A conference call discusses GitLab's financial results for the first quarter of fiscal year 2026, including business overviews, results commentary, and guidance for the upcoming quarters and fiscal year. The call also covers safe harbor statements, non-GAAP financial measures, and procedures for asking questions.

Revenue saw a 27% year-over-year increase to 215 million with a 12% non-GAAP operating margin, highlighting the platform's unique AI-native, cloud-agnostic, model-neutral capabilities across the software development lifecycle, offering value in air-gapped environments with a unified data store.

As organizations seek to maximize efficiency and gain competitive advantage through software, the Jeeves econs platform emerges as a core solution. By leveraging AI in software development, enterprises can maintain security and compliance while accelerating feature development, as exemplified by Super Micro's successful implementation resulting in doubled software team size and significantly faster development cycles.

In Q1 2025, Gitlab introduced major updates across its platform, focusing on enhancing Core DevOps capabilities, deepening security measures, and integrating AI natively. Key developments include centralizing artifact management, optimizing CICD pipelines, improving security visibility and control, and launching AI-enhanced features like chat and code suggestions. Notable expansions and partnerships, such as with R+V Insurance and Volkswagen Digital Solutions, showcased significant productivity gains and pipeline acceleration. The company also highlighted growing adoption of Gitlab Duo, particularly Duo Enterprise, and positive feedback from beta testers of the upcoming Gitlab Duo Workflow.

The company announces its FedRAMP moderate authorization, boosting its public sector business. It highlights significant adoptions across industries, particularly in security-conscious sectors, enabled by providing enterprise-grade isolation with cloud-native convenience. Key acquisitions and expansions, including those by a German automotive supplier and Natwest, showcase the platform's ability to streamline complex environments and improve development cycles. The dialogue also emphasizes the importance of customer contributions to the platform, driving innovation and feature velocity, and underscores the company's vision to become the world's best AI-native DevSecOps platform.

The company experienced significant revenue growth, free margin expansion, and record adjusted free cash flow in the first quarter. Revenue reached $214.5 million, a 27% increase from the prior year, with over 95% contributed by 10,100 customers spending at least $5000. The customer base with spend of $1000 or more increased by 26%. The retention rate stood at 122%, driven by a combination of new seats, upgrades, and strengthened ultimate and alab Do as customers expand AI deployments. The company anticipates fluctuations in these ratios based on the composition of the renewable portfolio.

GitLab reports significant year-over-year growth in Total RP and CRP, maintaining best-in-class gross margins. Q1 non-GAAP operating income saw a substantial increase from a loss to $26.1 million. Guidance for Q2 FY26 expects total revenue growth of around 24%, with full-year expectations similarly robust. The company highlights strong fundamentals, record adjusted free cash flow, and a goal to deconsolidate its joint venture, jihu.

The team highlights the strong Q1 performance, emphasizing growth, increased operating leverage, and the momentum in AI adoption. They introduce GitLab 18, showcasing new secure, scalable AI capabilities, and invite participants to a launch event on June 24. Discussions revolve around the impact of AI on coding, specifically focusing on code suggestion and completion, and how GitLab adds value beyond these features. Customer conversations are centered on utilizing AI to enhance productivity, accelerate innovation, and improve quality. The CEO shares insights on the competitive landscape, noting that customers are testing multiple AI tools side by side to ensure they provide the best for their engineers, ultimately benefiting GitLab by increasing the need for its platform in testing, publishing, and other post-code creation activities.

The discussion highlights the company's recent financial performance, noting a minimal revenue beat and steady guidance post-IPO. Key metrics such as RPO, CRP, and billings are strong, attributed to a favorable SaaS mix and back-weighted linearity in the quarter. The quarter had fewer days than the prior year, and the guidance assumes consistent macroeconomic conditions.

Observations note a slight deceleration in net new customer ads, particularly for those above specific spending thresholds, prompting inquiries into potential correlations with recent premium pricing adjustments.

The company has improved its volume of new first orders for enterprise and mid-market segments, with a focus on increasing dollars added within the quarter. The breakdown of new customer ads greater than 5K includes new customers, lost customers, expanding and contracting customers, with notable changes in customers moving into or out of the 5K bucket. Price sensitivity is observed in the SMB and lower mid-market segments, affecting new customer additions, but not the financials. Compensation is based on quarterly bookings, not new customer ads.

The discussion delves into concerns about artificial intelligence's effect on software developer job growth, noting strong AI adoption in developer use cases and proven productivity gains. Speakers address the historical trend of productivity advancements leading to increased opportunities for engineers, predicting sustained or growing numbers of software developers due to AI's ability to enhance coding capabilities and increase code volumes. Additionally, insights are shared on seat trends during renewals and the positive impact of AI on Gitlab's business model, emphasizing the large market potential and recent positive trends in developer hiring.

The dialogue discusses Gitlab's strategy to integrate AI into its platform to enhance collaboration, security, and efficiency in software development. Key focuses include building a unique collaborative experience, maintaining open-source and co-creation strategies, ensuring security and privacy, utilizing a single database platform approach, and integrating software lifecycle agents natively. The discussion also touches on changes in customer tier preferences and implications for expansion rates and pricing models.

The speaker discusses the trend of customers increasingly opting for the Ultimate package due to its security offerings, aligning with the market's shift towards integrating security in the DevOps lifecycle. While most customers start with the Premium package, the Ultimate upgrade serves as a significant expansion path. The company also addresses the decision to make Enterprise available to Premium customers, driven by demand for self-hosted models and AI capabilities, without impacting the upgrade to Ultimate. This strategic move aims to expand the service addressable market through more flexible packaging.

The company reports significant free cash flow in Q1 without any one-time factors, indicating strong business operations. Seasonality suggests Q4 could bring even higher margins. Amidst AI experimentation and vendor testing in the market, the company expresses confidence in its competitive edge, citing wins against leading competitors and positive feedback on its Gitlab Duo workflow product, set for public beta release later in the summer.

The discussion highlights GitLab's approach to integrating AI tools into its Premium and Ultimate offerings, aiming to lower adoption barriers for engineers. By including AI capabilities with usage limits, developers can easily start using the tools, leading to a smoother transition to Pro and Enterprise levels. Additionally, the conversation touches upon the differentiation of GitLab's enhanced minutes with GIWA ED, emphasizing the platform's focus on innovation, high-quality context, and improved outcomes.

Highlighting the significant advancements and innovations in Gitlab's offerings, including 100 new capabilities for premium customers and more for ultimate customers, with a focus on improved CICD pipelines, enhanced security features, and the introduction of AI-driven asynchronous work and collaborations.

The discussion focuses on the rationale behind the narrower-than-expected beat in Q1 results against guidance, noting the impact of fewer days in the quarter. Attention is also given to the assumptions made for Q2 guidance, particularly regarding the continuation of the macro environment since April, and inquiries about similarities or differences observed in May and early June compared to April.

Despite a cautious market environment, the company experienced a strong quarter with a mix favoring ZAS, recognizing more revenue upfront. Federal business exceeded expectations, showing significant year-over-year growth.

The discussion focuses on GitLab's recent quarter performance, noting an unusual SaaS linearity and exploring whether this is due to macroeconomic factors or execution issues. Metrics tracked internally include linearity, pipeline creation, and pipeline movement. The CFO emphasizes continuous improvement in execution across the organization, without specific quarter-related concerns being highlighted.

On June 11, 2025, a dialogue unfolds exploring the limits of future technological capabilities, questioning if current boundaries can ever be transcended.

The discussion explores the potential disruptions and benefits AI coding systems pose to established DevOps tool chains, emphasizing the importance of interoperability and open platforms. It also highlights the strategic approach to AI integration across the software lifecycle, including partnerships and product enhancements, to maintain competitiveness and innovation.