Truist downgrades GitLab on low visibility and heightened execution risk

Investing.com -- GitLab shares face mounting uncertainty as the company navigates a difficult transition away from its legacy seat-based pricing model, according to Truist, which downgraded the stock to Hold and cut its price target to $44 from $55. 

Analyst Miller Jump said GitLab is encountering “low visibility and heightened execution risk in the face of a business model transition” driven by rapid changes in developer tooling.

Truist said the industry-wide pivot toward consumption-based pricing, spurred by AI-enabled automation and machine labor, is creating structural challenges for GitLab. 

“AI agents cannot be sold a seat in GitLab’s current model,” the firm noted, warning that this “undermines the legacy backbone of their revenue.” 

While management plans to introduce consumption elements alongside the launch of its Duo Agent platform in late 2025 or early 2026, Truist believes the process is fraught with uncertainty.

GitLab recently highlighted that “seats were responsible for 80% of their net expansion” last quarter, but Truist argued this reflects “ingrained attachment to a legacy model” rather than evidence that seat-based pricing remains durable. 

The firm warned GitLab risks “straddling two models, creating strategic challenges.”

Competitive pressures are said to be intensifying as well. Microsoft remains a formidable threat, although Truist pointed to Satya Nadella’s recent comments underscoring GitHub’s strategic importance. 

Truist noted that “GitHub has lower pricing… and deep investments in AI-powered code assistants,” while developer workflows are shifting to assistant-led environments that erode GitLab’s premium pricing argument. At the same time, AI-native startups are “setting the pace on innovation,” which could further weaken GitLab’s moat.

Truist also flagged a fading pricing tailwind, estimating that the benefit from prior premium-tier increases will fall sharply, creating a “challenging pricing headwind” in FY27.

Given the combination of structural pressure, competitive threats and declining pricing leverage, Truist concluded that GitLab’s transition “is being driven by competitive necessity” rather than strategic strength.