Good day, everyone, and welcome to today's GitLab Third Quarter Fiscal Year 2025 Conference Call. At this time, all participants are in view and listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. Please note, this call is being recorded. I will be standing by should you need any assistance. And it is now my pleasure to turn the conference over to Kelsey Turcotte.

Good afternoon. We appreciate you joining us for GitLab's Third Quarter Fiscal Year 2025 financial results conference call. With me are Sid Sijbrandij, our Co-Founder and Executive Chair of the Board; Brian Robins, our CFO; and Bill Staples, our newly appointed CEO. During this afternoon's call, we will introduce Bill, provide commentary on our third quarter results, and guidance for the fourth quarter and fiscal year 2025. Before we begin, I'll cover the safe harbor statement. I would like to direct you to the cautionary statement regarding forward-looking statements on Page 2 of our presentation and in our earnings release issued earlier today, both of which are available under the Investor Relations section of our website. The presentation and earnings release include a discussion of certain risks, uncertainties, assumptions, and other factors that could cause our results to differ from those expressed in any forward-looking statements within the meaning of the Private Securities Litigation Reform Act. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or non-recurring items that management believes impact the comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. I'll now turn the call over to Sid Sijbrandij. Sid?

Thank you for joining us today. And before I get to the numbers, I couldn't be more excited to welcome Bill Staples to the team. This afternoon, we announced Bill will succeed me as CEO of GitLab. He will also take a seat on the GitLab Board, and I'll continue on as Executive Chair of the GitLab Board. As I have gotten to know Bill, his passion for software and commitment to innovation makes me confident he is the right person to lead the company going forward. Over his career, Bill has an impressive track record of building a scaling enterprise software organization. He most recently served as CEO of New Relic and held senior leadership roles at Adobe and Microsoft. I couldn't be more excited to welcome Bill to the team. Congratulations. Bill, over to you.

Thank you, Sid, and good afternoon, everyone. I'm humbled to have been asked by Sid and the Board to take on the role of GitLab's CEO. I spent nearly three decades building developer platforms and tools, and I know our customer and category very well. I'm convinced that we have a significant opportunity ahead of us. We've all seen how software has changed all aspects of our lives and transformed every business into a software-driven business. However, I believe we're still in the early stages of the software transformation, which I expect AI to further accelerate. In my view, there's never been a better time to serve developers, and GitLab offers the best and most comprehensive platform to do that. We sit at the heart of the software development life cycle, improving the development experience for everyone involved and enabling customers to create better quality software faster for enterprises. I look forward to rolling up my sleeves, spending time with customers, partners, you, and GitLab team members. Sid, I'm honored to take the helm of the company that you worked so hard to build. Thank you for entrusting me with your vision. Now I'll turn the call back to you.

Thanks, Bill. I really look forward to working with you. Turning back to the business, I want to talk about a few things. First, our really strong Q3. Second, our competitive advantage in AI and where we are going. And finally, the tremendous momentum we are seeing with GitLab Ultimate. We executed well and once again, we exceeded both revenue and profitability guidance. Third quarter revenue increased 31% year-over-year to $196 million and consistent with our commitment to responsible growth, our non-GAAP operating margin reached 13.2%. This is an increase of over 1,000 basis points year-over-year. From cybersecurity threats to compliance mandates, CTOs, CIOs and CISOs are facing increasingly complex challenges. And despite all of this, organizations need to accelerate the pace of software development to remain competitive and respond to ever-increasing customer expectations. This is why our DevSecOps platform resonates so well. On the AI front, we continue to build momentum with GitLab Duo Pro and Enterprise. Customers are realizing tangible value with it. One recently told us that 40% of their developers are saving more than 2 hours per week with Duo, and another customer is seeing productivity improvements of up to 50%. In their first purchase with GitLab, Emirates, the world's largest international airline chose Ultimate and Duo Pro. After comparing different AI-powered developer tools, it was our platform's building security and compliance capabilities and our AI code assistance that made us the choice. Another new customer, Oxblue, a leading global provider of construction video camera services, chose Ultimate and Duo Enterprise in a competitive assessment against GitHub. This is because of our ability to improve the developer experience across the entire software development life cycle, including productivity improvements and security. The combination of Ultimate and Duo Enterprise is a powerful one. While there are many AI solutions that can generate, we go beyond that. We integrate AI throughout the software development life cycle and we serve all stakeholders involved in shipping grade software, including product managers, security engineers, and operations teams. To take advantage of our end-to-end AI capabilities beyond the code creation, F5 moved from Duo Pro to Duo Enterprise in Q3. An international insurance and financial services company expanded their ultimate deployment and purchased Duo Enterprise. By the end of 2024, they will have replaced four-point products, saving over $2 million. They plan to consolidate more tools over the next three years, securing their entire software supply chain with a single DevSecOps platform. And with Duo Enterprise, they estimate that their engineering teams will spend up to 45% less time on mundane tasks like writing code, allowing them to spend time on more strategic valuable work. LATAM Airlines, the largest airline in Latin America and a new GitLab customer, selected Ultimate and Duo Enterprise in a competitive evaluation between us and several security, AI, and CI/CD point solutions. Now LATAM can consolidate their software tool chain, reduce costs, and improve productivity, and we can leverage our extensive security scanner coverage and AI throughout the software development life cycle. Looking ahead, we intend to be the vendor customers choose to partner with for a comprehensive approach to AI. There are three reasons we believe we are uniquely positioned to do this. First is our end-to-end DevSecOps platform. To be effective, AI models need context. And our platform's unified data store allows us to give the AI more and more relevant context. Second, customers value security when it comes to AI. I'm excited to share that GitLab Duo Enterprise customers can now deploy self-hosted models. This is a significant differentiator for us. With self-hosted models, customers can implement AI capabilities without their private data leaving the organization. This lowers the risk of security breaches and enables adherence to data protection laws. Recently, a large U.S. government agency chose to add 2,000 GitLab Duo Enterprise users to their existing ultimate licenses to provide their developers with an AI experience in an offline environment. They chose GitLab Duo because they could use their own self-hosted large language models with their existing GitLab incidents. Finally, customers need to trust the AI they are using. This concern is raised at all levels of our customers' organizations, including the Board of Directors. We partner with LLM vendors who do not use our customers' proprietary code to train their models. And we have adopted a transparency and privacy-first approach to safeguard customers' data and intellectual property. Earlier this week, we announced a bundled offering for GitLab Duo with Amazon Q, allowing developers to create and deploy high-quality secure code faster on AWS. The joint offering integrates AI capabilities from GitLab Duo and Amazon Q into a single interface for AWS customers using GitLab Ultimate. Gen AI innovations started with AI-powered code creation, which we offer in GitLab Duo Pro. With the introduction of Duo Enterprise, we expanded AI to everyone in the software development life cycle. We anticipate the next evolution in AI will be agentic, where AI will be autonomous and proactive rather than pump-based and reactive. Agentic AI is the foundation of GitLab Duo workflow, an autonomous agent for end-to-end software development that we shared a preview of earlier this year. This is where we see the industry going, and we intend to be the leader. Now, I'll move on to the success we're seeing, but Ultimate, there are multiple drivers creating demand for Ultimate and interest from partners like AWS. These include integrated security and compliance, GitLab Dedicated, and as I discussed Duo Enterprise. Ultimate has now reached 48% of our total ARR. During the quarter, Indeed, the #1 job site in the world moved from GitLab Premium to Ultimate. Prior to the upgrade, Indeed migrated thousands of projects from a legacy competitor to GitLab, increasing daily pipelines by 79% and cutting hardware costs by up to 20%. In Q3, they chose Ultimate to consolidate multiple tools into one platform for source code management, CI/CD, and security. Ultimate creates a paradigm shift in how customers can embed security in the earlier stages of software development. We also seamlessly integrate security checks and guardrails as the code is being written. Our recent Forrester study found that Ultimate customers can decrease their incident response times from one month to one hour. USAA is one of our longest-standing customers. With Ultimate, we have been able to boost the productivity and efficiency of their developers by setting and enforcing security and compliance scans and shifting security left. In addition, a large global supermarket chain with 12,000 stores in 18 countries upgraded to Ultimate to take advantage of our platform's full suite of security and compliance features. With Ultimate, they told us they expect to save 90 minutes per developer per day on manual security tasks and reduce costs by $10 million to $15 million per year. Ultimate is also attracting new customers like Prometheus Group, a provider of enterprise asset management software for plants and facilities. They chose GitLab to increase security and compliance with a single all-in-one platform, while also consolidating their tool chain and increasing visibility across projects. In fact, 9 of our top 10 largest new first-order customers in Q3 all purchased Ultimate. In the third quarter, GitLab Advanced SaaS became generally available for all our ultimate customers. Advanced SaaS is powered by technology we acquired with the acquisition of Oxeye. It uses a proprietary detection engine to identify exploitable vulnerabilities in first-party code. This delivers more accurate results so developers and security teams don't have to sort through the noise of false positive results. And unlike other stand-alone security scanners, Advanced SaaS is natively built into GitLab’s DevSecOps platform. This provides a developer experience free from the overhead that comes with integrating multiple point solutions. GitLab Dedicated, which continues to exceed our expectations, is also driving demand for Ultimate. To leverage Dedicated, customers must be on Ultimate because Dedicated is fully managed by GitLab. Customers can achieve quicker time to value compared to hosting the platform themselves, while maintaining high security and compliance standards. Enterprise Work Management platform, Smartsheet, purchased Dedicated through a hyperscaler partner to remove the need for maintenance, reduce infrastructure costs, and give teams time back for innovation, all while ensuring they have a highly reliable software development process. Blackstone, the world's largest alternative asset manager, purchased Dedicated for tool chain consolidation, compliance, and visibility. Dedicated also contributed to a record quarter in our public sector business, and we are building momentum with our in-process designation for FedRAMP moderate. The U.S. General Services Administration, the agency sponsoring FedRAMP, selected GitLab Dedicated for government. Dedicated will reduce the burden of building new tools and will establish a factory floor with an end-to-end FISMA compliant DevSecOps platform. GitLab is a great choice for highly regulated industries, and I am pleased with our performance in this market. I want to finish by saying thank you. First to our team members for living our values and mission, to our customers for placing their trust in us, and our partners for their support, and finally to the wider GitLab community. And with that, I'll turn it over to Brian.

Thank you, Sid, and welcome, Bill. I'm really pleased with our Q3 FY'25 results, which exceeded our expectations. We built off the momentum we saw in Q2 and continued to deliver against our commitment to profitable growth. Q3 revenue reached $196 million, an increase of 31% from Q3 of the prior year, and we delivered a record non-GAAP operating margin. We now have 9,519 customers with ARR of at least $5,000, which contributed over 95% of total ARR in Q3. In particular, we monitor the performance of our larger customer cohort of $100,000 plus in ARR, which increased 31% this quarter and reached 1,144. As a scale, this cohort continues to make significant investments in Ultimate, including our top 7 deals in the quarter. We are also seeing new customers land with GitLab Duo. In Q3, this included 5 six-figure first-order deals that included Duo. On the expansion front, we ended the quarter with a dollar-based net retention rate or DBNRR of 124%. Q3 DBNRR was driven by a combination of seat expansion at approximately 50%, increased customer yield at approximately 40%, and tier upgrades at approximately 10%. Total RPO grew 48% year-over-year to $811.8 million, while CRPO grew 39% year-over-year to $515.2 million. We encourage investors to look at these metrics over a multi-quarter period. Non-GAAP gross margin was 91% for the quarter. The team continues to do a very good job of driving operating efficiencies to maintain our best-in-class gross margin. SaaS now represents 29% of total revenue and grew 44% year-over-year. The considerable traction we are getting with GitLab Dedicated is helping drive this momentum. Once again, we saw a significant increase in operating leverage. Q3 non-GAAP operating income was $25.9 million compared to $4.7 million in Q3 of last year. Similar to Q2, we dropped our revenue outperformance to the bottom line, which, in combination with the team's focus on execution, translated to a record non-GAAP operating margin of 13.2% compared to 3.1% in Q3 of last year. This is an increase of more than 1,000 basis points year-over-year. As we scale, our land and expand model becomes increasingly efficient, which allows us to both invest in future growth while also driving operational efficiencies. Q3 FY'25 adjusted free cash flow was $9.7 million compared to negative $6.7 million in the prior year period. Cash from operating activities was negative $177 million in the third quarter compared to negative $6 million in the prior year period. Cash flow from operations reflects the conclusion of the bilateral advanced pricing agreements or APA with the IRS and the Netherlands Dutch tax authority. In addition to the third quarter payment of $188 million to the Dutch tax authority, which resulted from the APA negotiations, we have reserved an additional $10 million to be paid to the IRS. Although we have petitioned for an abatement of this amount, we expect it to be finalized in Q4. Now turning to guidance. For the fourth quarter of FY'25, we expect total revenue of $205 million to $206 million, representing a growth rate of 25% to 26% year-over-year. We expect non-GAAP operating income of $28 million to $29 million, and we expect a non-GAAP net income per share of $0.22 to $0.23, assuming $170 million weighted average diluted shares outstanding. For the full year FY'25, we expect total revenue of $753 million to $754 million, representing a growth rate of approximately 30% year-over-year. We expect a non-GAAP operating income of $69 million to $70 million, and we expect a non-GAAP net income per share of $0.63 to $0.64, assuming $168 million weighted average diluted shares outstanding. Separately, I would like to provide an update on JiHu, our China joint venture. In Q3 FY'25, non-GAAP expenses related to JiHu were $3.5 million compared to $4.3 million in Q3 of last year. Our goal remains to deconsolidate JiHu. However, we cannot predict the likelihood or timing of when this may potentially occur. Thus, for FY'25 modeling purposes, we forecast approximately $14 million of expenses related to JiHu compared with $18 million last year. In summary, Q3 was another strong quarter driven by demand for our leading AI-powered DevSecOps platform to help our customers build better software. GitLab brings together developers, security experts, and operations teams on a single platform to collaborate, improve quality, and prioritize security. And in a time when there is intense demand for software, this allows customers to both drive innovation and reduce cycle times. This is a large market that is ripe for consolidation, and I'm confident in our ability to build long-term shareholder value. The team is focused on a strong close to the year, and we look forward to seeing many of you over the coming weeks. Thank you all for joining today. With that, I'll turn it over to Kelsey who will moderate the Q&A.

Thanks, Brian. At this time, if you'd like to ask a question, please use the raise hand function or if you join via phone, you may press star nine. We also request that you limit yourself to one question and one follow-up. We'll take our first question from Koji Ikeda of Bank of America.

I wanted to ask a question actually before that said, real high level here. Thank you for everything you've done for the DevSecOps industry as CEO of GitLab. We wish you very much the best on your journeys from here. And Bill, great to meet you and hi, Brian. Okay. So first question, Brian, this is a numbers game here, and you just beat the midpoint of your guidance by 4.6%. And so what stood out from this quarter that was maybe above the less conservative guidance posture that you had from earlier this year?

Thanks, Koji. I appreciate the question. This quarter was a strong quarter across the board. We executed well across all fronts. A couple of things I'd like to point out is in the prepared remarks, I said this was the best quarter in the public sector that we've had in the company history. Ultimate continues to perform really well. 48% of total ARR now. It's greater than 50% of bookings. Net dollar retention was strong and 124% remains best-in-class, CRPO at 39%. And so the last thing I'll mention is churn and contraction as a percent of available to renew. It was the best quarter we had in the last 12 quarters. And so, every aspect of the business performed really well, really driven by the strength of the enterprise. So, really happy with how we ended the quarter.

Got it. For a follow-up, the revenue guidance for the fourth quarter looks about 25.5% at the midpoint. As we consider the next 12 months, aside from the law of larger numbers, is there anything we should take into account that might significantly slow that exit growth rate?

From a guidance perspective, we'll give next year's guidance on the next call. We have a number of different growth factors that we've talked about, the Duo Enterprise SKU, dedicated agile planning. It's just important to note that these things take time to ramp. You have roughly $800 million in revenue, growing 30%. It takes a while for them to make a meaningful impact.

Next question goes to Sanjit Singh of Morgan Stanley.

Congratulations, Bill, and Sid, on your remarkable careers. I’m eager to see what you both will do next. I wanted to discuss the category you mentioned, specifically the shift to workflows and the genetic architecture as the next phase of AI in this area. How do you foresee this evolving? Will it run alongside copilots, or will it integrate with code assistance and copilots? Additionally, what do you believe GitLab's strategic advantage will be regarding agents and genetic architectures?

Thanks for that question. Both are going to exist in parallel. So you'll have GitLab Duo Pro assisting people with coding, GitLab Duo Enterprise helping people with everything else that they need to do their job from planning to securing and everything else. On the other hand, you'll have the AI taking more initiatives being proactive; that's the agentic AI in the dual workflow. And we have an advantage there because we have an end-to-end solution. Our application does everything from planning all the way to deployment. And what's really important with AI is not so much the models anymore. The state-of-the-art models are all really, really good. Two things are important in agentic AI. You give them the right context. For example, it's good that they not only know about the code base, but also what your plans are with the applications. So it's great to have planning in GitLab as well so we can give that context. It's also important that the agents can take action. So what's great about GitLab is deployments are already part of GitLab. It's already existing functionality. So the agentic AI can look into that to trigger the action. So that's our strategic advantage. It's again the end-to-end platform. It not only makes things easier for humans, faster cycle by 10x. It makes things easier for the AI agents as well.

As a follow-up, I'm currently at AWS re:Invent, where several of us are present. You made a significant announcement regarding AWS, and it seems to be initially limited to self-hosting. Will this integration eventually become available in a SaaS offering with GitLab Cloud? Additionally, do you believe this could be a growth driver for the business?

We're super, super excited about this partnership with AWS. We were mentioned as a partner in the main keynote from Gatmar at Garmin; it was very, very exciting. And it's not just us at GitLab that are excited. Our joint customers are excited. We got more than 1,000 visits to our booth the day of the announcement. So, incredible response. We want to make things better for our joint customers. And right now, that's in closed beta, and it's accessible to beta participants who are GitLab Ultimate self-managed customers. But you might remember our GitLab Dedicated offering that is launched on AWS. AWS is where many of our customers are. And we can't wait to bring this joint offering to GitLab Dedicated, but we don't have a timeline for that yet.

Next question goes to Matt Hedberg of RBC.

Sid, first of all, congrats on everything you've done for GitLab. It's just been a real pleasure to work with you. And Bill, congrats on the role. We look forward to working with you in greater detail here. So there's a lot of good details that you just presented with us to dig in. I guess, could I start with just a macro buying question? It certainly seems like you guys are doing exceptionally well here. A lot of good upsell, a lot of first-order business. Do you get a sense that demand trends are improving maybe since 90 days ago?

Matt, this is Brian. Let me start on that. And so let me start off high level and talk about sort of the macro, and then I'll talk a little bit specifics around GitLab. And so on the macro, we're seeing what other companies are seeing. And so no changes there. People are buying GitLab for the value that we deliver. And so the payback period is pretty quick. So I would say that we're resilient there. From a specific to a GitLab perspective, as mentioned, it was a really good quarter all across the board. And so I think that the platform and the value and the payback, people are wanting to consolidate to a platform with a system of record, and that’s what we're seeing driving the growth.

Got it. And then maybe one, I don't think it came up too much in the script, but we continue to hear a lot of good things about your enterprise agile planning module. I'm curious, could you talk a little bit about that? Where you're seeing success? Are you seeing some general replacements these days? Just sort of curious on an update there.

Yes. Thank you so much, and thanks for your kind words. So the enterprise agile planning, it's a really important part of GitLab Ultimate. We're still in the early stages of this market opportunity and we will further enhance this functionality. But planning is an essential part of the DevSecOps lifecycle and doing that for the largest customers is amazing. For example, a North American professional sports league will leverage GitLab’s Enterprise Agile planning offering as part of a broader effort to streamline its technology stack, and this will allow them to reduce reliance on Atlassian products like JIRA and Bamboo, enhancing their efficiency across their development and operations teams.

Rob from Piper Sandler.

Great. And Sid best wishes to you and your family. Given some of the productivity gains that you guys talked about from Duo and obviously some exciting metrics, how are conversations with customers just around developer seats and thought process moving forward? And then, I guess, more tangibly, just what is the pricing yield that you're seeing as you're adding Duo to these seats? Are you getting full price near full price? We'd love to just get a sense.

Yes. Thanks, Rob. I appreciate the question. This is Brian. In Duo, very much like I said, very happy with where we landed for the quarter. We're seeing a lot of deals. And for the top five deals that we had, all of them had Duo attached to them. And Duo itself, when it's attached to a deal, makes up over 25% of the total net ARR in year one. And a number of people are deploying Duo and seeing the productivity gains up to 50%. And so, the feedback we've been getting from the customers has been extremely positive.

And I guess, any comment on the seat side of things, just in terms of how customers are thinking about seats, given the productivity gains you guys articulated earlier.

Yes. When considering seats, we have a diverse range of customers, and this is a general overview of our customer base and some implementation insights. When customers purchase Duo, they typically acquire it for most of their users, but they tend to implement it gradually. For example, a customer might buy between 100 and 150 seats and then gradually roll out a portion of that to different groups within their organization.

Next question goes to Joel Fishbein at Truist.

Sid, I wish you the best as well. Bill, congratulations on your new role. I'm going to ask something that was previously mentioned by Sanjit. There are skeptics who claim that the market is saturated, but your accelerating revenue growth suggests otherwise. First, how would you assess where we are in terms of vendor consolidation and the various tools available? Secondly, how much more potential do you believe we have in this area?

Yes. Thanks for that, Joel. We believe it's still early. We think that the vast, vast majority of enterprises, they are on DIY DevOps today. They have so-called best-in-class solutions, but they have all kinds of point solutions and the really hard part is integrating that. You can make an estimate about GitHub's revenue. And when you look at the market, it's a $40 billion market. And whatever your estimate is for GitHub, that means that we're in a very early inning here. I would say we're in the first inning. So that's why we're so excited about this market. We see every time that we can make those replacements, the more point solutions they replace, the better the result. Every month GitLab becomes better, and we're able to replace more of these point solutions.

And Joel, just a real quick follow-up. Great outperformance on the margin side of the business. I know you've always historically said prioritizing growth over profitability, but I'd love to know how we were thinking about margins going forward. Yes. Thanks, Joe. We're super happy with the increased operating leverage we can continue to get in the model. We look at doing that across the entire enterprise. When we went public, we talked about there may be some pressure on our non-GAAP gross margins due to the increase in SaaS. SaaS has grown 44% year-over-year and is now 29% of our total revenue. And we've still been able to maintain best-in-class non-GAAP gross margins of 91%. So I'm happy with how we've done there. Sales and marketing EDR is the best it's been in company history this quarter, so we continue to work on margin. Our #1 thing is to grow but we'll do that responsibly. We continue to invest in growth, the new SKUs, AI and so forth. But we're doing that responsibly. And so that's what you saw this quarter from 3Q '25 to 3Q '24: we had over 1,000 basis points improvement.

Next question goes to Kash Rangan at Goldman Sachs.

Sid, all the best. Bill, congratulations. Hello, Brian. Could you share your insights as you get to know the business better in your new role? What did you observe at GitLab, and what strategies from your experience at other significant tech companies do you think you can bring to our company? How will you apply your unique perspective to help GitLab reach its full potential, especially with such a great team still in place?

Thank you, Kash. I really am thrilled to be here. I mean, if you just listen to this narrative and look at the numbers, who wouldn't want to be a part of GitLab. I've spent nearly my entire career building software for developers and I have a ton of respect for what Sid and the GitLab team have done, and the fit really is perfect. For our customers, GitLab is a strategic partnership because we sit at the heart of their software development process, and we directly help them increase the quality, the speed, and the security of their software, and that drives direct improvements to their business. I also believe there's just an enormous opportunity ahead of us. As I look at recent technology trends, including all the rapid advancements in AI, I believe the ability for software to transform our world is enormous, and GitLab can play a central role in unlocking that transformation. I couldn't be more excited to lead the company, and my immediate priority is to spend time with our customers, our partners, GitLab team members around the world and all of you to learn how I can better serve as CEO. So thanks for the question.

Next question goes to Shrenik Kothari at Baird.

Great. Again, wishing you Sid a swift recovery and healthy future. And welcome, Bill, it's great to interact you back in the day at the future tax and good here, you outlined your vision for GitLab. Of course, we look forward to hearing more from you. And, of course, you mentioned the excitement about AI and also heard from Sid about agentic AI and Duo workflow, all of that sounds super exciting. Just on the GitLab Ultimate, that's kind of hit a big milestone, 48% of total ARR reflects strong customer adoption. Of course, you talked about having GitLab Duo Enterprise; it's driving significant upsell. Just on a high level, just curious Sid, what are you guys seeing in terms of any inflection for features like integrated security and compliance, which, of course, we've heard before, always had a kind of a slower adoption curve overall steps. And mostly tied to organizational challenges. Just could you help us provide some color on anything which is evolving or changing and primary factors, which is now driving this acceleration?

Yes. GitLab Ultimate is doing really well. And over time, its features are becoming better. I think one remarkable thing was the advanced SaaS launch. We acquired Oxeye, and we were able to really quickly turn that into a much better product offering. Our product offering that advanced SaaS is going to make things better for humans, like the humans will have fewer false positives, so they can focus on what matters and not have to do work that doesn't matter, but it also helps to inform the AI to give the AI better context about what's happening. So kind of the one acquisition is helping both humans and AI, and that's making security better. We'll make the compliance better over time, and it's such an advantage to have it integrated into the whole workflow. We see that customers are able to be more secure on more projects more of the time if it's totally integrated, and that's a big reason for customers to buy Ultimate.

We're going to go to one question now just for efficiency. Next up is Ryan MacWilliams from Barclays.

For Sid, any differences in adoption between Duo Pro and Duo Enterprise adoption at this point? And then where are your customers stand overall in terms of their developer tool AI rollout? Like have they done test use cases today and now ready to go from like initial ROI to broader throughout the organization? Or do you think that's more of a 2025 story as they just familiarize themselves with your AI tools?

Yes. So what we're seeing is that if a customer is on GitLab Ultimate and they're really bought into using GitLab end-to-end, that Duo Enterprise is the better candidate. So that's been amazing to see. I think if you talk about Duo workflow, we're very, very early. It's in the hands of a few customers, but we're looking forward to a beta this winter. But we're early; don't expect a lot this year, this fiscal year. This is the future. We're working on it, and it will come, and we're doing our best to make sure it's great and that it's secure.

Moving on to Michael Turrin at Wells Fargo.

I wanted to ask the sort of the mirror question to what Kash asked earlier. Certainly, wishing you the best Sid, but I think it would be useful just to hear more on your thoughts on Bill, what made him the right fit? Anything you saw from the experience perspective? And really just thinking about the stage that GitLab is at in terms of maturity, all of the new product innovation and efforts, you're rolling out. Just kind of would just love to hear your thoughts on the overall transition there.

Yes, I couldn't be more excited than with Bill as a successor. I think he's a perfect fit for GitLab. I've talked to a lot of CEOs, and I haven't found anyone that is such a good fit with us. Bill has amazing leadership qualities. He's learned from the best leader. He’s a great leader himself. But he also really cares about the software process. He's been a software developer himself. He has been in this market. He knows what the market is like, what our users are like, what our buyers are like. Of course, he's going to go on tour and speak to our customers. But this is someone who cares very deeply about it and has the operational skills to write an amazing next chapter for GitLab.

Next question goes to Gray Powell of BTIG.

Well, thanks, Kelsey. I'll keep this one short. A question for Brian. Just how do you feel about your visibility on the pipeline and the demand environment today versus 6 or 12 months ago?

Yes, thank you, Greg, for the question. When we discussed Q3, there weren’t many changes from Q2 or Q3. The spending environment remains cautious, but we haven’t observed significant fluctuations. We felt confident enough to raise our projections for the year, and we’re pleased with the pipeline situation for Q4.

Next question goes to Pinjalim Bora at JPMorgan.

Sid all the best and welcome, Bill. I want to talk about agentic AI. As the AI agents kind of become a reality with every software developer might a potential ephemeral agents working for them. How do you envision GitLab’s pricing model evolving to fit that world over time?

That's a great question. The background is, if the agents do the work and it's not directly tied to a user, how do you price that? Do you still price that per seat? And I can't comment on future pricing. But I've already given some ideas of what Bill is great; one of the things he's also overseen at New Relic is a move to consumption pricing. That's not the reason we brought him in. We brought him in because he's a great leader, but that never hurts. And despite going to that, pricing may be different for these workflows. We do see a great future for people working in software. And if you look at AI, it's making it easier for people to get on in software. With Duo, it's easier to program something. So I'm not going to give forecast or pre-announce pricing, but those are my thoughts.

Next and final question goes to Nick Altmann at Scotiabank.

Wishing you all the best. My question is about the ultimate premium mix. It seems that Duo Enterprise is gaining good traction, particularly with new customers and contributing to the overall demand for ultimate. When you speak with customers, could you explain how significant the Enterprise is in encouraging them to upgrade from Premium to Ultimate? Additionally, as we consider this dynamic moving forward and the potential for more new customers to choose Ultimate, how should we evaluate the pace of the shift in recurring revenue from Ultimate compared to Premium?

Yes, I think there's different customers. We talked about Emirates becoming a customer. And they combine Ultimate with Duo Pro. There's also a ton of customers combining Ultimate Duo Enterprise. So it's going to vary by customer. I think we should recognize that it's also going to evolve over time. What's important to us is that we are end-to-end with customers. We’re excited about working with the hyperscalers to make sure that customers use all of GitLab. We're also making progress with the system integrators of the world, making sure people get all the value out of GitLab. If you look at how much functionality GitLab offers, there are very few companies using everything today. So that's a big thing we can focus on, making sure to use more of the platform and get even more value. Even though nobody uses everything of GitLab, they already have a 480% return in three years. Think about all the features we're still going to. Think about all the features we still can get adopted. That’s where a lot of the leverage is. Use more of GitLab, become even better at writing software. Yes, AI is helping. Even without the AI, it's already great. And I think the adoption in the future is going to be greater and greater.

Thanks, Sid. This concludes our Q3 FY'25 earnings presentation. Thanks to all of you once again for joining us, and have a great evening.