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Investing.com -- Macquarie downgraded GitLab to Neutral from Outperform and cut its target price to $40 from $70, saying the company has yet to show a clear path to reaccelerating growth as execution remains uneven and several customer segments weaken.
GitLab posted a small third quarter revenue beat and lifted the high end of its full year outlook by the same $5 million, but Macquarie said the update is unlikely to reassure investors.
Revenue growth slowed to 25% year on year, a new low, and the guidance increase marked the first raise this year, which the brokerage said falls short of the company’s historical beat and raise pattern.
Macquarie said the drag is coming from both internal and market factors. Federal and small business demand weakened through the year and sales changes for fiscal 2026, including a new sales chief, a new team focused on winning new customers and a shift in resources toward quota carrying staff, may have disrupted near term execution. The firm said these issues often signal deeper challenges rather than temporary noise.
The are some structural risks on GitLab. Like enterprise budgets are tilting toward AI coding tools and away from hiring developers, which may hurt GitLab’s seat based pricing model.
Also there is rising competitive pressure from Microsoft GitHub, though it said it is unclear how much share GitLab may be losing.
The firm trimmed long term revenue expectations despite a slight increase to fiscal 2026 estimates. It cut fiscal 2027 and 2028 forecasts and applied lower valuation multiples, driving the 43% reduction in its target price.
Macquarie now values the stock using an average of EV revenue, EV free cash flow and discounted cash flow approaches.
GitLab guided fourth quarter revenue to $251 million to $252 million, up about 19% year on year and roughly in line with estimates.
Full year revenue is now expected at $946 million to $947 million, up 25%. Management said small business softness has persisted and the recent US government shutdown will weigh on federal deals.
Macquarie said the shares trade at a steep discount to the group’s growth software index and could rebound if sales execution improves or if adoption of GitLab’s Duo Agent Platform accelerates. But it warned that continued choppy execution or broader structural pressure remain risks.