GitLab Inc.: revenue grows 21%, but GAAP loss deepens on restructuring

On September 1, GitLab Inc. reported results for the second quarter of fiscal 2027 (ended July 31, 2026). Revenue grew 21.3% year over year to $286.3 million, but the GAAP loss widened to $36.8 million from $9.2 million a year earlier, driven by one-off restructuring charges. The stock fell 3.1% on the release but gained 7.1% by September 4. In our view, at the current price the share looks rather unattractive: the portal's model implies 14% downside.

Key takeaways

— Revenue in Q2 grew 21.3% to $286.3 million, but the pace slowed from 29.2% a year earlier

— GAAP loss widened to $36.8 million due to one-off restructuring charges of $19.4 million

— Operating cash flow turned negative: minus $3.1 million versus plus $49.4 million a year earlier

— Net debt is negative at $226.1 million, with over $1.2 billion in cash and investments

— The company repurchased shares worth $104.6 million in the quarter, supporting the price but not offsetting weak cash flow

— Q3 guidance implies revenue of $281–283 million, below the level achieved in Q2

— The portal's model implies 14% downside from the current price

Attractiveness

Key figures, USD bn

Revenue in Q2 grew 21.3% to $286.3 million, but the pace slowed from 29.2% a year earlier

In Q2 of fiscal 2027 (ended July 31, 2026), GitLab Inc. revenue reached $286.3 million, up 21.3% year over year. However, growth decelerated: a year earlier it was 29.2%, and in the prior quarter 23.1%. The slowdown is sequential: 24.6% in Q3 2025, 23.2% in Q4, 23.1% in Q1 2026.

The main contribution came from subscriptions – $258.3 million (90% of revenue), with licenses adding $27.9 million. The company cites record gross bookings and net ARR growth of over 40% year over year, but this has not yet accelerated revenue.

GAAP loss widened to $36.8 million due to one-off restructuring charges of $19.4 million

GAAP net loss in Q2 was $36.8 million versus $9.2 million a year earlier. The main driver was restructuring charges announced in May 2026: $19.4 million, including accelerated vesting and award modifications for affected employees ($3.9 million).

Operating loss widened to $56.9 million from $18.4 million, with GAAP operating margin deteriorating from –8% to –20%. Meanwhile, non-GAAP operating income rose to $42.6 million from $39.6 million, reflecting the exclusion of stock-based compensation and one-off items.

Operating cash flow turned negative: minus $3.1 million versus plus $49.4 million a year earlier

In Q2, operating cash flow was –$3.1 million versus +$49.4 million a year earlier. The deterioration was driven by an increase in accounts receivable (outflow of $57.3 million) and accrued expenses, partially offset by an inflow from deferred revenue.

Adjusted free cash flow (non-GAAP) was positive at $9.8 million, but only a quarter of the $46.5 million a year earlier. Over the trailing twelve months, operating cash flow was $232.9 million, reflecting strong prior quarters.

Net debt is negative at $226.1 million, with over $1.2 billion in cash and investments

As of July 31, 2026, cash and short-term investments totaled $1,257.0 million ($226.5 million cash plus $1,030.5 million short-term investments). There is no debt, so net cash position is $226.1 million (negative net debt).

During the quarter, net cash position declined by $108.9 million due to share repurchases, but the company remains financially strong. Deferred revenue grew to $574.7 million, providing future inflows.

The company repurchased shares worth $104.6 million in the quarter, supporting the price but not offsetting weak cash flow

The report states that GitLab repurchased approximately 3.5 million shares during the quarter. According to the cash flow statement, $104.6 million was spent on buybacks, significantly exceeding quarterly operating cash flow (–$3.1 million).

The buyback was funded from accumulated cash, reducing net cash by $108.9 million in the quarter. This supports the share price but reduces the company's financial flexibility.

Q3 guidance implies revenue of $281–283 million, below the level achieved in Q2

The company expects Q3 fiscal 2027 revenue in the range of $281–283 million, below the actual $286.3 million in Q2. This suggests a possible sequential decline, unusual for a fast-growing company.

Q3 non-GAAP operating income guidance is $35–37 million, below the $42.6 million achieved in Q2. For the full year, the company expects revenue of $1,129–1,133 million, implying slower growth in H2.

The portal's model implies 14% downside from the current price

Our value-creation model, based on EBITDA growth and a target multiple, estimates the fair value of the share at 14% below the current market price. This suggests the market is already pricing in an optimistic scenario that may not materialize.

At the current market cap of $8,086.7 million and LTM revenue of $1,100 million, the EV/Revenue multiple is approximately 7.3x (after net cash). This is above the average for mature software companies, especially given slowing growth.

Valuation on the latest reported figures

Bottom line

In Q2, GitLab Inc. showed strong revenue growth of 21.3%, but the pace is slowing, and the GAAP loss widened due to one-off restructuring charges. Operating cash flow turned negative, contrasting with positive non-GAAP metrics. The company maintains a significant net cash position but is spending it on buybacks, which supports the price but does not create operational value. At the current valuation, which per the portal's model implies 14% downside, the shares look rather unattractive. A revision would require faster revenue growth and sustained cash flow improvement.