Software development tools maker GitLab (NASDAQ:GTLB) reported Q2 CY2024 results topping analysts’ expectations, with revenue up 30.8% year on year to $182.6 million. The company expects next quarter’s revenue to be around $187.5 million, in line with analysts’ estimates. It made a non-GAAP profit of $0.15 per share, improving from its profit of $0.01 per share in the same quarter last year.
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GitLab (GTLB) Q2 CY2024 Highlights:
- Revenue: $182.6 million vs analyst estimates of $177.2 million (3.1% beat)
- Adjusted Operating Income: $18.17 million vs analyst estimates of $10.56 million (72.1% beat)
- EPS (non-GAAP): $0.15 vs analyst estimates of $0.10 (45.8% beat)
- The company lifted its revenue guidance for the full year to $743 million at the midpoint from $735 million, a 1.1% increase
- EPS (non-GAAP) guidance for the full year is $0.46 at the midpoint, beating analyst estimates by 26.9%
- Gross Margin (GAAP): 88.3%, down from 89.5% in the same quarter last year
- Free Cash Flow Margin: 5.9%, down from 22.1% in the previous quarter
- Net Revenue Retention Rate: 126%, down from 129% in the previous quarter
- Market Capitalization: $7.53 billion
“Our results show the combination of our end-to-end platform and AI solutions are driving results for our customers by aligning to business goals, providing measurable benefits, and improving security,” said Sid Sijbrandij, GitLab CEO and Co-Founder.
Founded as an open-source project in 2011, GitLab (NASDAQ:GTLB) is a leading software development tools platform.
Developer Operations
As Marc Andreessen says, "software is eating the world" which means the volume of software produced is exploding. But building software is complex and difficult work which drives demand for software tools that help increase the speed, quality, and security of software deployment.
Sales Growth
As you can see below, GitLab’s 50.2% annualized revenue growth over the last three years has been incredible, and its sales came in at $182.6 million this quarter.
Unsurprisingly, this was another great quarter for GitLab with revenue up 30.8% year on year. On top of that, its revenue increased $13.4 million quarter on quarter, a very strong improvement from the $5.41 million increase in Q1 CY2024. This is a sign of acceleration of growth and great to see.
Next quarter’s guidance suggests that GitLab is expecting revenue to grow 25.3% year on year to $187.5 million, slowing down from the 32.5% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 23.6% over the next 12 months before the earnings results announcement.
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Product Success
One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company’s products and services over time.
GitLab’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 126% in Q2. This means that even if GitLab didn’t win any new customers over the last 12 months, it would’ve grown its revenue by 26%.
Despite its recent drop, GitLab still has an excellent net retention rate. This data point proves that the company sells useful products, and we can see that its customers are satisfied and increasing usage over time.
Key Takeaways from GitLab’s Q2 Results
It was good to see GitLab beat analysts’ revenue, adjusted operating income, and EPS expectations this quarter. We were also glad it lifted its full-year revenue and earnings guidance, which came in higher than Wall Street’s estimates. Zooming out, we think this was a solid "beat-and-raise" quarter. The stock traded up 10.2% to $49.25 immediately following the results.
So should you invest in GitLab right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.