GitLab Faces Challenges Amidst Competitive AI Landscape
GitLab (GTLB) shares have decreased by 27.1% year-to-date. In comparison, the broader Zacks Computer & Technology sector has declined by 21%, while the Zacks Internet Software industry has seen an 18.3% drop.
Recent declines in GitLab’s share price can be attributed to escalating competition in the AI-driven code generation sector, particularly from Microsoft (MSFT) and its code repository platform, GitHub. GitHub has advanced significantly through its AI-powered coding assistant, GitHub Copilot, developed with support from OpenAI, reinforcing Microsoft’s leading position in the developer tools market.
Additionally, ongoing macroeconomic conditions and the swift transition towards agentic AI capabilities continue to pose challenges for GitLab.
GitLab Strengthens Its Position in Enterprise Software
Despite these challenges, GitLab’s strong DevSecOps platform—a suite that includes GitLab Ultimate, GitLab Dedicated, and GitLab Duo—has contributed to customer adoption and loyalty. This enhancement bolsters its competitiveness in the enterprise software sector by improving security, scalability, and AI-driven automation. Currently, GitLab supports over 50 million registered users and is trusted by more than half of the Fortune 100 companies.
GTLB’s Future Lies with AI Integration
GitLab’s AI-driven DevSecOps offerings feature a comprehensive product suite that accelerates software development while enhancing security measures. The centerpiece of its offerings, GitLab Ultimate, integrates development, security, and operations. The recent launch of Advanced SAST in September 2024 further bolstered its security capabilities. As of the fourth quarter of fiscal 2025, GitLab Ultimate contributed to 50% of the company’s Annual Recurring Revenues, underscoring its role in customer engagement and revenue generation.
Moreover, GitLab Duo, slated to enhance software development workflows, provides real-time code suggestions that boost developer productivity. This integration of AI into GitLab’s operation demonstrates the company’s dedication to innovation and responsiveness to the dynamic needs of contemporary development teams.
GitLab’s Duo Workflow product, which emphasizes AI-powered software development, entered private beta in the fourth quarter of 2024. Leveraging Generative AI to enhance the software development lifecycle makes GTLB increasingly appealing to AI-focused developers and organizations.
Strategic Partnerships Bolstering GitLab
GitLab benefits significantly from partnerships with major cloud providers, including Amazon‘s (AMZN) Amazon Web Services (AWS) and Zscaler (ZS). These collaborations improve GTLB’s scalability and deployment options, strengthening its competitive stance in the DevSecOps arena by assuring smooth integration and secure, cloud-centric operations.
Notably, GitLab has integrated GitLab Duo with Amazon Q, which enhances DevSecOps on AWS. This collaboration aims to boost security, scalability, and operational efficiency, enabling companies to develop and deploy software more efficiently.
In the fourth quarter of fiscal 2025, Zscaler selected GitLab as a partner following a competitive evaluation process. This partnership reinforces GTLB’s standing in the DevSecOps field while enhancing security features, streamlining workflows, and promoting enterprise adoption.
Conclusion: Maintain GTLB Investment for Now
Despite navigating challenges like heightened competition and cautious corporate spending, GitLab’s robust AI-driven DevSecOps offerings, strategic partnerships, and increasing enterprise acceptance suggest potential for long-term growth. These elements indicate that investors might consider holding onto their stock at this time.
Currently, GitLab holds a Zacks Rank #3 (Hold). To explore further, you can view the complete list of Zacks #1 Rank (Strong Buy) stocks.
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This article initially appeared on Zacks Investment Research (zacks.com).
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
