- Both GitLab and Asana reported strong second-quarter results, with the former posting a 38% YoY revenue growth
- While results could have been better in both cases, both GitLab’s and Asana’s results point that the spending activity has been normalizing in recent months
- This prompted the DevOps company to boost its full-year guidance and ultimately send shares higher
Software developers Gitlab (NASDAQ:GTLB) and Asana (NYSE:ASAN) reported strong second-quarter results despite the still-difficult macro environment.
GitLab reported revenue growth of 38% year-over-year, which was better than what the Street was looking for.
The company’s management also noted that customer spending activity appears to be stabilizing, which prompted it to raise its profit and revenue guidance for its full fiscal year.
On the other hand, Asana’s sales were up 20% annually, which marks a deceleration from 26% last quarter but much better sequential revenue growth than last quarter.
GitLab’s Robust Quarter
GitLab reported revenue of $139.6 million, up 38% annually and higher than the consensus of $129.9 million. The company also posted a surprising profit for Q2, as its adjusted earnings of $0.01 per share came in better than the expected loss of 3 cents per share.
Adjusted gross margin expanded by 200 basis points to 91% from the year-ago period, which will likely be welcomed by investors as GitLab’s competitors are struggling to expand margins given top-line pressures.
The company said the number of customers with more than $5,000 of ARR (annual recurring revenue) increased 33% YoY, while the number of customers with over $100,000 of ARR rose as much as 37% to 810. The dollar-based net retention rate was 124% in Q2.
“GitLab’s strong quarter is a result of our focus on creating a differentiated and innovative DevSecOps platform and executing on a strong go-to-market motion,” said Sid Sijbrandij, GitLab CEO and co-founder.
Along these lines, Gitlab boosted its top- and bottom-line guidance for the full year. The company now sees revenue in the range of $555 million to $557 million, an upgrade relative to the prior forecast for $541-543 million. Analysts were looking for a number just below $543 million.
On the bottom line, the company previously expected to report an FY-adjusted loss per share of 14 cents to 18 cents. Following the Q2 outperformance, GitLab now sees FY adjusted loss per share at 5-8 cents. This compares to the consensus for a loss per share of 14 cents.
For this quarter, GitLab sees revenue in the range between $140-141 million, topping the expected $138.2 million. The company forecasts a loss per share of $0.02-0.01.
“We believe that our rapid pace of product innovation and strong customer demand position us to capture a greater share of the estimated $40 billion total addressable market opportunity,” CEO Sijbrandij added.
A strong set of results came after GitLab was named a leader in the inaugural Gartner (NYSE:IT) Magic Quadrant for DevOps Platforms. GitLab is known for helping developers to reduce complexity and increase general operational efficiency.
During Q2, the company released GitLab 16.0, which will boost AI-powered workflows. The latest release includes more than 55 improvements, with many of them focused on further integrating AI into workloads. Among other things, GitLab improved its AI-powered Code Suggestions.
Despite the tough macro environment, GitLab shares rose +5.4% after-hours after the company reported better-than-expected earnings and revenue which is something to be expected as Tyler Corvin, the senior options trader behind The Trading Analyst predicted a +6.1% post-earnings move.
Overall, GitLab remains well-positioned for the AI era as the company continues to record strong top-line growth while, at the same time, expanding its gross margins.
Asana Tops Estimates, Offers Conservative Guidance
Work management software developer Asana also reported a better-than-expected set of results for its second quarter. A loss per share of 4 cents was better than the expected loss of 11 cents per share.
Revenue increased 20% YoY to $162.5 million, while analysts were looking for $157.91 million. The number of customers spending $5,000 and $100,000 on a YoY basis grew 15% and 20%, respectively. The dollar-based net retention rate in the second quarter was more than 105%.
The company said it generated $20.2 million in cash flow from operating activities, a stark improvement compared to negative $41.6 million in the year-ago period. Adjusted gross margin was 90.3%, up from last year’s 90.1%.
“Asana’s Q2 results beat expectations on the top and bottom line. Revenue growth was better than our guidance, operating margin improved 37 percentage points, and we posted positive free cash flow,” said Dustin Moskovitz, co-founder and chief executive officer of Asana.
For this quarter, the company sees third-quarter revenue of $163.5-164.5 million and a loss per share of 11 cents to 10 cents. Analysts were expecting a loss per share of 15 cents on sales of $162.8 million.
For FY24, the company sees adjusted EPS in the range of -$0.42-0.39 on revenue of $642-648 million. This compares to the Street consensus for a loss per share of 52 cents on sales of $644.4 million.
Asana shares fell modestly in the early Wednesday trade as investors were likely looking for better implied Q4 guidance. It could be that the management opted for a more conservative approach given the ongoing macro challenges, as well as the fact that it just appointed a new chief revenue officer.
During the second quarter, Asana launched several Gen AI-focused products, including Asana Intelligence, which makes enterprise AI capabilities core to Asana’s work management platform.
The product accelerates the decision-making process, improves productivity, and maximizes the impact, according to the company’s management.
CEO Moskovitz highlighted that Asana “was made for this moment,” meaning the AI era.
“We’ve been laying our AI foundation and product building blocks for years, and the recent developments in AI play right into our core strengths. Asana is an AI-first product now and we intend to help customers maximize impact by weaving AI into the fabric of our architecture.”
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Shane Neagle is the EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.