GitLab Q3 FY2026 Earnings: Revenue Growth and Operational Efficiency

GitLab Inc. (GTLB), a central figure in the software development world, recently released its financial results for the third quarter of fiscal year 2026. For those uninitiated, GitLab provides a DevSecOps platform—a single application that unifies software development, security, and operations. In a market fiercely contested by Microsoft’s GitHub and Atlassian, GitLab aims to be the comprehensive tool for enterprise software teams.

We are going to dig into the income statement from their latest 10-Q filing to unpack the company's trajectory, examining how their top-line growth is filtering down to the bottom line and what the underlying operational metrics tell us about their path to profitability.

Visualizing the Quarter

To better understand how GitLab converts its revenue into profit (or loss), the following flow diagram illustrates the movement of capital through the business for the three months ended October 31, 2025:

Top-Line Growth and Margins

GitLab reported total revenue of $244.4 million for the quarter, representing a robust 25% increase year-over-year compared to $196.0 million in the same period last year. The revenue mix remains heavily weighted towards recurring sources:

• Subscription (Self-managed and SaaS): Generated $223.3 million, accounting for roughly 91% of total sales.
• License (Self-managed and other): Contributed $21.1 million.

A standout metric for GitLab continues to be its gross margin. The company reported a Gross Profit of $212.1 million, translating to a stellar 86.8% gross margin. This indicates that the cost of delivering their software and services (Cost of Revenue) is relatively low, leaving substantial capital available to fund operations and expansion.

Operating Discipline and the "Net Income" Nuance

While the company is still reporting losses, the trend points toward improved operational efficiency. The Operating Loss narrowed significantly to $12.4 million, a marked improvement from the $28.7 million operating loss in the same quarter last year.

However, readers might notice a confusing discrepancy in the bottom-line Net Loss. GitLab reported a Net Loss of $8.8 million this quarter, whereas they reported a Net Income of $27.8 million in Q3 of the prior year.

This requires a closer look at the tax lines. In the prior year period (Q3 2024), GitLab benefited from a massive income tax benefit of over $39 million. This year, they recorded a tax provision (expense) of $1.8 million. When you strip away these tax anomalies and look strictly at the operating performance, the core business health has actually improved year-over-year, despite the headline Net Income number flipping to negative.

Retention and Customer Growth

Beyond the income statement, two key metrics highlight the company's health:

1. Dollar-Based Net Retention Rate: This came in at 119%, meaning existing customers are spending 19% more than they did a year ago. While this is a strong number for any SaaS company, it is a decrease from 124% a year ago, suggesting a slight deceleration in upsell velocity or expansion.
2. Large Customers: The number of customers with over $100,000 in Annual Recurring Revenue (ARR) grew to 1,405, up from 1,144 in the prior year, validating their "land and expand" strategy within large enterprises.

Risks and Outlook

GitLab operates in a high-stakes environment. The filing highlights risks associated with the rapid integration of Artificial Intelligence (AI) into their products. As competitors race to automate coding with AI, GitLab must innovate quickly without compromising the security or stability their enterprise clients demand. Additionally, given their reliance on open-source contributions, security breaches within the open-source supply chain remain a critical risk factor.

In summary, GitLab's latest quarter demonstrates a company that is scaling effectively while tightening its operational belt. While the tax-adjusted bottom line shows they are not yet consistently profitable on a GAAP basis, the narrowing operating losses and high gross margins suggest the underlying economics of the business remain intact.