On Tuesday, the software developer’s stock dropped by 24% after it projected its full-year 2025 revenue and profit to be below Wall Street estimates due to cautious spending in an uncertain economy.
Despite this, analysts and investors believe that the company’s fiscal year 2025 forecast is overly cautious and that the company will experience steady growth.
Investor Ophir Gottlieb, CEO of Capital Market Laboratories, believes that given the uncertainty surrounding the Federal Reserve and economic data, the company’s lower guidance is a measure of caution rather than an indication of slower business expectations. If premarket losses hold, the company’s market capitalization is set to drop by about $2.8 billion from the $11.59 billion it held at the close of Monday’s trading.
CFO Brian Robbins stated that the company’s philosophy behind providing forecasts will be “less conservative” as it enters its third year as a public firm.
GitLab’s platform, which helps users manage, develop code, automate processes, and test programs, is seeing increased adoption, according to the company.
For the first quarter, GitLab expects to incur a loss of between $12 million and $13 million, which includes a $15 million expense related to an in-person company-wide summit for its employees who largely work remotely, the first such event since 2019.
While the company’s revenue projection for the first quarter and fiscal year 2025 fell below analysts’ expectations, it warned that the annual revenue projection does not account for a potential price hike. After placing greater limitations on its free tier, GitLab is seeing a healthy conversion rate from free to paid subscriptions, according to Gil Luria, a senior software analyst at D.A. Davidson.
Last year, the company raised prices for its Premium tier for the first time in five years and expects $10 million to $20 million of incremental revenue in the fiscal year, according to Robbins.
Compared to its peers Atlassian (TEAM.O), the stock of GitLab trades at 241.09 times forward profit projections, while Atlassian trades at 69.42 and 26.99 respectively.