GitLab (GTLB -2.96%), a leading DevSecOps platform company, posted robust financial results in its Q2 Fiscal Year 2025 earnings release on September 3, 2024. The company reported revenue of $182.6 million, surpassing the management's guidance of $176.0-$177.0 million. Non-GAAP (generally accepted accounting principles) operating income came in at $18.2 million, exceeding the $10.0-$11.0 million guidance. Additionally, non-GAAP diluted net income per share was $0.15, higher than the $0.09-$0.10 range expected. This quarter reflects strong operational execution and strategic progress.
| Metric | Q2 FY 2025 Actual | Q2 FY 2025 Guidance | Q2 FY 2024 Actual | Y/Y Change |
|---|---|---|---|---|
| Revenue ($M) | 182.6 | 176.0-177.0 | 139.6 | 31% |
| Non-GAAP Operating Income ($M) | 18.2 | 10.0-11.0 | -4.3 | 523.26% |
| Non-GAAP Diluted Net Income per Share ($) | 0.15 | 0.09-0.10 | - | - |
| GAAP Operating Margin | (22%) | - | (39%) | 17 pts |
Source: Expectations based on management's guidance, as provided in 2024-06-03 earnings report.
Overview of GitLab
GitLab Inc. is a comprehensive DevSecOps platform that integrates development, operations, IT, security, and business teams into a single tool. The company aims to address inefficiencies and fragmentation in the software development lifecycle with its all-in-one platform. Recently, GitLab launched GitLab Duo Enterprise, an AI-powered add-on, and was recognized as a leader in the Gartner Magic Quadrant for AI Code Assistants. This highlights GitLab's commitment to innovation and market leadership.
The company focuses on broad adoption of its platform, evidenced by its substantial customer base and pivotal growth metrics. GitLab reported a 19% increase in customers with >$5,000 ARR (annual recurring revenue) and a 33% rise in customers with >$100,000 ARR. The dollar-based net retention rate stood at 126%, reflecting strong customer retention and recurring revenue.
Quarterly Highlights
GitLab's revenue for Q2 FY 2025 was $182.6 million, up 31% from $139.6 million in Q2 FY 2024. This exceeded management's guidance by $5.6 million. The significant revenue growth indicates continued, strong market adoption and customer retention. The company's GAAP operating margin improved to (22%) from (39%) in Q2 FY 2024, showcasing enhanced operational efficiencies. Non-GAAP operating margin also drastically shifted to a positive 10% from (3%) in Q2 FY 2024, indicating effective cost management and profitability.
Moreover, non-GAAP diluted net income per share was reported at $0.15, compared to management's guidance of $0.09-$0.10, marking a 50% outperformance at the high end of the range. Non-GAAP net income was $24.5 million, significantly up from $1.9 million in Q2 FY 2024. These financial metrics highlight GitLab's successful strategies in growth and profitability.
GitLab also launched GitLab Duo Enterprise, an AI-powered add-on priced at $39 per user per month. The launch coincided with GitLab being named a Leader in the Gartner Magic Quadrant for AI Code Assistants. This underscores the company's focus on integrating AI into its DevSecOps platform, enhancing its competitive edge.
Customer engagement remained robust, with clients generating >$5,000 ARR increasing to 9,314, up 19% YoY, and those generating >$100,000 ARR rising to 1,076, up 33%. The dollar-based net retention rate was 126%, demonstrating strong customer growth and retention. However, the company's GAAP gross margin dropped slightly to 88% in Q2 FY 2025 from 89% in Q2 FY 2024, while the non-GAAP gross margin remained steady at 91%.
Operating cash flow was $11.7 million for Q2 FY 2025, down from $27.1 million in Q2 FY 2024. This decrease appears to be a point of concern, though the substantial gains in other financial metrics may offset this trend for now. GitLab delivered positive operating cash flow and notable margin expansion, bolstered by strategic innovations and effective cost management.
Looking Ahead
For Q3 FY 2025, GitLab's guidance includes revenue of $187.0-$188.0 million, non-GAAP operating income of $19.0-$20.0 million, and non-GAAP diluted net income per share of $0.15-$0.16. These projections reflect management's confidence in continued strong performance. Furthermore, the company raised its full-year guidance, now expecting revenue of $742.0-$744.0 million (up from $733.0-$737.0 million) and non-GAAP operating income of $55.0-$58.0 million (up from $34.0-$38.0 million). The upward revision highlights management's optimistic outlook.
Investors should watch for further advancements in GitLab's AI capabilities, customer growth metrics, and strategic partnerships. The integration of AI within its DevSecOps platform and expansion through strategic alliances are pivotal for future growth. Also, paying attention to any changes in gross margins and cash flow will be crucial as GitLab navigates its rapid growth phase.
