Overview
Raymond James has moved GitLab to a Market Perform rating from Outperform, highlighting escalating concerns about the software company’s large-scale internal overhaul and what the firm characterizes as weakening growth momentum. The downgrade was detailed in a research note published Tuesday.
Execution risk tied to simultaneous changes
In their note, Raymond James analysts stressed that GitLab's stated shift into what management calls the company's 'second act' as a public company introduces material execution risk. The brokerage specifically flagged management's plan to rearchitect the platform while cutting headcount at the same time - a combination the analysts warned could produce operational disruption and may make it harder to retain top engineering and product talent.
Near-term guidance preserved, but longer-term pressure possible
GitLab has maintained its guidance for the current quarter and for fiscal 2027, yet Raymond James cautioned that the broader restructuring effort could exert pressure on performance later in the year. The analysts said investors are unlikely to extend the benefit of the doubt to management until the turnaround plan demonstrates clear results, and removed the firm’s prior $35 price target.
Product and go-to-market pivots amid deteriorating metrics
The note also documents several strategic shifts since CEO Bill Staples assumed leadership in late fiscal 2025. Those shifts included a renewed emphasis on customer acquisition and an effort to expand product depth. Raymond James observed that these initiatives have coincided with a nearly 40% year-over-year decline in base customers added, roughly a 500-basis-point drop in dollar-based net retention, and decelerating projected revenue growth.
Competitive, compensation and controls concerns
Analysts highlighted growing competitive pressure from larger rivals such as Microsoft’s GitHub and Atlassian. Raymond James further raised concerns about ongoing dilution from stock-based compensation and identified weaknesses in internal financial controls as additional risk factors in their assessment.
Implications
For investors and market participants focused on enterprise software and DevSecOps providers, the downgrade underscores uncertainty around GitLab's ability to execute a complex transformation while maintaining customer momentum and internal stability. The brokerage warned that deterioration could accelerate into the second half of the fiscal year if the company is unable to stabilize trends.
This article presents the facts and analysis contained in the Raymond James research note; it does not add or infer material beyond those findings.