GitLab Shares Slide Despite Another Earnings Beat

GitLab (GTLB) shares tumbled 15% in early trading Wednesday after reporting Q3 results that topped expectations yet highlighted mounting pressures across key customer segments. Analysts pointed to a slowdown in small-to-medium business demand and lingering impacts from the recent U.S. federal government shutdown.

Key Analyst Concerns

Wells Fargo analysts Ryan MacWilliams and Chris Brazeau noted:

AI-driven coding tools did provide some downstream demand benefits
SMB weakness persists (segment is 8% of ARR)
U.S. federal shutdown effects will also impact Q4
Customer additions slowed, with only 956 net new customers—the lowest in four years
RPO and cRPO growth decelerated to 27% and 28%, raising concerns about FY2026 revenue guide

Wells Fargo kept an Equal Weight rating but reduced its price target from $50 → $45.

More Neutral Views: Mizuho

Mizuho maintained a Neutral rating and cut its target from $52 → $47, noting several ongoing risks:

AI adoption may erode the developer seat-based model
Rising competition from GitHub (MSFT) and AI-native startups
Monetization for premium tiers may be weaker than management implies
Execution risk with the new go-to-market strategy

More Bullish Opinions: Cantor & RBC

Despite the selloff, some analysts remain constructive.

Cantor (Overweight, $60 PT) emphasized:

GitLab Ultimate drove strong platform adoption, now 54% of ARR
7 of the 10 largest Q3 deals were Ultimate tier
Strong security/compliance features driving demand
Payback under 6 months, ROI of 480% over three years
Operating margin improved to 17.9% from 13.2%
Free cash flow margin jumped to 11.1% from 4.9%

RBC (Outperform, $58 PT) added:

Progress in first-order business is steady
Upcoming GitLab Duo Agent Platform launch to shift model toward hybrid seat + consumption
Management sees room for improvement but remains optimistic

Peer Impact

JFrog (FROG) fell 1%
Microsoft (MSFT), whose GitHub competes directly with GitLab, declined 2.9%