Guggenheim Securities on Tuesday moved GitLab to a Neutral rating from Buy and removed its $50 price objective, attributing the change to what it described as "more pronounced AI risk and lack of near-term catalysts." The update follows the firm's initial coverage, which began in September 2025, when analysts expected firmer net revenue retention (NRR) and seat expansion among existing customers.
In its updated modeling, Guggenheim projects revenue growth of about 19% for fiscal year 2027 (FY2027), versus the company's earlier guidance midpoint of 16%. The analysts also model an operating margin near 14%, above management guidance of roughly 12%.
Despite the topline revision, Guggenheim flagged a core concern around NRR. The firm documents a decline in NRR from 133% in FY2024 to 123% in FY2025 and then to 118% in FY2026. Its forecast assumes NRR will finish FY2027 at approximately 113%, which is below management's expectation of about 115%.
The analysts tie the NRR weakness to budget reallocation toward AI coding tools, an effect management has acknowledged. Management estimates that more than 30% of annual recurring revenue (ARR) is under pressure, broken down by Guggenheim as roughly 20% coming from price-sensitive small and mid-sized business and mid-market customers and about 12% from the public sector.
Guggenheim did note constructive metrics in GitLab's business. Gross revenue retention has remained close to 96–97%, churn exiting FY2026 was the lowest in four years, and additions of new logos contributed an estimated 800 to 1,000 basis points to overall revenue growth. The firm also pointed to record expansion in the number of customers generating more than $1 million in ARR, which rose 26% year-over-year to 155 accounts.
But the analysts emphasized a larger structural vulnerability: GitLab's predominantly seat-based pricing approach. As they put it, "Under what is still almost entirely a seat-based model, GitLab doesn’t monetize incremental usage, only tier upgrades." The implication is that as AI coding tools advance and developers rely on them for a greater share of code production, customers may have less incentive to increase GitLab spending even if headcount does not decline.
On new product strategy, Guggenheim expressed skepticism about the Duo Agent Platform (DAP), GitLab's credit-based offering that includes prebuilt agents for CI/CD, security and planning workflows. The analysts wrote that, "Based on our initial customer conversations, interest has been limited." They also highlighted an adoption constraint: about 70% of GitLab's revenue is generated from self-managed customers who must upgrade to release 18.8 or later to access DAP. Management has guided for minimal DAP revenue contribution in FY2027.
Market performance reflects investor caution: GitLab shares are down 43% year-to-date, while the IGV software ETF has declined about 25% over the same period.
Guggenheim's move reduces near-term upside expectations for the stock, even as some retention and enterprise-account metrics remain favorable. The assessment highlights a tension between improving product adoption among larger customers and mounting risks tied to how AI-driven workflows could alter consumption of seat-based developer platforms.