GitLab's stock plummets as company forecasts much slower revenue growth

GitLab’s stock plummets as company forecasts much slower revenue growth

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Shares of GitLab Inc. cratered in extended trading today after the DevOps company reported revenue guidance for the coming quarter and full year that fell some way short of Wall Street’s expectations.

The company had just reported a net loss for the fourth quarter of $46.3 million, up slightly from the $40.6 million loss it posted a year earlier. It delivered a loss before certain costs such as stock compensation of three cents per share, with revenue rising 58% from a year earlier to $122.9 million. The results were better than expected, with analysts modeling a wider loss of 14 cents per share on lower revenue of $119.6 million.

However, investors were clearly much more interested in GitLab’s prospects going forward and they did not like what they saw. For the first quarter of fiscal 2024, GitLab is forecasting a loss of between 14 and 15 cents per share on revenue of just $117 million to $118 million. Wall Street is looking for a slightly bigger loss of 16 cents per share on higher revenue of $126.2 million.

For the full year, GitLab sees its losses at between 24 and 29 cents per share, with revenue in a range of $529 million to $533 million. That suggests revenue growth for the year of just 25% at the middle of the forecast range — much slower than what GitLab has traditionally enjoyed. In contrast, Wall Street is looking for a loss of 54 cents per share on revenue of $586.4 million.

The guidance suggests that the previously fast-growing GitLab is about to slow down fast. When the company first went public in 2021, its revenue growth was accelerating at an incredible 70% annually and even this year it barely let up, with fiscal 2023 revenue reported at $424.3 million, up by an impressive 68%.

Investors didn’t like the forecast of a sudden slowdown one bit, as GitLab’s stock lost more than 32% of its value in extended trading. The company has already been on a downward spiral, with its shares falling 48% last year as investors rotated out of money-losing technology firms.

GitLab is a pioneer of the DevOps industry. Its software allows companies to adopt a modern strategy of rapid, continuous software updates by combining their developer teams and information technology operations staff. Using GitLab’s tools, developers can share code more easily and create new applications much faster than before.

Co-founder and Chief Executive Sid Sijbrandij (pictured) tried to put a brave face on things, highlighting the value his company provides to its customers. “Now more than ever, it is critical for companies to show an immediate return on their software investments,” he said. “With our DevSecOps platform, our customers are consolidating tools, reducing integration costs, increasing productivity and accelerating their revenue by deploying their software faster. We believe we are well-positioned to continue to demonstrate significant value to our customers in the current macroeconomic environment.”

That may be so, but it doesn’t hide the fact that GitLab is suffering amid broader economic woes affecting the tech industry. In recent weeks the company has made moves to steady its ship, saying this month that it will raise the price of its premium subscription tier in April, from $19 per month to $29. Last month, it announced that it would lay off around 130 employees, or about 7% of its workforce.

Photo: SiliconANGLE

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