What Happened?

Shares of devSecOps platform provider GitLab (NASDAQ: GTLB) jumped 7.6% in the morning session after investors revisited the company's strong third-quarter earnings report and upgraded full-year guidance, which had initially been met with a sell-off. 

The stock had previously plunged despite the company reporting solid results. For its fiscal third quarter, GitLab's revenue grew 25% year-over-year to $244.4 million. The company also raised its full-year forecast for both revenue and earnings per share. The initial negative reaction, which saw the stock fall sharply, appeared to stem from concerns about weakness in its segment serving smaller businesses. Broader market worries that artificial intelligence features were not turning into revenue as quickly as hoped also weighed on the stock. The rebound suggested investors were looking past these issues and focusing on the strong performance and improved outlook.

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What Is The Market Telling Us

GitLab’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 5 days ago when the stock dropped 14.2% on the news that the company reported third-quarter results that beat expectations but offered a mixed financial outlook that signaled slowing revenue growth. 

Despite revenue growing 24.6% year-over-year to $244.4 million and adjusted earnings per share beating estimates by 24%, investors focused on the cautious guidance. The company's forecast for fourth-quarter revenue of $251.5 million implied year-over-year growth of 19%, a notable deceleration. While GitLab raised its full-year profit forecast, this was overshadowed by worries about the top line. Adding to the concerns, GitLab's Net Revenue Retention Rate, a key metric showing how much existing customers are spending, slipped to 119% from 121% in the prior quarter. The combination of slowing revenue growth and declining net retention outweighed the company's current profitability beat, leading to the sharp sell-off.

GitLab is down 30.2% since the beginning of the year, and at $39.34 per share, it is trading 46.2% below its 52-week high of $73.14 from February 2025. Investors who bought $1,000 worth of GitLab’s shares at the IPO in October 2021 would now be looking at an investment worth $378.68.

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