Key Points

• GitLab reported its fiscal Q1 results yesterday and delivered sales and earnings that topped Wall Street's expectations.

• While the quarterly results were better than anticipated, GitLab's forward guidance is causing sell-offs for the stock.

• Management's earnings guidance was actually better than expected, but its sales forecast has underwhelmed the market.

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GitLab (NASDAQ: GTLB) stock is sinking in Wednesday's trading following the company's recent quarterly report. The software development specialist's share price was down 7.7% as of 10:30 a.m. ET. The stock had been down as much as 14.3% earlier in trading.

After the market closed yesterday, GitLab published results for the first quarter of its 2026 fiscal year -- a period that wrapped at the end of April. The company reported sales and earnings that beat Wall Street's expectations, but investors are seeing some signs in the quarterly results and forward guidance that are weakening confidence in the stock.

GitLab stock sinks despite Q1 sales and earnings beats

In the first quarter of its current fiscal year, GitLab posted non-GAAP (adjusted) earnings per share of $0.17 on revenue of $214.51 million. For comparison, the average analyst estimate had called for adjusted per-share earnings of $0.15 on revenue of $213.21 million.

GitLab's revenue increased 26.8% year over year in the quarter, with growth driven by increased spending from existing customers and the addition of new clients. The company's net revenue retention rate came in at 122%, and the company ended fiscal Q1 with 1,288 customers generating more than $100,000 in annual recurring revenue -- up 26% year over year.

While the company's adjusted gross margin did slip to 90% from 91% in the prior-year period, it was still a strong quarter for the business. But that hasn't been enough to stop a big sell-off for GitLab stock.

Wall Street isn't happy with GitLab's sales outlook

For fiscal Q2, GitLab is guiding for per-share earnings between $0.16 and $0.17 on sales between $226 million and $227 million. The average analyst estimate had called for adjusted earnings per share of $0.16 on sales of $227.05 million. So while the company's earnings forecast is actually ahead of Wall Street's target, the shortfall on its sales guidance range is underwhelming investors.

For the full year, GitLab is guiding for adjusted per-share earnings between $0.74 and $0.75. Meanwhile, the average Wall Street forecast had called for adjusted earnings per share of $0.73 on revenue of $941.69 million. Again, the company's targeted profit range exceeded expectations, but its sales forecast was softer than Wall Street anticipated. Overall momentum for the business still looks pretty strong though, and today's pullback could be a buying opportunity for long-term investors.