GitLab Inc. · Q2 FY2027 call

Revenue was $286.3 million, up 21% year-over-year, and Non-GAAP operating income was $42.6 million, representing a 15% operating margin. Our sales team delivered the largest gross bookings quarter in company history, and net ARR grew more than 40% year-over-year, our highest in several years.

Q2 was our largest first order quarter in three years. First order count grew more than 100% year-over-year, and first order net ARR increased nearly 40%. […] more than half of our current 1 million-plus in run rate revenue comes from customers whose first order was less than $5,000.

Account executive capacity increased approximately 30% year-over-year, while productivity per rep improved approximately 10%. Attrition also improved year-over-year for the second consecutive quarter.

Paid CRR ended the quarter above $40 million, up from $15 million existing in Q1, thanks to the introduction of Flex. […] Our objective is to exceed $100 million of paid CRR by the end of this fiscal year. We entered this year with a business monetized entirely through seat subscriptions, and we now expect to exit it with seats continuing to grow alongside a meaningful and scaling consumption business.

I am pleased to report that we now have seen stabilization in SMB and mid-market this quarter, with performance ahead of our targets for both of those segments in both expansion and first orders.

Year-over-year, secure repositories grew 60%, code pushes grew 50%, CI/CD pipelines grew 40%. Among some customers moving aggressively into AI-assisted development, we have seen code bases grow as much as 500%. The pattern is increasingly clear. As enterprises adopt more AI development tools, they use more of GitLab.

at the beginning of this quarter, we made the difficult decision to restructure the company. Many people chose to stay and help build GitLab's next chapter. Together, we delivered one of the strongest quarters in our company's history.

Q2 was an exceptional quarter, and we believe an important inflection point for this business. Revenue was $286.3 million, up 21% year-over-year, and roughly five points ahead of our guidance. […] Net ARR grew 42% year-over-year, our second highest growth quarter in the last four years. Dollar-based net retention accelerated sequentially for the first time since 2024

We closed significantly more large deals than we forecasted. We saw better than expected linearity and sales attainment improved. Deals of $500,000 or more grew more than 150% year-over-year. […] Public sector also rebounded meaningfully in the quarter

Total RPO grew 16% year-over-year to $1.2 billion, and current RPO grew 20% to $744.7 million. Calculated billing grew 24%, doubling the 12% growth rate we posted just last quarter.

We incurred approximately $23.3 million in restructuring charges, in line with what we outlined last quarter. On JiHu, Q2 Non-GAAP expenses were essentially flat year-over-year at $3.0 million. Our goal remains to deconsolidate JiHu, though we cannot predict if or when that will happen.

We return capital to shareholders by repurchasing approximately 3.5 million shares. We have about $245 million remaining under our current authorization. We ended Q2 with $1.3 billion in cash and investments.

Today, approximately 15% of a traditional self-managed license is recognized upfront. Under Flex, the license fee is no longer recognized upfront. […] for every $50 million of our self-managed available to renew that converts to Flex in FY 2027, we estimate approximately $5 million of revenue that would otherwise have landed in FY 2027 instead shifts to be recognized over future periods. […] we expect a maximum potential impact on our revenue to be approximately $13 million in FY 2027.

Because Flex is a contractual dollar commitment, the full committed amount is captured in total RPO. However, Flex is excluded from current RPO […] This quarter, CRPO saw a three-point headwind relative to RPO purely from the absence of Flex commitments in that metric.

Q2 benefited from exceptional execution, more large deals than forecasted, improved linearity, and our best pipeline conversion ever. Our second half outlook assumes a more normalized pace of bookings from here, not a repeat of Q2's exceptional levels.

on Duo Agent Platform, we assume limited contribution in FY 2027 relative to our large existing revenue base. […] we have not incorporated the potential impact of Flex in our guide, but we do intend to quantify the revenue recognition impacts through the rest of the year.

We expect approximately $50 million of JiHu-related expenses for the year, compared with $13 million last year.

Last month in August, we also launched Secrets Manager and Dedicated Runners, our second and third new consumption products this year. […] our artifact management product, which is in private beta now, but we expect will be coming in public beta this quarter.

We're now in the middle of re-architecting that Git infrastructure to achieve roughly 100x scale what humans have ever required. That's really important because agents operate at that machine scale level with one engineer or builder, invoking dozens and sometimes hundreds of agents to accomplish a particular task.

Flex has only been in the market for 10 weeks, so it is just too new to bake into our guidance with precision. At the same time, we have been really pleasantly surprised by customer demand and how potentially impactful Flex could be in the back half of the year.

that paid CRR metric that we introduced last quarter and updated this quarter with more than $40 million in paid CRR is really the best way to understand how dollars are flowing through our consumption model. Paid CRR captures both Flex commitments, credit commitments, as well as on-demand paid usage.

We still have one primary competitor. Our position versus that competitor is, I think, stronger than it has ever been. They have struggled with reliability and meeting the needs of customers in this new agentic era with security and trust and other dimensions. We are seeing higher win rates.

Our SaaS dedicated contribution is about 34%, that grew 36% year-over-year. That's really in line with what we've been messaging. At the time of the IPO, we were at 22%, so we expect those margins to come down over time.

for many of our customers, the token or inference cost is actually not embedded in the GitLab agreement. They pay us for the access to the platform, and they pay for the work done in the platform, the context, the harness, the governance and auditability that we provide, not the inference. Those are all very high-margin products. […] a lot of the margin changes that we've seen in the business have been driven more by the mix shift to SaaS than the early AI adoption.

It is a top U.S. bank, and they previously had started with a fairly modest commitment to Duo Agent Platform. Once they started rolling it out across their engineers and seeing the value that it provides, saw the need to increase their commitment 10x this quarter […] We have got several now that are spending multiples in excess of their Premium or Ultimate seat price now in terms of credits.