GitLab shares climbed more than 16% in after-hours trading after the software company beat Wall Street expectations for fiscal second-quarter revenue and earnings, raised its full-year outlook, and reported early demand for a new consumption-based billing product designed for large enterprise customers.
GitLab reported revenue of $286.3 million for the quarter ended July 31, up 21.3% from a year earlier. That exceeded the $273.1 million consensus estimate cited in the company’s earnings materials. Adjusted earnings reached $0.24 a share, compared with an expected $0.18, while adjusted operating profit rose to $42.6 million, producing an adjusted operating margin of roughly 15%.
The results point to a company converting demand for AI-assisted software development tools into larger contracts and a more flexible revenue model. Yet the figures also show that major corporate deals are taking longer to close, leaving GitLab exposed to the timing of internal approval processes at its biggest customers.
Guidance rises as bookings and retention improve
GitLab raised its full-year revenue forecast, bringing the midpoint of its outlook to $1.131 billion. It also lifted its expected adjusted operating profit for the year to about $150 million.
The upgraded guidance followed record gross bookings during the quarter, according to GitLab, alongside net annual recurring revenue growth of more than 40% year over year. Annual recurring revenue, or ARR, measures the value of contracted subscription revenue on an annualized basis and is closely watched in software because it offers a view of future sales before revenue is fully recognized.
Dollar-based net retention rose to 117%, GitLab said. The measure tracks how much revenue a group of existing customers generates over time, including upgrades and expansions but excluding customers newly acquired during the period. A rate above 100% means existing customers, as a group, spent more than they did a year earlier.
The quarter marked GitLab’s first sequential improvement in dollar-based net retention since 2024. That reversal offers a more constructive signal than headline revenue alone: it indicates that existing enterprise clients are expanding their use of GitLab’s platform after a period in which software companies faced tighter scrutiny of technology budgets.
GitLab’s larger customer base also continued to grow. The company counted 1,571 customers contributing more than $100,000 in annual recurring revenue, up 17% from a year earlier. Customers spending more than $5,000 annually totaled 11,114.
Contracted future revenue increased as well. Remaining performance obligations, which represent contracted revenue that has not yet been recognized, rose 16% year over year to $1.2 billion. Current RPO — the portion expected to be recognized over the next 12 months — increased 20% to $744.7 million.
Flex model brings consumption revenue into focus
A central feature of the quarter was the early rollout of GitLab Flex, a hybrid billing model that combines committed spending with usage-based consumption. GitLab said Flex generated more than $20 million in customer commitments within six weeks of its launch.
The company’s annualized run rate for paid consumption rose from $15 million at the end of the first quarter to more than $40 million by the end of the second quarter. GitLab has set a goal of surpassing $100 million in annualized paid consumption run rate by the end of its fiscal year.
That target is ambitious, but the product’s early uptake gives GitLab a route to monetize AI-related workloads beyond conventional per-seat subscriptions. Traditional software licenses rise largely with headcount. Consumption pricing can expand when customers run more automated workloads, use more computing resources, or deploy AI agents more widely across development teams.
GitLab also moved its Orbit agent context platform into public beta during the quarter. The company said internal benchmarks showed cross-file refactoring speeds improving by as much as 11 times, while factual hallucinations — instances in which an AI system produces incorrect information — fell by up to 45%.
Those figures are GitLab’s own internal benchmarks rather than independently validated results. Even so, they illustrate the sales argument GitLab is making to enterprise technology leaders: AI coding tools must show measurable gains in developer output and reliability before they can command larger budgets.
Cash flow reflects contract timing and AI spending
Profitability on an adjusted basis did not translate into stronger quarterly cash generation. GitLab reported free cash flow of $9.8 million, down from $46.5 million a year earlier. Operating cash flow was negative $3.1 million.
GitLab attributed the decline primarily to collection timing on large multiyear contracts and increased upfront investment in AI infrastructure and agent development. The company ended the quarter with more than $1.3 billion in cash and short-term investments, giving it substantial capacity to fund product development without immediate financing pressure.
Management also flagged longer approval cycles for enterprise deals, especially contracts worth more than $1 million. Multilayer sign-off processes involving chief financial officers can move deal closings and revenue recognition between quarters, making reported results less smooth even when overall demand remains intact.
Software earnings offer a limited crypto market signal
The rally in GitLab shares may draw attention from cryptocurrency traders looking for signals on demand for AI and enterprise software, though a single earnings report offers a narrow read on token markets. Strong software spending can support the narrative that companies are allocating more money to automation and AI infrastructure, areas that overlap with some blockchain projects but do not automatically translate into demand for digital assets.
ByteTree reported a 0.73 correlation between major cryptoassets and the iShares Expanded Tech-Software Sector fund in fresh market data cited in the supplied materials. It also said the daily relationship between digital assets and the Nasdaq reached 0.9 in June. Correlation measures how closely assets have moved together over a defined period; it does not establish that one market causes moves in the other.
GitLab’s results are more useful as evidence that enterprise customers are willing to pay for software tools with measurable productivity benefits. The company’s raised outlook, improving retention and growing consumption commitments reinforce that point, while its slower large-deal approvals show that corporate budgets remain disciplined rather than indiscriminate.
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