GitLab (GTLB +17%) is experiencing a significant surge after reporting strong EPS upside in its Q2 (Jul) report. This provider of software development tools, or DevOps Platforms, also posted healthy revenue growth of +30.8% year-over-year to $182.6 million, surpassing analyst expectations. The revenue boost was driven by new customer acquisitions and expansion within existing clients. GitLab also guided Q3 (Oct) EPS above consensus.
- Enterprises are integrating AI into all aspects of software development, which requires measurable benefits and improved security. GitLab excels in these areas, resulting in larger deal sizes. For example, Barclays purchased GitLab Duo seats this quarter along with additional ultimate licenses.
- Customers are excited about the productivity and security benefits of GitLab Duo, including up to 90% reduction in time spent on toolchain operations, 50% faster lead time, and 50% faster vulnerability detection.
- Adjusted operating margin jumped to 10%, significantly exceeding expectations. This compares to -3% a year ago and -2% in Q1 (Apr), showcasing the operating leverage in GitLab's business model and contributing to the EPS upside.
After a surprise profit in Q1 and significant margin expansion in Q2, investors are taking a fresh look at GitLab. The stock had pulled back since early March, but consecutive strong earnings results are putting GitLab back on the radar.
