Should You Hold on to GitLab Despite the Stock's 17% YTD Decline?

GitLab GTLB shares have lost 16.8% in the year-to-date, underperforming the broader Zacks Computer & Technology sector’s rise of 7% and the Zacks  Internet - Software industry’s increase of 16.2%.

The underperformance can be attributed to challenging macroeconomic uncertainties and increased competition in AI-enabled DevSecOps, particularly from larger players like Microsoft MSFT. Microsoft has strengthened its position in the DevSecOps space by seamlessly integrating GitHub and Azure DevOps. GTLB shares have also underperformed Microsoft shares, which have gained 19.4% in the year-to-date period.

GTLB Stock Performance

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However, the company is benefiting from strong demand for its DevSecOps platform. Its solutions, such as GitLab Ultimate, Dedicated, and GitLab Duo, play a significant role in driving customer adoption and expanding existing customer relationships. 

GitLab’s expanding clientele and market leadership in the DevSecOps platform category are contributing to its growth prospects. In the first quarter of fiscal 2026, customers with more than $5K of Annual Recurring Revenue (ARR) increased to 10,104, up 13% year over year. Customers with more than $100K of ARR increased to 1,288, up 26% year over year, demonstrating GTLB’s ability to attract and retain large enterprise customers.

GitLab Benefits From Expanding Portfolio

GitLab’s expanding portfolio has been noteworthy. In May 2025, GitLab launched GitLab 18, introducing powerful AI-native features across its DevSecOps platform. This release introduces integrated AI tools, including Code Suggestions and Chat, directly into Integrated Development Environments, now available to Premium and Ultimate customers at no additional cost. 

GitLab Premium users can also purchase Duo Enterprise without upgrading to Ultimate, gaining access to advanced AI across the development lifecycle. GitLab 18 also enhances CI/CD performance, artifact management, and security compliance with new tools like custom Static Application Security Testing logic, Fast Identity Online passkey support, and organization-level vulnerability dashboards.

Further expanding its portfolio, in May 2025, GitLab announced that it had achieved FedRAMP Moderate Authority to Operate status for GitLab Dedicated for Government, thereby enhancing secure DevSecOps for federal agencies.

Strong DevSecOps Partnerships Aid GTLB

GitLab is benefiting from a rich partner network, which includes cloud platforms like Alphabet’s GOOGL Google Cloud and Amazon AMZN. These platforms are helping it expand its footprint among large enterprise customers.

In April 2025, GitLab announced the general availability of GitLab Duo with Amazon Q, integrating Amazon Q’s AI agents into its DevSecOps platform to accelerate development, modernize legacy code, and streamline security and code reviews.

The integration of GitLab’s DevSecOps platform with Alphabet’s Google Cloud services is enhancing developer productivity by streamlining authentication, boosting application deployment and improving the developer experience. This collaboration between GitLab and Alphabet ensures a more seamless and efficient development workflow.

GitLab Initiates Q2 & FY26 Guidance

GitLab’s expanded clientele and market leadership in the DevSecOps platform category are contributing to its growth prospects.

For the second quarter of fiscal 2026, GitLab expects revenues between $226 million and $227 million, indicating an approximate growth of 24% year over year. 

Non-GAAP fiscal second-quarter earnings are expected to be between 16 cents and 17 cents per share. 

For fiscal 2026, GitLab expects revenues between $936 million and $942 million, indicating growth of approximately 24% year over year. 

Non-GAAP earnings are expected to be between 74 cents and 75 cents per share.

GTLB’s Earnings Estimates Trend Upward

The Zacks Consensus Estimate for GTLB’s second-quarter fiscal 2026 earnings is currently pegged at 16 cents per share, which has increased by a penny over the past 30 days, indicating a year-over-year increase of 6.67%.

The consensus mark for second-quarter fiscal 2026 revenues is pegged at $226.55 million, indicating year-over-year growth of 24.08%. 

The Zacks Consensus Estimate for GTLB’s fiscal 2026 earnings is currently pegged at 75 cents per share, which has increased 7.14% over the past 30 days, indicating a year-over-year increase of 1.35%.

The consensus mark for fiscal 2026 revenues is pegged at $939.60 million, indicating year-over-year growth of 23.75%.

GitLab Inc. Price and Consensus

GitLab Inc. price-consensus-chart | GitLab Inc. Quote

GTLB Trading at a Premium

We point out that GTLB stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month price/sales (P/S), GTLB is trading at 7.57X, higher than the Zacks Computer and Technology sector’s 6.57X.

Price/Sales (F12M)

Image Source: Zacks Investment Research

What Should Investors Do With GTLB Stock?

GitLab’s strong growth, AI-powered DevSecOps platform and solid partnerships position it as a leader in the DevOps space.

However, GitLab faces challenges from one-time expenses, such as the global Summit event and ongoing costs related to its China joint venture, Jihu, which add pressure to its margins. Macroeconomic uncertainties and increased competition in AI-enabled DevSecOps continue to pose a headwind. Stretched valuation also remains a concern.

GitLab currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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