GitLab proves it’s possible to get a better valuation for your software company

No matter whether you prefer to track the public or private markets, 2022 has proven to be a messy year for software companies.

After a bullish 2021, when investors sent software stocks into the stratosphere, startups rode the same wave of enthusiasm to new heights. Since then, we’ve tracked the pullback in value that software companies have endured, as well as the resulting knock-on effects on startup fundraising and pricing.

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You’re probably tired of the bad news by now. We understand, and to combat the general ominous vibe surrounding startup founders, we’ve been fishing for the good news. We hit on some of it over the weekend, and we’re back with more.

GitLab just showed that it’s possible to make investors so very happy that they reprice you by more than 25% in a single day. Let’s find out how — and we’ll loop in the latest from Salesforce to undergird our point.

GitLab’s quarter

Shares of GitLab rose just over 28% yesterday to $51.00 per share, up $11.16 in a single day. And investors aren’t changing their mind, with shares of the developer-focused git service not giving back much, if any, of those gains in pre-market trading.

What did GitLab have to accomplish to see such a dramatic repricing from investors? The rare public market triple-crown: It beat on revenue, profitability, and outlook in the quarter. Here’s the data:

• Revenue growth of 75% to $87.4 million, ahead of analyst expectations of $78.1 million, and faster than the 69% growth it recorded in the previous quarter.
• Adjusted loss per share of $0.18, better than the $0.27 per share loss expected in the quarter.
• Raised revenue forecast of $93.5 million to $94.5 million for the current quarter, and $398.0 million to $402.0 million for the current fiscal year. Both ranges are ahead of the $93.14 million (quarter) and $398.51 million (year) that Yahoo Finance calculates as the current analyst average.

Even more, for you SaaS fans out there, GitLab saw “dollar-based net retention above 130%,” which is rather impressive. In short, GitLab accelerated growth, beat revenue and profit expectations, and raised its outlook to levels that put it ahead of current street estimates.

Now, as it is 2022, there is of course a little bit of bad news: even after its huge bump in stock market value, GitLab’s stock still trades far below its record high last year.