GitLab's AI Pricing Changes, CRO Strategy Make JPMorgan Analyst Cautious Despite Expected Q1 Beat

JPMorgan analyst Pinjalim Bora maintained a Neutral rating on GitLab Inc (NASDAQ:GTLB) and set a price target of $58 on Wednesday.

Bora is tactically positive going into the first quarter, largely because the stock has lagged the broader market while GitLab’s demand trends are likely stable.

The analyst expects a normal beat cadence, similar to the last few quarters, driving high 20% growth, partially aided by pricing benefits.

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Additionally, he expects the company to maintain a conservative guidance posture and likely guide the second quarter much closer to the pin while flowing in the first-quarter beat into the full year.

Finally, Bora noted there is likely to be a decent amount of cushion on the profitability side, as he estimated headcount growth exiting the first quarter, running slightly below consensus operating expenditure growth assumptions for fiscal 2026.

At the same time, the analyst is slightly cautious of the refinements around sales and GTM that the new CRO might put in place, both across new customer acquisition and expansion plays. Bora is also unsure how to interpret the pricing and packaging changes.

While Bora appreciated GitLab’s continuous innovation and strategic role in the software development value chain, he maintained his Neutral rating due to the challenges posed by Agentic AI’s impact on developer headcount and evolving competition in the DevSecOps space.

In May, Bora noted some pricing and packaging changes, including promotions around the Premium SKU and packaging changes around AI capabilities.

GitLab has updated its pricing promotions around the Premium SKU. The analyst noted that these promotions have been in effect at least since the second half of calendar 2024 and were largely focused on smaller companies as GitLab tests the price sensitivity of its low-end customer base.

Concerning pricing on its AI-related SKUs, Bora noted that with the launch of GitLab 18, the company seems to be folding the AI-code suggestion capabilities, along with Duo Chat into the existing pricing constructs of Premium and Ultimate SKUs, for both Cloud and Self-managed customers, essentially offering them for free.

The analyst noted that this compares to these AI features previously being part of the paid add-ons. Additionally, the company is relaxing the purchase requirements around Duo enterprise, allowing even Premium SKU customers to buy that AI SKU versus previously, which was limited to only Ultimate SKU customers, he said.

Analyzing website traffic to GitLab.com as a signal for top-of-the-funnel trends for GitLab, Bora noted a deceleration in both total visitor growth and unique visitor growth for the three months ending April (or fiscal first quarter), as compared to the previous quarter. More specifically, total visitors declined -17% Y/Y in the fiscal first quarter (versus -16% last quarter), while unique visitors declined -24% in the fiscal first quarter (versus -15% last quarter).

Based on data from LinkedIn, Bora noted that GitLab’s Y/Y total headcount growth remained relatively stable in April (at +17% Y/Y versus ~17% in January or fiscal fourth quarter), while sales headcount growth marked a slight uptick in April (+2% versus -1% in January or fiscal fourth quarter).

GitLab projected first-quarter revenue of $213 million and adjusted EPS of 14 cents..

GTLB Price Action: GitLab stock is down 3.65% at $46.25 at market close on Wednesday.

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