We initiate on GTLB with a Strong Buy rating and a $125 PT. GitLab builds a single application DevOps platform that helps organizations plan, build, secure, and deploy software at scale.
The investment thesis: Our FY26E revenue growth estimate of $1.02bn is ahead of consensus by 8-10% on compounding monetization catalysts (Premium-tier price resets + rapid mix-shift to Ultimate + Dedicated modules + early Duo AI monetization), with only half of Premium-tier uplift baked-in. Ultimate adoption is a two-quarter INFLECTION from 44% to 50% of ARR, and Duo ARR pipeline is already ahead of expectations.
Management is executing into a significant expansion opportunity, with 35% y/y backlog growth well ahead of 24% consensus assumption, supporting our conviction for continued topline beats. We see the market compounding effect as significantly underappreciated, justifying a 15.5x forward EV/Sales multiple, a premium to the current 8.5x level, supported by superior 124% net retention and AI-driven monetization traction.
Sustained premium multiples are not without risk, given potential for adoption delays and macro uncertainty, but we see R/R as attractive.
Bottom line: We see a path for sustained outperformance, underpinned by underestimated monetization levers and room for material multiple re-rating, making GTLB a high-conviction Strong Buy at current levels.
The Flywheel: Ultimate and Dedicated Upsell Anchor Durability of Expansion
This is where the magic happens: AI-driven monetization is rapidly emerging as a transformational revenue/margin lever within the GitLab financial model, which consensus is only starting to appreciate. The signs are already clear – GitLab’s AI suite (especially GitLab Duo) is driving strong and accelerating adoption by new and existing blue-chip customers.