By Mackenzie Tatananni
GitLab stock was rising Friday after the software company posted better-than-expected earnings and announced a leadership transition.
GitLab reported adjusted earnings of 23 cents a share, beating the FactSet consensus estimate of 16 cents. Total revenue increased to $196 million, up 31% from a year prior and surpassing Wall Street's forecast of $187.9 million.
GitLab stock was rising 1% to $66.76.
Chief Financial Officer Brian Robins pointed to the company's record non-GAAP operating margins in the third quarter.
"I am very pleased with our results and the team's execution as we continue to deliver against our commitment to responsible growth," Robins said in a news release.
In a separate announcement, GitLab reported that Sid Sijbrandij would be stepping down as CEO to focus on cancer treatment.
Sijbrandij co-founded the company in 2012 and will serve as executive chair of GitLab's board. In a social media post, Sijbrandij shared that he was "working towards making a full recovery."
Bill Staples was named Sijbrandij's successor, effective immediately. Staples is the former CEO of web analytics company New Relic and has nearly 30 years of experience in web development.
GitLab raised its full-year guidance on the back of strong earnings. The company now anticipates adjusted per-share earnings between 63 cents and 64 cents on revenue between $753 million and $754 million. GitLab previously projected earnings of 47 cents on revenue of $744 million.
Raymond James analysts reiterated their Outperform rating on the stock and raised their price target to $80, writing that the company's Duo AI tool would likely "become an increasing theme."
The analysts also identified the strides Staples made while heading New Relic, notably the company's turnaround, which concluded in 2021. The initiative drove margin expansion and a shift to consumption pricing before the company ultimately was taken private last year.
"New Relic shares increased more than 50% over the time of Staples' CEO tenure, and while we think Plan A will be a focus on maintaining a healthy growth trajectory while improving margins, we do believe GTLB is a strategic asset," the analysts wrote.
Needham analysts shared the sentiment, maintaining a Buy rating while raising their price target to $80 from $75.
"Management left the door open to evolving the mechanism GitLab monetizes as agentic AI remains a debate for how seat-based subscription models should capture value," analyst Mike Cikos noted. Seat-based subscription is a software pricing model in which the cost of a service is based on the number of "seats," or individual users.
"In this regard, we see Mr. Staples' experience overseeing New Relic's transition to a Consumption-based model as an invaluable asset," Cikos wrote.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
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December 06, 2024 10:51 ET (15:51 GMT)
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