GitLab Stock Surges on Google Cloud Deal. Here's What It Means for Investors

The past year has been a tough one for GitLab (NASDAQ: GTLB) shareholders. The market has had a difficult time understanding where the cloud-based DevSecOps (development, security, and operations) platform fits into the artificial intelligence (AI) boom, and what it all means for investors. That uncertainty has sent shares plunging, and the stock has lost roughly half its value over the past year. However, the company shared a development today that gave investors a much-needed boost of confidence.

GitLab announced an expanded collaboration with Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google Cloud to bring its agentic AI tools to cloud customers.

Image source: Getty Images.

A much-needed win

In a press release issued late on Tuesday, GitLab announced that Google Cloud customers can now access its Duo Agent Platform directly from Google's Vertex AI models that they already use -- including Gemini. The actions taken by these AI agents are governed by GitLab's built-in compliance and audit controls -- meaning they are unlikely to go rogue or make risky decisions. Moreover, GitLab Duo Agent Platform usage will count toward fulfilling Google Cloud commitments.

"AI agents are only as good as the context they operate on and the governance around them," according to GitLab chief product and marketing officer Manav Khurana. He went on to say, "This partnership connects [GitLab's Duo Agent Platform] to Vertex AI's strongest models."

Developers use GitLab's tools to speed up development, helping them build, secure, and deploy new software. The platform's onboard AI functionality helps programmers be more efficient, keeps their creations secure, and deploys them more effectively.

A tough transition

GitLab has been shifting to a hybrid subscription pricing model that combines a fixed, recurring user fee with variable usage-based charges. Some investors consider that change as a risky one, questioning whether the company has pricing power in the current AI-powered environment. Others view it as a long-term growth driver.

The transition introduced an element of uncertainty, prompting GitLab to issue conservative guidance. Investors dislike uncertainty, even when there is potential for improved results. This prompted several price target reductions and downgrades from Wall Street's finest -- and a corresponding decline in the stock price.

It remains to be seen if GitLab's Duo Agent Platform, its hybrid pricing model, and its expanded collaboration with Google Cloud will be enough to reignite the company's growth. That said, GitLab is one of only two players that form the DevSecOps duopoly (the other is Microsoft-owned GitHub). The stock is currently selling for roughly 27 times forward earnings, which is an attractive price for a company expected to deliver double-digit revenue growth over the next five years.

Danny Vena, CPA has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet, GitLab, and Microsoft. The Motley Fool has a disclosure policy.