GitLab (NASDAQ: GTLB) Shifts to AI, Reports Strong Earnings Amid Workforce Cuts

• RBC Capital maintains its Sector Perform rating on GitLab (NASDAQ: GTLB), with the stock priced at $31.82.
• GitLab is undergoing a significant strategic shift, including a 14% workforce reduction and a stronger focus on artificial intelligence.
• The company's pivot to AI is showing early positive results, with better-than-expected first-quarter earnings and an increased full-year financial forecast.

RBC Capital has maintained its Sector Perform rating on GitLab (NASDAQ: GTLB), with the stock priced at $31.82 during the announcement. GitLab is a company that provides a single application for the entire software development lifecycle. This platform helps developers plan, build, secure, and deploy software.

The company is undergoing a significant strategic change. As highlighted by The Wall Street Journal, GitLab is cutting 14% of its workforce, which affects 350 employees. This move is part of a larger plan to focus more on artificial intelligence and exit operations in 22 countries.

This pivot to AI appears to be showing early positive results. The company reported better-than-expected earnings for its first fiscal quarter and increased its financial forecast for the full year. This was driven by growing momentum in its AI-related business.

For its first quarter of fiscal year 2027, GitLab reported 23% revenue growth and a 2-point increase in its operating margin. The operating margin is a measure of profitability that shows how much profit a company makes from its core business operations before interest and taxes.

CEO Bill Staples notes that the rise of AI is creating strong, long-term benefits for the company. He pointed to promising results from the GitLab Duo Agent Platform, positioning the company as a key player for secure software creation in the age of AI.