Gitlab Inc (NASDAQ:GTLB) stock rose 0.91% (As on December 17, 11:20:48 AM UTC-4, Source: Google Finance) after KeyBanc downgraded the company to Sector Weight from Overweight without a price target as part of its 2026 vertical software outlook. The analyst in question cited the software giant’s pricing power, as well as changes to its business model that increase execution risk in the short term. The company’s pricing power will likely be a headwind throughout 2026 while changes to its business model to incorporate new usage-based elements increase execution risk in the near-term, the firm tells investors in a research note.
Further, there will be changes to the business model to incorporate new consumption/usage-based elements with the Duo Agent Platform increase execution risk in the [near-term]; and there is continued overhang of AI code generation weighing on developer headcount growth for seat-based models likely remains,” analysts at the firm wrote in a note to clients. “While we continue to appreciate GitLab’s platform driving consolidation opportunities, we see more balanced risk-reward at current levels.”
On the other hand, in recent quarters, GitLab has released its AI-powered DevSecOps platform. This has raised the bar on what analysts expect in terms of accelerated AI-driven upsells, rapid AI feature adoption, measurable seat expansion, and clear pricing uplift from AI integration. Unfortunately, GitLab’s revenue guidance of between $946 million and $947 million for its fiscal year 2026 implies steady growth, but not the AI premium that analysts want. The Microsoft announcement then makes GitLab guilty by association. It’s too early to draw firm conclusions from the report. However, it could suggest that companies are still in proof-of-concept (POC) mode. That means they’re experimenting with AI, but may not be ready for large-scale paid adoption. This comes at a time when AI budgets are lumpy and tied to ROI metrics that are still unclear. The takeaway may be that if Microsoft can’t hit its AI sales targets, then smaller AI-platform vendors will likely face similar adoption headwinds.
Moreover, in the third quarter, customers with more than $5,000 of ARR reached 10,475, an increase of 10% year-over-year. Customers with more than $100,000 of ARR reached 1,405, an increase of 23% year-over-year. Dollar-Based Net Retention Rate was 119%. Total RPO grew 27% year-over-year to $1.0 billion, while cRPO grew 28% to $659.1 million.
Meanwhile, GitLab announced that Jessica Ross will join the company as Chief Financial Officer (CFO), effective January 15, 2026. Ross joins from Frontdoor, where she served as CFO.