Gitlab shares soar 15% on strong beat-and-raise quarter, margin expansion

Investing.com — Gitlab lifted its annual guidance after reporting better-than-expected results on Tuesday, as a flurry of deals and a jump in margins boosted performance. 

Gitlab Inc (NASDAQ:) surged over 15% in premarket trading Wednesday. 

For fiscal 2024, the company now expects adjusted EPS between $0.45 and $0.47 up from prior guidance for adjusted EPS of $0.34 to $0.37. Revenue is expected in a range of $742 million to $744M, from $733M to $737M previously. 

The company Q2 adjusted earnings of $0.15 a share on revenue of $182.6M, beating Wall Street estimates for $0.10 on revenue of $176.9M.

Current remaining performance obligation, or cRPO, a key metric that measures subscription backlog expected to be recognized over the next 12 months, was $475.0B, up 42% compared to the second quarter of fiscal 2024.

“We delivered another quarter of better than 30% top-line growth and significant year-over-year operating margin expansion,” the company said, as non-GAAP margin swung to 22% in Q2 from negative 3% in the prior-year period.

Looking ahead of Q3, the company guided adjusted EPS in a range of $0.15 to $0.16 on revenue of $187M to $188M, compared with analyst estimates for $0.11 and $187M.

RBC Capital Markets analysts reiterated an Outperform rating on GTLB stock after the report, and raised their target price from $55 to $60. 

“We liked hearing about a stable demand environment, strength in the enterprise and Ultimate adoption, bullish leading indicators and early opportunity around GenAI,” they wrote. “FY/25 guidance was increased by more than the Q2/25 beat and could provide a path to 30% + growth, in our view.”

Analysts at Wolfe Research were similarly bullish.

“After what felt like somewhat of a false start in 1Q, GTLB delivered one of the cleaner prints across Software this earnings season,” they said in a note.

“We walk with increased confidence in underlying fundamentals, particularly so given the strong turnaround in key, forward-looking metrics, and believe the potential for M&A remains on the table.”

Yasin Ebrahim contributed to this report.