You might of heard of Gitlab as a developer, however have you consider investing in them? I would not recommend investing in Gitlab now, but I would track them as a potential value investment in the future and here is why!
My circle of competences
Warren Buffett spoke of your circle of competences,
“Know your circle of competence, and stick within it. The size of that circle is not very important; knowing its boundaries, however, is vital”.
Fortunately, I have had pretty of experience with Gitlab.
[1] Wikipedia contributors. (n.d.). Circle of competence. In Wikipedia. Retrieved December 30, 2024, from https://en.wikipedia.org/wiki/Circle_of_competence
Through my personal experience using GitLab at work, I’ve seen firsthand how it’s users experience outshines competitors like GitHub.
Gitlab makes deploying software for small businesses easier, and it has a high customer retention rate for it.
See software companies in my personal experience are not always going migrate their entire codebase if they built it in Gitlab already or Github for example. Small business or even large corporation with internal software teams are not going migrate their deployment scripts like runners, and pipelines to reconfigure to Github or Jenkins if it has already settle down with Gitlab.
Gitlab’s business operates on a B2B Annual Licensing Model this generates Annual Recurring Revenue (ARR) for its business. As I mention earlier once companies settle down and pay for Gitlab or github they have become committed to that platform overtime.
This is why Gitlab and Github offer freemium features for project or code development, because once a coding project shows promise for business it has to scale it’s deployments and developer access. They want you get hook on their platform as a business and developers.
This why so many software companies make 80% to 90% in margin with B2B platforms due to the ARR. ARR licenses model with B2B businesses are really powerful and its why you see companies like Salesforces, Oracle, Redhat become so successful.
Gitlab has done this interesting thing called “Dollar-Based Net Retention Rate” to track its success per quarter in retentation. [2]
Dollar-Based Net Retention measures how much revenue your existing customers generate compared to a year ago.
It’s calculated by dividing the current revenue (ARR) from the same customers by the revenue (ARR) they generated 12 months earlier, then multiplying by 100 to get a percentage.
If the percentage is above 100%, it means you’re earning more from your existing customers (through upgrades, expansions, etc.).
If it’s below 100%, you’re earning less (due to downgrades or customer loss).
That number is really important because it tells us if Gitlab is losing customers to competitors.
Now another reason gitlab is great is it’s user experience, not everyone is going agree with that but deploying software is really painful without tools like CI/CD.
UX is great!
Even small things, like adding images or editing, feel intuitive on GitLab compared to the often cumbersome experience on GitHub. GitLab allows switching between writing in markdown and preview mode. You can edit live in preview mode, unlike GitHub where you cannot.
See no editing allowed!
This makes editing and updating userstories in Gitlab easier and more fluid.
Whether it’s typing up user issues, creating user stories for developers, or managing workloads through Kanban boards and sprints, GitLab makes the process easy.
Tasks like handling merge requests, conducting documentation reviews, and technical reviews are far simpler and more efficient. This ease of use has given me a clear view of why GitLab is a standout in the DevOps space.
Except for its roadmap feature please improve it!
Why are people buying Gitlab? well it allows corporation to “unify the entire development experience”. However, its more than that its about control for its customers who are business executives. Who want to limit access and provide control for the corporation.
Another benefit customers buy into is that Gitlab is open-source, not solely controlled by Microsoft like Github is. [2] Corporations are creating software more than ever before in house.
However, your GitHub Repo is not as private as we think they are and that is why so many people are buying into Gitlab.
Corporate Trust
That is why corporate trust is key to the B2B market.
“more than 50% of the Fortune 100 companies are GitLab customers”. [2]
In terms of user numbers, GitHub has roughly 56 million users while GitLab has more than 31 million.
GitHub revenue Hit $2 Billion, in 2024 back in 2018 Microsoft acquired GitHub for $7.5 billion. [7][8]
See Microsoft is making its return on their invest NPV wise and will see greater return on profits longterm, there is something to be made in the DevOps market.
Soon to hit a billion in revenue
In a couple years Gitlab is going hit a $1 billion in revenue.
GitLab_Consolidated_Balance_Sheets [2]
There is a potential growth story with China as JiHu (Gitlab) version in operating business in the public of china.[2] Competing against Gitee (码云) is a Chinese Git service that is very popular in China. Gitlab “establish GitLab Information Technology (Hubei) Co., LTD (“JiHu”), a legal entity in the People’s Republic of China.” [2]
Gitlab’s total revenue for 2023 was $424.3 million and January 31, 2024 $579.9 this is a growth rate of 37%. [2] It will take about 1.73 years (about 21 months) for GitLab to hit $1 billion in revenue. This assumes it maintains a 37% annual growth rate.
Gitlab’s forward looking statements for projected revenue and customers in 2025
- 2025 Q1 $677 million run rate revenue 8,976 base Customers [4]
- 2025 Q2 $730 million run rate revenue 9,314 base Customers [5]
- 2025 Q3 $784 million run rate revenue 9,519 base Customers [6]
GitLab is projecting a 15.8% growth in run rate revenue from Q1 2025 to Q3 2025. I suspect Gitlab is just being humble with these projects and aim to achieve a much higher return on revenue.
Risk of Gitlab
Finally for closing out my post, I went to mention risk many writers forget to mention the risk of investing but these are general news articles and its 10-K.Recently there has been a change in leadership. Change of CEO in the past year found Sid Sijbrandij (“see-brandy”) to Bill Staples
There is always the possibility Gitlab cannot ensure revenue growth & it has incurred major losses in history as a company.
| Fiscal Year | Net Loss (in millions) |
|---|---|
| 2022 | $155.1 |
| 2023 | $172.3 |
| 2024 | $424.2 |
Total Accumulated Deficit (as of Jan 31, 2024) $1,149.8 well its not as bad as Ubers total losses of $48 billion before hitting cashflow positive.
https://uberlosses.com/ [9]
GitLab spends lot of money on:
- Expansion and enablement of our sales, services, and marketing organization to increase brand awareness and drive adoption of
the DevSecOps Platform;
• Product development, including investments in our product development team and the development of new features and functionality for the DevSecOps Platform;
• Technology and sales channel partnerships;
• International expansion;
• Acquisitions or strategic investments; and
• General administration, including increased legal and accounting expenses associated with being a public company.
There is always a risk of hacking for Gitlab that can hurt its brand, Security and privacy breaches may hurt our business. [2]
Competition from Microsoft’s Github and other devops platforms like Vercel.
GitHub: A widely used platform for version control and collaboration, owned by Microsoft. As of January 2023, GitHub reported over 100 million developers.
Bitbucket: Popular for teams in the Atlassian ecosystem, offering version control and CI/CD tools. As of 2019, Bitbucket had over 10 million registered users.
GitLab: An open-core DevOps software package that can develop, secure, and operate software. GitLab has an estimated over 30 million registered users, including 1 million active licensed users.
Market is still new and unformed things are still playing out, gitlab added AI to their product this has potential risk. Gitlab is a “Transparency” company this is not normal for most companies. Gitlab could fail at marketing, sales, technical support, and integration services.
There is cyclical nature to budget cycles to companies buying software.
“Historically, we have experienced seasonality in new customer contracts, as we typically enter into a higher percentage of subscription
agreements with new customers and renewals with existing customers in the last two fiscal quarters of each year.” [2]
The tech market as a whole might be overvalued right now—P/E ratios are through the roof, and growth expectations are stretched thin. However, when you dig deeper, you’ll find that not all companies are created equal.
GitLab, for instance: its valuation metrics, like price-to-sales, are lower than many of its peers, even though it’s growing faster and boasts a loyal developer community. This discrepancy could make GitLab a hidden gem in today’s frothy tech landscape.” The product is sticky, its branding is strong, and if Gitlab can maintain its position long it will become value investment.
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References
[1] Wikipedia contributors. (n.d.). Circle of competence. In Wikipedia. Retrieved December 30, 2024, from https://en.wikipedia.org/wiki/Circle_of_competence
[2] GitLab Inc. (2024). Annual report (Form 10-K), fiscal year ended January 31, 2024. Retrieved December 30, 2024, from https://s204.q4cdn.com/984476563/files/doc_financials/2024/q4/10K-2024.pdf
[3] TechWorld with Nana. (2022, June 9). GitLab CI CD tutorial for beginners [Crash course] [Video]. YouTube. Retrieved December 30, 2024, from https://www.youtube.com/watch?v=qP8kir2GUgo
[4] GitLab Inc. (2024). Investor presentation: First quarter fiscal year 2025. Retrieved from https://s204.q4cdn.com/984476563/files/doc_financials/2025/q1/GitLab-Webcast-Slides-1QFY25.pdf
[5] GitLab Inc. (2024). Investor presentation: Second quarter fiscal year 2025. Retrieved from https://s204.q4cdn.com/984476563/files/doc_financials/2025/q2/GitLab-Q2-FY25-Earnings-Call.pdf
[6] GitLab Inc. (2024). Investor presentation: Third quarter fiscal year 2025. Retrieved from https://s204.q4cdn.com/984476563/files/doc_financials/2025/q3/GitLab-Q3-FY25-Earnings-Slides.pdf
[7] Nathan Latka article: Latka, N. (2024, December 2). How GitHub revenue hit $2B by prioritizing developers. Development & DevOps. https://blog.getlatka.com/github-revenue/
[8] Microsoft News Center: Microsoft. (2018, June 4). Microsoft to acquire GitHub for $7.5 billion. Microsoft News Center. https://news.microsoft.com/2018/06/04/microsoft-to-acquire-github-for-7-5-billion/
[9] Financial Times: Financial Times. (2024, December 31). Uber makes first operating profit after racking up $31.5bn of losses. Financial Times. https://www.ft.com/content/dae2b90e-1ba0-4e8f-aabc-34aae4ca05d7