1 Growth Stock Down Over 60% to Buy Right Now

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GitLab (GTLB) became well-known soon after its 2021 IPO as a leading company focused solely on DevSecOps. It offers a single, cloud-based platform that covers all stages of software development – from coding to security testing and final deployment. However, the stock price dropped significantly during the 2022-2023 tech market downturn, falling around 80% from its highest point.

GitLab’s stock is starting to bounce back, thanks to more companies using its DevSecOps platform, which is powered by artificial intelligence. However, the stock price is still down about 63% from its peak, suggesting investors remain hesitant.

Even with current challenges, GitLab’s focus on artificial intelligence, security, highly regulated industries, and government work could significantly increase its stock price in the near future. Here’s a closer look at the reasons why.

AI-native strategy

GitLab is now a leading DevSecOps company that builds artificial intelligence into every stage of software development. Their AI tools, called GitLab Duo, are gaining popularity quickly. In early 2025, weekly use of GitLab Duo increased six times over, even though it started with a limited number of users. About a quarter of this growth comes from new customers who unlocked Duo features after upgrading to GitLab Premium or Ultimate.

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GitLab recently introduced its Duo Agent Platform, currently available in public beta, designed for large companies. This platform allows engineers to use AI assistants to streamline the entire software development process-from building and testing to securing and deploying-which helps speed up work and get software released faster. While many AI coding tools can generate code, GitLab points out that quality and security can be issues. GitLab’s platform addresses this by including built-in privacy, security, and compliance features to ensure high standards for enterprise-level software.

GitLab is working with companies like Amazon, Anthropic, OpenAI, Alphabet, and Cursor, allowing their AI tools to integrate with GitLab’s Duo Agent Platform and security processes. This provides customers with a choice of AI options while keeping everything secure within GitLab.

GitLab is not only building a great product, but also figuring out the best way to make money from it. They’re shifting from a pricing system based solely on the number of users to one that combines user numbers with how much the product is actually used, thanks to their new Duo Agent Platform. GitLab hopes to launch this platform by the end of 2025, which is a challenging goal. They expect AI features to eventually bring in more revenue, but the initial financial impact will likely be small.

Robust financial performance

GitLab reported strong financial results recently. Revenue increased by 29% compared to last year, reaching $236 million. The company also achieved a non-GAAP operating margin of 17% in the quarter ending July 31st. Free cash flow significantly improved, jumping to $46 million from $10.8 million in the same quarter last year.

GitLab finished the second quarter with a strong financial position, holding $1.2 billion in cash. This allows them to invest in new features like artificial intelligence, improve the platform itself, and strengthen their sales and marketing efforts.

GitLab’s forecast for revenue in 2026 appears to have worried investors. While the company recently exceeded revenue expectations for the second quarter, its 2026 revenue projection is between $936 million and $942 million. GitLab explained this cautious outlook is due to adjustments in how it sells its products and reduced spending by small and medium-sized businesses.

Other growth catalysts

GitLab stands out because it’s an all-in-one platform that tracks every stage of software development. Having this complete picture allows its AI-powered features to be more accurate and dependable. Plus, as an independent DevSecOps provider that works with any cloud and AI tools, GitLab gives businesses and government agencies the freedom to choose the best solutions for their needs, without being tied to a single vendor.

We’re seeing a really encouraging trend with our clients increasingly choosing GitLab Ultimate, our most comprehensive offering. It’s clear they’re prioritizing strong security features alongside their development workflows, and that’s driving significant revenue growth for us. In fact, Ultimate accounted for 53% of our annual recurring revenue at the end of Q2, and it was included in 8 out of our 10 largest deals that closed during that period. This really highlights the value customers are finding in the complete package.

GitLab Dedicated, a private, cloud-based version of GitLab’s platform for secure software development, is becoming increasingly popular. Annual Recurring Revenue (ARR) for this service jumped 92% to $50 million, driven by strong interest from companies in finance and government. Receiving FedRAMP authorization for “GitLab Dedicated for Government” is now allowing GitLab to pursue contracts with U.S. federal agencies, opening up significant opportunities in highly regulated industries and for projects requiring data sovereignty.

These efforts are key to attracting valuable new customers. We’ve seen a 25% increase in clients who contribute over $100,000 in annual recurring revenue (ARR), reaching 1,344 by the end of the second quarter. We’re also successfully selling more to our current customers, with a net retention rate of 121% based on dollar value.

Reasonable valuation

Even with its positive qualities, GitLab’s current price-to-sales ratio is relatively low at 9.4, compared to its average of 13.7 over the last three years.

GitLab appears to be a good value for investors, given its promising growth in artificial intelligence, increasing customer base, and healthy financial position. While the stock price may fluctuate in the short term, investors who can handle some risk might want to consider buying a small amount now.

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2025-09-14 19:33