Is Beaten-Down GitLab Stock a Buy as Revenue Growth Remains Strong?

Although its shares have bounced from their lows, GitLab (NASDAQ: GTLB) stock failed to keep its momentum when the company reported its fiscal first-quarter results after the bell on June 2. The DevSecOps (development, security, and operations) company has been caught in the narrative that it will be an AI loser, despite continuing to deliver strong revenue growth. The stock has lost about a third of its value over the past year.

Let's take a closer look at its results and prospects to determine if the growth stock is a buy, or if it's time for investors to give up on the name.

Solid growth continues

GitLab saw solid growth in fiscal Q1, coming from both new and existing customers. It realized a 30% increase in new logo growth -- i.e., acquiring new customers -- in the quarter, while its dollar-based net retention was 117% over the past 12 months, showing strong growth within its customer base. The company said it was seeing rising demand from non-technical users, while it also recorded nearly $20 million in consumption revenue from its Duo Agentic Platform.

Overall revenue climbed 23% year over year to $264.2 million. That was well above the company's guidance for revenue of $253 million to $255 million. Subscription revenue increased by 23% year over year to $239.3 million, while license revenue jumped by 25% to $24.9 million.

The company continues to focus on enterprise customers, where it is seeing the strongest growth. The number of customers with $100,000 or more in annual recurring revenue (ARR) rose by 18% to 1,519, making up 75% of its ARR. Meanwhile, customers with $5,000 or more in ARR now represent 95% of its business.

Looking ahead, GitLab upped its full-year guidance. It now expects full-year fiscal 2027 revenue of $1.112 billion to $1.118 billion, representing growth of 16% to 17%, and adjusted earnings per share (EPS) in the range of $0.79 to $0.82. That's up from a prior forecast for revenue of $1.099 billion to $1.118 billion and adjusted EPS of $0.76 to $0.80.

For fiscal Q2, it forecast revenue to be between $272 million and $274 million, representing approximately 16% growth at the midpoint. It guided for adjusted EPS of between $0.17 and $0.18.

The company also announced that it is slashing about 14% of its workforce and exiting 22 countries as it flattens its organizational structure. This will not impact sales rep numbers, which it has been increasing. It expects the impact of more quota-carrying sales reps to start to have a positive impact in the second half of the year.

Image source: Getty Images.

Is it time to buy the stock?

GitLab continues to produce solid growth, although management maintains a conservative tone as it continues to make organizational changes. The new logo growth was encouraging, and its switch to a hybrid seat-plus consumption pricing model (combining a fixed, recurring per-user fee with variable charges based on product usage) with its Duo Agent Platform (which requires consumption credits) appears to be paying early dividends. Meanwhile, the company is set to get in on the popular trend of offering flexible credits with the introduction of GitLab Flex.

The stock remains unloved, leaving it with an attractive price-to-sales multiple of just 4.1 based on fiscal 2027 (ending January 2027) analyst estimates, despite being a company flush with cash and growing its revenue at a solid clip. I continue to believe the company has a highly valuable platform and is undervalued, and as such I'd be a buyer of the stock at these levels.

Geoffrey Seiler has positions in GitLab. The Motley Fool recommends GitLab. The Motley Fool has a disclosure policy.