Sometimes beating earnings just isn't enough. GitLab Inc. (GTLB) learned that lesson the hard way on Wednesday when shares plunged despite delivering better-than-expected third-quarter results. The culprit? Fourth-quarter guidance that missed Wall Street's mark by what amounts to a rounding error.
GitLab reported earnings of 25 cents per share, comfortably ahead of the 20-cent consensus estimate. Revenue came in at $244.4 million, topping expectations of $239.63 million and representing a solid 24.64% jump from the prior year's $196 million. Pretty good numbers by any reasonable measure.
"More code means more of a need for GitLab," CEO Bill Staples explained. "Engagement is growing across our platform as we are a critical part of how our customers deliver high quality, secure software. We've architected GitLab and Duo Agent Platform to provide intelligent orchestration across the software lifecycle, facilitate trust and accuracy in an AI world, and help accelerate the end to end software delivery process required to win."
But here's where things got tricky. For the current quarter, GitLab expects revenue between $251 million and $252 million. Analysts were looking for $252.65 million. That's a miss of less than $1 million, or roughly 0.3%. Yet the market treated it like a disaster, sending shares down 13.6% to $37.49, dangerously close to the stock's 52-week low of $37.89.
The company did offer some better news for those willing to look further out. GitLab significantly raised its full fiscal year 2026 guidance, projecting adjusted earnings of 95 to 96 cents per share compared to its previous range of 82 to 83 cents. That's well above the Street's 83-cent estimate. Revenue guidance also got a boost to $946 million to $947 million, up from the prior $936 million to $942 million range and beating the consensus of $941.12 million.
Analysts Turn Cautious
The analyst community responded with a chorus of price target cuts. Rosenblatt trimmed its target to $55 from $58. On December 3rd, Goldman Sachs maintained its neutral rating but lowered its target to $42 from $48. UBS kept a buy rating but dropped its target to $51 from $60, while Keybanc stuck with overweight but reduced its price target to $49 from $53.
Not everyone was bearish though. Cantor Fitzgerald reiterated an overweight rating with a $60 target, and JP Morgan maintained neutral with a slight bump to $53 from $52. The mixed reactions suggest analysts are weighing solid fundamentals against near-term execution concerns.
