Shares of GitLab Inc. were trading slightly lower in the after-hours session today, even though the company reported strong fiscal first-quarter earnings and revenue and followed that with strong guidance.

The company reported a profit before certain costs such as stock compensation of four cents per share, easily beating the Street’s forecast of a loss of four cents per share. That earnings beat came on the back of some impressive revenue growth. GitLab said its sales rose 33% from a year earlier to $169.2 million, ahead of the Street’s estimate of $165.9 million.

Despite the strong results, GitLab failed to make any progress on its road to profitability, instead going backwards. It reported a net loss of $54.9 million for the quarter, up slightly from the $52.9 million loss it delivered one year ago.

GitLab co-founder and Chief Executive Sid Sijbrandij (pictured) said today’s results demonstrate that customers see big value in the company’s end-to-end DevSecOps platform. “[It] enables them to leverage AI throughout the software development lifecycle and enhance productivity while creating better and more secure code,” he explained.

The company is considered to be a pioneer in DevOps, selling software that allows companies to adopt a modern strategy of rapid, continuous software updates by combining their developer teams and information technology operations staff. Using GitLab’s tools, developers can share code more easily and create new applications faster than before.

Like many other software companies, GitLab has been looking at ways it can incorporate generative artificial intelligence features into its platform to improve user experiences. During the quarter it made notable progress there, announcing general availability of its new Duo Chat chatbot service, which provides real-time guidance to advanced software engineers and non-engineers through a conversational interface. With the addition of Duo Chat, GitLab can now offer customers a “side-by-side assistant” within their software coding, testing and deployment environments, offering helpful suggestions at every step of their workflow.

GitLab’s losses increased despite some solid customer growth numbers. During the quarter, it increased its number of customers that generate at least $5,000 in annual revenue by 21%, to 8,976 in total. Meanwhile, the number of customers providing at least $100,000 in annual revenue increased by 35%, to 1,025.

Investors seemed to be a tad disappointed in the results, as GitLab’s stock moved 1% lower in extended trading.

Constellation Research Inc. analyst Holger Mueller said the problem for investors is that although GitLab is showing very good growth at over 30%, it could only do this with a similar increase in its cost base. “GitLab failed to improve its profitability and that is not what investors like to see,” he explained. “They like to see their investments making progress towards eventually delivering a profit, and that means managing their costs better so they don’t match, or outpace revenue growth.”

The analyst said investors are likely to be alarmed by GitLab’s general and administrative costs, which increased by $33 million in the quarter, more than what was added to its sales and marketing and research and development budgets combined. “This doesn’t look good at all to investors, and the pressure is on GitLab’s executive team to turn this around, starting in the next quarter,” Mueller said.

GitLab’s platform is growing in popularity, and that may be the reason behind its optimistic guidance for the current quarter. It’s projecting second quarter earnings of between nine and 10 cents per share, ahead of the analyst consensus estimate of five cents. It also sees revenue of between $176 million and $177 million, about the same the Street’s forecast of $176.7 million.

In addition, the company raised its full-year revenue outlook, saying it now sees fiscal 2025 revenue of between $733 million and $737 million, up from an earlier range of $725 million to $731 million. The company’s original revenue target came in below Wall Street’s forecast, but the revised estimate means the company is now confident it will deliver above the analyst consensus estimate of $731.7 million.

Photo: SiliconANGLE