Major internal overhaul at Gitlab attracts downgrade from Raymond James
Investing.com -- Raymond James downgraded GitLab to “Market Perform” from “Outperform,” citing growing concerns over the software firm’s sweeping internal restructuring plans and weakening growth trends.
In a research note published Tuesday, Raymond James analysts said GitLab’s planned transition into what management described as the company’s “second act” as a public company introduces significant execution risks. The analysts highlighted management’s intention to rearchitect the platform while simultaneously reducing headcount, warning that the strategy could create operational disruption and potentially drive away top talent.
Although GitLab reaffirmed its first-quarter and fiscal 2027 guidance, Raymond James cautioned that the broader restructuring could pressure performance later in the year. Analysts noted that CEO Bill Staples has already shifted strategy multiple times since taking over in late fiscal 2025, including a stronger focus on customer acquisition and a push toward deeper product expansion. However, those initiatives coincided with a nearly 40% year-over-year decline in base customers added, a roughly 500-basis-point drop in dollar-based net retention, and slowing projected revenue growth.
Raymond James also removed its prior $35 price target, saying investors are unlikely to give management the benefit of the doubt until the turnaround strategy proves successful. The brokerage warned that business deterioration could accelerate into the second half of the fiscal year.
GitLab, which provides a DevSecOps platform integrating software development, operations, and security workflows, has faced mounting competitive pressure from larger rivals including Microsoft’s GitHub and Atlassian. Raymond James also flagged concerns over ongoing dilution from stock-based compensation and weaknesses in internal financial controls.