GitLab (GTLB -2.96%), a leader in DevSecOps platforms, showcased impressive financial performance in its Q3 fiscal year 2025 earnings release on December 5, 2024. Revenue reached $196 million, beating analyst and management predictions. Non-GAAP diluted EPS stood at $0.23, outperforming expectations by $0.08. Overall, GitLab's strategic initiatives are reflected in its substantial revenue growth and expanded margins.
| Metric | Q3 FY 2025 | Q3 Estimate | Q3 FY 2024 | Y/Y Change |
|---|---|---|---|---|
| Non-GAAP EPS (Diluted) | $0.23 | $0.155 | $0.09 | +155.6% |
| Revenue | $196.0M | $187M | $149.7M | +31.0% |
| Non-GAAP Operating Margin | 13% | — | 3% | +10 pp |
| Adjusted Free Cash Flow | $9.7M | — | $(6.7)M | +245.5% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in 2024-09-03 earnings report.
The Business and Recent Focuses
GitLab pioneered an integrated DevSecOps platform that combines development, security, and operations tasks into one streamlined tool. This innovation intends to optimize the software development lifecycle by eliminating the need for multiple separate tools. Its approach promises to reduce complexity, providing significant productivity gains and cost efficiencies for users. GitLab's major focus remains on expanding this comprehensive platform, which already serves 30 million users, including over half of the Fortune 100 companies.
Recently, GitLab has concentrated on strategic partnerships and innovation within AI-powered features. Partnerships with industry giants like AWS enhance its market position and increase its customer base. These collaborations, alongside continuous innovation, especially in security solutions, form the cornerstones of GitLab's strategy.
Quarterly Achievements and Changes
In the third quarter, GitLab exceeded revenue guidance, achieving $196 million against a guided range of $187 million to $188 million. This success is attributed to the rising demand for its all-in-one DevSecOps platform. The non-GAAP operating income also surpassed expectations, reaching $25.9 million compared to a guided $19 million to $20 million. This led to an improvement in the non-GAAP operating margin to 13%, up from 3% the previous year.
These financial results were driven by both customer growth and retention. Customers contributing more than $5,000 in annual recurring revenue increased by 16% to 9,519, while those exceeding $100,000 grew by 31% to 1,144. GitLab maintained a strong Dollar-Based Net Retention Rate of 124%, showcasing robust account expansion.
Product achievements include notable recognitions in the Gartner Magic Quadrant, as well as launching the Advanced SAST (Static Application Security Testing) feature, which underlines GitLab's emphasis on security. Furthermore, strategic alliances, such as with AWS, continue to propel its market presence.
However, the quarter was not without its challenges. GitLab noted a significant cash usage increase, with GAAP net cash used in operating activities rising from $6 million last year to $177 million this quarter. This warrants monitoring as the company navigates a competitive landscape, particularly with competitors such as GitHub.
Looking Forward
Looking ahead, GitLab's management has issued strong guidance. For the fourth quarter, it anticipates revenues in the range of $205 million to $206 million. For the full fiscal year, expected revenues are between $753 million and $754 million, with a non-GAAP diluted net income per share forecast of $0.63 to $0.64. This guidance suggests continued financial growth and margin improvement.
Investors should keep an eye on GitLab's strategic investments, particularly in AI and security components, since these areas are anticipated to be significant growth drivers in the coming years. Additionally, monitoring the company's cash flow management and ongoing competitiveness in the fast-evolving DevSecOps space will be crucial.
