Sometimes beating expectations just isn't enough. GitLab Inc. (GTLB) learned that lesson the hard way on Wednesday, watching its shares plunge even after posting respectable third-quarter results.

The software development platform reported revenue growth of 25% year-over-year to $244.4 million, powered by subscription revenue that jumped 27%. Not bad, right? Wall Street didn't think so, sending the stock down 13.6% to $37.44.

What Analysts Are Saying

Rosenblatt Securities analyst Blair Abernethy maintained his Buy rating but trimmed his price target from $58 to $55. He pointed to "headwinds in federal government and continued SMB weakness" that clouded an otherwise solid quarter.

Canaccord Genuity analyst Kingsley Crane kept his Buy rating and $70 price target intact, but his notes revealed the real concern: GitLab's net recurring revenue growth decelerated to 119%, down from 121% the previous quarter and 124% a year ago. That's still impressive growth, but the trend line isn't moving in the right direction.

The Numbers Behind the Worry

Gross margin remained robust at 88.6%, though it contracted about 240 basis points year-over-year. The customer base continued expanding, with 10,475 customers spending more than $5,000 and 1,405 clients above the $100,000 threshold.

For the fourth quarter, GitLab guided to revenue of $251-$252 million, essentially meeting the consensus estimate of $251.9 million. Management raised full-year fiscal 2026 guidance to $946-$947 million in revenue and 95-96 cents per share in non-GAAP earnings.

The mixed message: results were fine, but growth is slowing. In today's market, that's enough to spook investors.