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The DevSecOps Platform Everyone Complains About But Nobody Wants To Replace |
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This is the kind of software name that gets punished in a broad risk-off tape, even when the business is doing the right things. |
The product sits in the day-to-day plumbing of how teams ship code, fix bugs, and manage security. It is not a shiny line item you casually swap out on a Monday. |
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| The Setup | GitLab Inc (NASDAQ: GTLB) is a DevSecOps platform that aims to unify software development, security, and operations in a single workflow. | Shares are around $36 and down roughly 41% over the past year, with a market cap near $6B. | One useful signal that sentiment is starting to shift is that a well-known research firm recently upgraded the stock to a top-tier rating, driven by improving earnings expectations. | In plain English, analysts have been moving profit forecasts higher, which tends to happen when execution starts showing up in the numbers. |
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What GitLab Actually Does | GitLab sells a platform for building and shipping software that bundles the full lifecycle into one place: planning, code hosting, CI/CD pipelines, security scanning, and deployment workflows. The core pitch is consolidation. | Most enterprise engineering orgs are a patchwork of tools. GitLab's bet is that buyers would rather reduce tool sprawl, simplify governance, and embed security earlier in the workflow than keep stitching together point solutions. | Two product angles matter most right now: | 1) Platform stickiness
Once GitLab runs source control and build pipelines, it becomes infrastructure. That drives seat expansion, tier upgrades, and add-ons over time. | 2) Enterprise deployment options
Large customers often care less about features and more about control, reliability, and governance. GitLab has been pushing deeper here with offerings designed for more regulated and security-conscious environments. | Then there is AI, which is turning into the next big pricing and packaging lever. |
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Poll: When you hear "budget," what do you feel? |
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Why The Stock Has Been So Weak |
1) The market re-rated enterprise software hard
A lot of software names got repriced as if growth will slow permanently. Even solid execution gets ignored if investors are anchored on multiples and macro risk. |
2) Seat-driven math is less exciting in a hiring pause
GitLab benefits when engineering headcount expands. When companies freeze hiring, growth leans more on upsell, consolidation, and proving ROI. |
3) AI raised expectations for everyone
AI is not a nice-to-have anymore. Buyers want productivity improvements they can measure. If AI does not translate into real usage and expansion, it quickly gets treated as slideware. |
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The Bull Case |
1) Growth is still healthy in a cautious environment |
GitLab guided to quarterly revenue around $238–$239M in its recent outlook, implying growth in the low-to-mid 20s year over year. |
That is a strong pace for an enterprise platform in a budget-sensitive period. |
The bigger tell is customer mix. GitLab has been growing its base of larger customers, including those spending $100K+ in annual recurring revenue, which suggests it is landing deeper inside enterprises instead of stalling out at smaller teams. |
2) Retention is doing the job |
Dollar-based net retention in the low 120s range signals customers are still expanding spend over time through seats, tier upgrades, and broader platform adoption. |
When markets are nervous, retention is the proof the product is not optional. |
3) Security spend is structurally resilient |
Security and compliance are not a cyclical nice-to-have. GitLab's premium tiers benefit when customers want security integrated into the development process, not bolted on after the fact. |
That positioning can hold up even when budgets tighten, because fewer tools and stronger governance is an easy CFO-friendly pitch. |
4) Enterprise deployment can shift the mix toward bigger, stickier deals |
For larger customers, procurement often hinges on governance, control, and reliability. |
If GitLab keeps winning in these environments, it can support larger contract sizes and longer-lasting deployments. |
5) AI can become a real upsell lever if it stays inside the workflow |
GitLab's AI angle is most compelling when it is not just a code assistant. The bigger opportunity is lifecycle AI: code review help, security remediation suggestions, pipeline troubleshooting, and deployment workflow automation. |
If those features increase productivity and reduce cycle time, they become expansion drivers rather than demos. |
6) Rising profit expectations can change the narrative fast |
When earnings expectations start moving higher, it usually means the model is improving: better margins, better efficiency, or more durable growth than feared. |
If GitLab stacks a couple clean quarters, the stock can re-rate quickly simply because it is priced for doubt today. |
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The Bear Case | 1) IT budgets can stay tight longer than people expect | If enterprises keep optimizing seats and delaying expansions, retention can soften and growth can decelerate. The stock will trade heavy if the market thinks that is the new normal. | 2) AI becomes table stakes, not differentiation | If everyone offers an AI layer, the market shifts to who has the most trusted governance, the cleanest enterprise packaging, and the most measurable ROI. GitLab has to prove its AI features are expanding spend, not just checking a box. | 3) Execution risk around large deployments | Big customers create big opportunity, but they can also create lumpiness and more scrutiny. If deployment cycles drag or renewals get tougher, the multiple compresses again. | 4) Guidance matters more when the stock is already bruised | A cautious guide can reset sentiment quickly. With a stock down this much, investors are hypersensitive to any sign that growth is slipping faster than expected. | |
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What I'd Watch Next | Revenue growth staying in the low 20s range without heavy discounting Net retention stability and commentary on seat expansion versus tier upgrades Growth in $100K+ ARR customers and enterprise deal size trends Signs that AI features are actually driving expansions or renewals Operating leverage improving as the company scales Any shift in sales cycle length or buyer scrutiny tied to budgets
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My Take | GTLB looks like a platform business trading like a disposable software tool. | The core product sits in workflows companies do not want to disrupt, and that gives GitLab multiple ways to win: consolidation, security-driven upsell, enterprise-grade deployments, and AI embedded across the lifecycle. | The stock does not need a return to peak optimism. | It needs a steady sequence: durable growth, retention that holds up, and clearer evidence that AI is helping customers do more with the same headcount. | If that happens, the current range can start to look less like a broken chart and more like a reset point for a business that is still compounding under the hood. | |
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That's all for today. Thank you for reading. If you have any feedback, please reply to this email. | Best Regards, | — Adam Garcia
Elite Trade Club |
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