By Akash Sriram
(Reuters) -GitLab shares fell 16% on Tuesday after the software developer forecast full-year 2025 revenue and profit below Wall Street estimates, citing a cautious spending environment due to an uncertain economy.
CFO Brian Robbins said he expects GitLab's philosophy behind providing forecasts to be "less conservative" as the company enters its third year as a public firm.
Still, analysts and investors predicted stable growth for the company.
"Given the uncertainty with the Fed and economic data, I expect lower guidance than some hope for as a measure of caution rather than a measure of slower business expectations," said investor Ophir Gottlieb, CEO at Capital Market Laboratories.
If losses hold, GitLab is set to lose about $1.9 billion from the $11.59 billion market value it held at Monday's close.
The company forecast a first-quarter loss between $12 million and $13 million, including a $15 million expense related to an in-person company-wide summit for its employees who largely work remotely, the first such event since 2019.
GitLab said it was seeing stronger adoption of its platform that helps users manage, develop code, automate processes and test programs.
Revenue projection for the first quarter and fiscal year 2025 too fell below analysts' expectations. However, the company warned that the projection does not include a potential hike in prices.
"After placing greater limitations on its free tier, GitLab is seeing healthy amounts of free-to-paid conversions," said Gil Luria, a senior software analyst at D.A. Davidson.
The company had raised prices for the Premium tier in April 2023 for the first time in five years and expects $10 million to $20 million of incremental revenue in the fiscal year, Robbins said.
GitLab's stock trades 241.09 times forward profit projections, compared with 69.42 and 26.99 for peers Atlassian (NASDAQ:TEAM) and Splunk (NASDAQ:SPLK), respectively.