What we think about GitLab (GTLB)
GitLab in Three Words: Thriving DevOps Enabler
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Background
You might see GitLab refer to itself as either a DevOps platform (bringing together software development and operations teams to streamline the software development process) or, more often, as a DevSecOps platform (technically along the same vein as DevOps, but with an incremental focus on security).
Put simply, though -- and to borrow GitLab’s words -- it’s a platform that “empowers organizations to maximize the overall return on software development by delivering software faster and efficiently, while strengthening security and compliance.”
But we also shouldn’t confuse GitLab with GitHub, a popular closed-source platform with which GitLab competes (and which was acquired by fellow 7investing recommendation Microsoft (NASDAQ: MSFT) for $7.5 billion in 2018). GitLab is an “open-core” company that ships both a free open-source version called GitLab CE, or Community Edition, and a closed-source version called GitLab EE, or Enterprise Edition. GitLab EE offers both free and paid tiers, with prices for the latter ranging from $19 per user/month to $99 per user/month (depending on the features and enterprise support levels required).
That raises the question: Even putting aside GitHub -- which GitLab is more than aware of as an obviously competitive solution (more on that in the “Key Risks” section below) -- aren’t there loads of other software-development tools that can help enterprise clients accomplish essentially what GitLab does? The answer: Yes, but none work together under a unified, cohesive platform like the one GitLab provides.
In fact, before becoming GitLab customers, many businesses first progress through three earlier phases of DevOps before realizing they would do well to adopt a DevSecOps platform built from the ground up (GitLab).
In the BYO (bring-your-own) DevOps phase each team -- from software to operations, IT, security and business -- have cobbled together their own sets of separate tools to accomplish their respective goals. When those teams realize the separate toolsets make it difficult to work together, however, organizations tend to move to the “best-in-class” DevOps phase, where they standardize each team’s processes using the same sets of tools. Even then, though, moving software changes through disparate toolsets -- however solid individually -- represents another harrowing challenge, so they progress to the third DevOps phase: DIY (do-it-yourself) -- which, by the way, GitLab management has repeatedly singled out as the company’s largest competitive threat. The DIY phase involves completing hoards of custom integration work to support the software development effort, only then to so often realize maintaining these DIY DevOps integrations tends to be far more work than anticipated.
That’s when organizations move to a single DevSecOps platform like GitLab, where all teams can work across a unified system that’s designed with integration and more efficient, secure software-development practices in mind.
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Recent Company Updates
Shares of DevOps platform Gitlab have come to life at the end of 2023. After a 0% return through Thanksgiving, shares are now 40% after a solid third-quarter report that was nicely aligned with our recent Santa Claus rally.
Revenue increased 32% to $150 million and the company reported its very first quarter of positive operating income (on a non-GAAP basis; excluding stock-based comp and one-time restructuring charges). Dollar-based retention clocked in at a healthy 128%, showing that customers are loyal to the platform and are using it more frequently. Gitlab appears to be well-positioned to capitalize on the world’s need for more efficient software development. CEO Sid Sijbrandij insists that “companies cannot afford to slow down their software innovation.”
Things happen quickly in the software world. GitLab is an enabler of efficiency and developer productivity.