7.2% in premarket activity on Wednesday, hovering around $24.35 per share.
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