Gitlab Inc. Q1 FY2026 Earnings Call

Good day, everyone, and welcome to today's GitLab First Quarter Fiscal Year 2026 Conference Call. Please note this call is being recorded. It is now my pleasure to turn the conference over to Kelsey Turcotte.

Good afternoon. We appreciate you joining us for GitLab's First Quarter Fiscal Year 2026 Financial Results Conference Call. With me are Bill Staples, our CEO; and Brian Robins, our CFO. During this afternoon's call, we will provide an overview of the business, commentary on our first quarter results and guidance for the second quarter and fiscal year 2026. 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 nonrecurring 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 measures. I'll now turn the call over to Bill.

Thank you, Kelsey, and good afternoon, everyone. Thank you for joining us today. First quarter revenue increased 27% year-over-year to $215 million, with non-GAAP operating margin reaching 12%. I want to thank our team for your focus on execution and our customers. Our continued growth underscores the demonstrable value customers realize with our AI-native DevSecOps platform. Unlike competitors, we are the only AI-native, cloud-agnostic, model-neutral DevSecOps platform capable of running anywhere, including air-gapped environments. We offer comprehensive solutions across the software development life cycle with built-in contextual AI that's really only possible on a platform with a unified data store. Every day, organizations face pressure to maximize efficiency, and software is an essential lever they have to create business agility and competitive advantage. Our DevSecOps platform stands at the core of enabling customers to build that mission-critical software. I view our strategic differentiators as an opportunity for GitLab to advance conversations about AI's strategic role in software development. As enterprises embrace AI and transform development practices, our unified platform uniquely enables them to maintain enterprise security and compliance. We believe our market is moving rapidly in a direction that's inherently advantageous for platform solutions. I expect AI co-creation tools to empower more co-creators than ever. The result is that the volume of code being created will expand, and all of those users and agents still require a platform in order to test, validate, secure, package, and deploy their code to production environments. This is what GitLab does today. Supermicro, an AI solutions provider, recently doubled the size of their software team and upgraded from our free tier in Q1. They selected GitLab Premium and Duo Pro to build an internal software acceleration program targeting 2x faster feature development for their end-to-end AI infrastructure solutions. It was a big quarter for our R&D team with the annual launch of new product capabilities across the platform in GitLab 18. This May introduction and product roadmap build upon the essential capabilities of successful software development: core DevOps, security, and AI. In core DevOps, we are centralizing artifact management, optimizing CI/CD pipelines for speed and security, and making it easier for users to find, filter, and embed content from anywhere in the platform. We want to ensure customers can easily collaborate and drive maximum ROI from their GitLab investment. We're also deepening our security capabilities to help customers achieve comprehensive visibility and control. This includes custom frameworks to design, implement, and enforce compliance, vulnerability dashboards to pinpoint critical findings, and innovation to improve detection accuracy, reduce false positives and help customers focus on the code that threat actors can exploit. Security is a key driver of GitLab Ultimate adoption, and we want to deliver market-leading solutions that are even more effective because they're embedded in our DevSecOps platform. Finally, we are natively integrating AI throughout the platform. Customers who use our Premium and Ultimate tiers now have access to both Duo Chat and Code Suggestions. In addition, GitLab Duo Enterprise is now available for GitLab Premium customers. We now include Chat and Code Suggestions with Premium and Ultimate because we see every engineer experimenting with AI, and we want Duo to be an obvious solution for them with no barriers to adoption. This integrated approach offers an ideal starting point for both new and existing customers, allowing them to leverage Chat and Code Suggestions with limited usage limits and providing them a smooth upgrade path to our offerings with higher usage limits and more comprehensive capabilities, including GitLab Duo Pro, Duo Enterprise, and when GA, GitLab Duo Workflow. We also made Duo Enterprise available to Premium customers for the first time in response to customer demand for self-hosted models and its ability to inject AI in planning, collaboration, and deployment. By lowering barriers to adoption and expanding the serviceable market with more flexible packaging, we believe we will be able to unlock more Duo adoption in coming quarters. New and existing customers are increasingly finding Duo a compelling solution versus competitors. For example, our R+V insurance, a top 5 German insurer, is expanding their GitLab deployment by implementing Duo Enterprise in their regulated environment. After adopting GitLab Ultimate in 2023 to integrate their full DevSecOps lifecycle, R+V's recent Duo Enterprise evaluation demonstrated significant improvements with a more than 35% acceleration in AI-assisted test generation and 25% acceleration in both root cause analysis and code explanation. In April, we launched GitLab Duo with Amazon Q, a strategic integration that embeds Amazon Q's autonomous software development agents directly within the GitLab DevSecOps platform. Early access participant Volkswagen Digital Solutions reported significant productivity gains, noting the joint capabilities dramatically reduce context switching and accelerate their entire pipeline from code commit to production deployment. Our partnership with AWS extends beyond technical integration to coordinated go-to-market initiatives, including GitLab's position among the select AWS Global Summit sponsors. This alliance amplifies our market presence and drives higher quality customer engagement. Over the coming months, we'll showcase this powerful combination at AWS Global Summit events, further expanding our enterprise reach. Finally, we remain on schedule to launch GitLab Duo Workflow, our agentic AI solution, this winter. We're getting great feedback from our workflow private beta participants. What began as a private beta with 6 major customers has now expanded to dozens. Developers report that Workflow is beginning to transform their daily productivity. Engineers describe confidently delegating complex multi-step refactoring tasks to Workflow and then watching as it methodically outlines a transparent execution plan resulting in clean, properly committed code. Our private beta satisfaction metrics are really compelling. 82% of surveyed users already classify themselves as either satisfied or very satisfied with Workflow's capabilities, validating our strategic investment in agentic software development. Momentum with GitLab Duo continues to grow, particularly with Duo Enterprise. In Q1, the number of customers who purchased GitLab Duo for the first time increased 35% quarter-over-quarter. We also closed some great expansion deals with existing customers. For example, Highmark Health and enGen, a healthtech subsidiary of Highmark Health, added GitLab Duo Enterprise to their existing GitLab Ultimate deployment. Multiple strategic objectives drove this decision, which includes enhanced developer productivity, and a comprehensive enterprise-wide AI solution that strengthens both code quality and security while simultaneously extending generative AI benefits beyond developers to their broader technical teams. Ultimate now represents 52% of total ARR with 8 of our 10 largest deals in the quarter purchasing Ultimate. We're also seeing Ultimate continue to increase as a percentage of total new customer lands. This quarter's new Ultimate customers include Eficode, Technosylva, Premise Health, and SGK. We also had significant expansions at American Family Mutual Insurance Company and the FBI. In Q1, a leading AI-powered market intelligence and search platform chose GitLab in a competitive evaluation that included GitHub. Their goal is to unify their growing development team under a single solution to manage what has become a very complex environment. In addition to GitLab Ultimate, they chose Duo Enterprise to power AI development capabilities and streamline workflows. These large-scale adoptions validate our comprehensive platform strategy and demonstrate growing market recognition of the value delivered by Duo Enterprise. Turning to Dedicated, our single-tenant SaaS solution. We continue to see broad adoption across industries, and I'm pleased to announce that we achieved FedRAMP Moderate authorization. We expect this will create a nice tailwind in our public sector business with Dedicated for Government. The rapid adoption we're seeing validates our strategic investment in providing enterprise-grade isolation with cloud-native convenience, particularly among security-conscious sectors where compliance requirements traditionally slowed digital transformation efforts. In Q1, German-based FORVIA HELLA, one of the world's oldest automotive suppliers, purchased GitLab Dedicated and Duo Enterprise. Dedicated will enable them to streamline their highly complex environment and reduce R&D overhead costs. Additionally, Ignite by FORVIA HELLA, the organization software factory, shared with us that GitLab Duo's intelligent Code Suggestions have become a daily asset for their developers. Combined with the chat feature, Duo allows for immediate feedback and iteration, resulting in faster development cycles and a more secure code base. According to Ignite, GitLab Duo is a seamless and powerful addition to their workflows. Also in Q1, NatWest expanded their investment with us. Since NatWest became a Dedicated customer in 2022, we've partnered closely with them to drive results that include 20% improvements in deployment frequency over the last 12 months, which have increased the pace of outcomes to colleagues and customers utilizing AI code generation and governance simplification. Based on the success they've seen over the past several years, NatWest increased their GitLab footprint to 17,000 users on Dedicated and 6,000 Duo Enterprise seats. One of the things that distinguishes GitLab is our vibrant co-creation ecosystem with April setting an all-time record for customer contributions to our platform. This represents customer-driven innovation with industry leaders like Thales, Scania, and Siemens; recent submissions include package registry capabilities and expanded logging functionality for our AI gateway. This collaborative model delivers real-world value across multiple dimensions. It accelerates our feature velocity, ensures innovations match enterprise requirements, and fosters deeper partnerships with our customers. I believe our mission to help customers deliver secure software faster is of critical importance to every business in the world, and our technology holds transformational power. We aspire to be the world's best AI-native DevSecOps platform, unlocking step function productivity improvements by redefining the software engineering experience through human and agent collaboration. I shared this new vision for GitLab with our team members a few weeks ago, and I will introduce it along with the innovation we're building today and the roadmap ahead at our GitLab 18 launch event later this month. And with that, I'll turn it over to Brian.

Thank you, Bill, and thanks again to everyone for joining us today. I'm pleased with our team's focus on execution in the first quarter, which resulted in 27% revenue growth, significant year-over-year operating margin expansion, and record adjusted free cash flow. These results highlight the effectiveness of our intelligent DevSecOps platform and demonstrate our ability to generate sustainable growth while enhancing profitability. We believe all of this positions us for long-term success, even amid evolving market conditions. Turning to the numbers. First quarter revenue reached $214.5 million, an increase of 27% from Q1 of the prior year. We now have 10,104 customers with ARR of at least 5,000 hours, which contributed over 95% of total ARR in Q1. Our larger customer cohort of $100,000-plus in ARR increased 26% year-over-year and reached 1,288. We have a diversified customer base, both by industry and geography, and new single customer accounts for more than 2% of ARR. On the expansion front, we ended the quarter with a dollar-based net retention rate or DBNRR of 122%. Q1 DBNRR was driven by a combination of seat expansion at approximately 80%, increased customer yield at approximately 5%, and tier upgrades at approximately 15%. Q1 seat growth was driven in part by strength in Ultimate and GitLab Duo as customers started on their AI journey and continue to expand deployments. We also continue to see a tailwind on mix of seats from the large deal we signed in Q4, which will continue through Q3 of this year. As we have mentioned, we expect these ratios to fluctuate quarter-to-quarter based on the composition of the underlying renewable portfolio. Total RPO grew 40% year-over-year to $955.1 million, while cRPO grew 34% year-over-year to $584.8 million. We encourage investors to look at these numbers over a multi-quarter period. Non-GAAP gross margin was 90% for the quarter. The team has maintained a best-in-class gross margin even as our SaaS business has quickly scaled, driven in part by the strength in GitLab Dedicated. SaaS is 30% total revenue and grew 35% year-over-year. Once again, we saw a significant increase in operating leverage. Q1 non-GAAP operating income was $26.1 million compared to a loss of $3.8 million in Q1 of last year. As a reminder, we hosted Summit, a global gathering of our team in Q1 FY '25, which was a nonrecurring expense of $15 million. Non-GAAP operating margin was 12.2% compared to negative 2.3% in Q1 of last year, an increase of approximately 1,400 basis points year-over-year. We have a very strong business model with minimal fixed expenses given our remote work environment. This gives us the flexibility to continue to invest in the business and expand operating margins. Now turning to guidance. Our guidance philosophy has not changed and assumes that the macroeconomic environment we have been operating in since April continues. For the second quarter of FY '26, we expect total revenue of $226 million to $227 million, representing a growth rate of approximately 24% year-over-year. We expect a non-GAAP operating income of $23 million to $24 million, and we expect a non-GAAP net income per share of $0.16 to $0.17, assuming 171 million weighted average diluted shares outstanding. For the full year FY '26, we expect total revenue of $936 million to $942 million, representing a growth rate of approximately 24% year-over-year. We expect a non-GAAP operating income of $117 million to $121 million, and we expect non-GAAP net income per share of $0.74 to $0.75, assuming 172 million weighted average diluted shares outstanding. The fundamentals of our business are very strong. We generated $104.1 million in adjusted free cash flow in Q1, a record adjusted free cash flow margin of 49%. Free cash flow was driven by ongoing improvements in operating leverage and Q4 to Q1 seasonality and collections. We ended the quarter with $1.1 billion in cash and investments, providing us with significant flexibility to navigate market fluctuations while continuing to invest in both our AI capabilities, platform enhancements, and go-to-market organization. Separately, I'd like to provide an update on JiHu, our China joint venture. In Q1 FY '26, non-GAAP expenses related to JiHu were $3.1 million compared to $3 million in Q1 of last year. Our goal remains to deconsolidate JiHu. However, we cannot predict the likelihood or timing when that may potentially occur. Thus for FY '26 modeling purposes, we forecast approximately $18 million of expenses related to JiHu compared with $13 million from last year. In closing, I'm pleased with our team's focus on execution in Q1, which resulted in another strong quarter of top line growth, increasing operating leverage, and growing momentum in AI adoption. We also continue to meaningfully enhance our platform. I'm very excited about all of the new secure, scalable, AI-native capabilities we're delivering in GitLab 18 and what that can mean for customers. We invite you to join our GitLab 18 launch event on June 24 to learn more about it. To register, please visit our Investor Relations website. Thank you for joining today. With that, I'll now turn it over to Kelsey, who will moderate the Q&A.

We'll take our first question from Rob Owens at Piper Sandler.

Hopefully, you guys can hear me on the other end, and I will stick to Kelsey's one question just to try and stay on her good side. Bill, in a high level, obviously, a lot of noise around what AI is doing with coding, especially with code suggestion and code completion. And I think you did a good job in your prepared remarks kind of laying out the value that you add beyond that, right, in terms of packaging, testing, CI/CD. So help us understand just where customer conversations are strategically right now with things just moving so fast in this space.

In every conversation I have with engineers and customers, the topic of AI comes up. Customers recognize this trend, and team leaders are actively looking for ways to leverage AI to enhance productivity, spur innovation, and improve quality. The pace of change is rapid, with new tools and techniques emerging daily, and we are keeping pace. This quarter, I engaged more deeply with our product and engineering teams, gaining insight into our developments and feeling optimistic about the focus and innovation coming from our engineering team under our new vision. Currently, it’s common for customers to mention they are using Duo alongside other competitive tools like Copilot, Cursor, or Windsurf. They are open to trying multiple options in order to provide the best tools for their engineers. This trend is likely to continue. A positive outcome of this experimentation is that all the tools emphasizing code creation are generating more code and increasing the number of code creators who will ultimately need GitLab for the subsequent processes, including testing, validation, security, packaging, and publishing. We believe that this is a promising time for engineers and supports GitLab’s mission moving forward.

Great. Thanks for the question. Next question goes to Koji Ikeda of Bank of America.

I wanted to ask about the growth. When I look at the business and the financial metrics, it seems like there are two distinct growth stories. Looking at the fiscal Q1 performance, it might be one of the smallest beats we've seen since the IPO, yet you are maintaining the revenue guidance for the full year. However, when I analyze further, RPO and cRPO billings look quite strong. Can you help clarify these factors? Additionally, could you share any insights on deal linearity during the quarter and compare May demand to April demand?

Thanks, Koji. This is Brian. For the quarter, there weren't any surprises. I'm happy with how the team executed in the quarter. There were 2 things that we observed in the quarter. One is the mix favored more SaaS. And then two, the linearity was back-end weighted in the quarter. As a reminder, also, Q1 had a few less days than Q1 of last year. There's been no change in guidance philosophy, and we're assuming the same macroeconomic conditions that we've seen this year in the guidance.

Thanks, Koji. Next question goes to Sanjit Singh of Morgan Stanley.

Congratulations on the improving profitability, really nice to see. I guess my question, I guess, for Brian, when we look at the sequential customer adds this quarter, when we look at like net new adds, on both the 100,000 side and on the customers above 5,000, it looked like they decelerated a little bit. And I was wondering if there's any theme there with some of the pricing changes you announced in the quarter with respect to new customers signing up for Premium and just any sort of color behind the net new customer additions this quarter. Appreciate it.

Yes, absolutely. Great question. Let me break down the answer by addressing two points. First, I want to talk about new first orders, and then I will explain the composition of the numbers related to customers above 5,000. One of the company's goals we discussed in the last earnings call was to increase the volume of new first orders. On a logo basis, we performed better this quarter compared to last year for both the enterprise and mid-market segments, and we also saw significant improvement in the dollars added this quarter. This initiative is starting to pay off. When examining the components of new customer additions over 5,000, several factors contribute to that. First, we have new customers. Second, we account for lost customers and churn. Third, there are customers expanding into the 5,000 range, and fourth, customers contracting into that range. The most notable change was in customers expanding and contracting into the 5,000 category, which resulted in a difference of 160 logos year-over-year. At the lower end of the market, in the SMB and lower mid-market segments, we are seeing some price sensitivity, but it is not affecting our financials. It is impacting new customer additions. Importantly, we do not base compensation on new customer additions; we focus on bookings from the quarter. I hope that clarifies things. I'm not concerned about the new customer additions greater than 5,000 this quarter.

Great. Thanks, Brian. Next question goes to Kash Rangan at Goldman Sachs.

I didn't catch that part.

But we're having some trouble hearing you. Would you like to drop for a minute and then we'll put you back in the queue? Okay. So we'll take the next question from Derrick Wood at Cowen.

Great. I guess either for Bill or Brian, we receive investor questions about the strong adoption of AI in developer use cases and the proven productivity gains. Is there a concern about job growth in the software developer market? How are you both seeing the trend in seat growth during renewals, and what is your broader perspective on how AI will affect the demand for developers in enterprises over the next couple of years?

Yes. Thanks, Derrick. I'll talk a little bit about how I see the outlook, and Brian, feel free to add any commentary on the seat trends in the quarter. I think I know there's a raging debate about this, and I think a lot of it is borne out of anxiety about the future by engineers, frankly, as they see how powerful AI can be at helping to do software engineering. Frankly, I've seen this trend throughout my career, building developer tools in around this space for about 30 years. Every time we create advances in productivity and higher levels of abstraction where prized engineering skills become maybe less required and sometimes no longer required, the same kind of phenomenon occurs. And I'd say this one is definitely stronger than other times because of the power of AI. But every time I've also seen that higher level of abstraction and more productivity actually yield more opportunity. And I believe the same is true here with AI. I see the number of engineers continuing to be sustained and even grow. I think the number of people who are able to create code is only going to increase with some of the power of AI and ability to create code without having necessarily the deep technical skills at times required. And then I also believe the volumes of code will also increase. And both of those are really important for GitLab. As you know, we price today based on users, but also, a large part of our business is taking that code and helping users manage it throughout the software life cycle. And so more code and more users means good business for GitLab. Brian, do you want to talk about any of that?

I will provide some insights on seats and developer hiring. In our dollar-based net retention rate, 80% of the contributions came from seats. This stems from a combination of factors, including a significant deal in the fourth quarter and the additional seats we are selling for Duo in our add-on SKUs. I am pleased with the number of extra seats we're adding to our customer base. Regarding developer hiring, we are not directly linked to market trends. There is a vast total addressable market that we are just beginning to penetrate, offering significant opportunities ahead. Recently, some reports have suggested that developer hiring has improved, and we have noticed a positive trend over the last couple of quarters.

Great. Thanks for the question. Appreciate it. Next question goes to Pinjalim Bora of JPMorgan.

Can you hear me?

Yes, we can now.

Great. Bill, it seems like the bottleneck has kind of shifted right from kind of AI-driven code generation, and GitLab is obviously poised to break that bottleneck for a lot of your customers as you infuse AI, but how do you make sure that GitLab extracts the value that is aligned with that unlock that customers might enjoy beyond coding since your pricing is kind of more on a seat basis, right? How are you thinking about that?

Yes, that's a great question. We've been analyzing this topic quite thoroughly for some time, especially during my last quarter when I collaborated with product and engineering to refine our vision with more ambition and focus for the upcoming quarters. As I mentioned in my prerecorded remarks, I’m looking forward to discussing this vision further at our launch event on June 24. Here are five key areas where we are concentrating on creating value and differentiation with our AI strategy. GitLab is recognized as a platform where engineers collaborate and teams come together to develop software throughout the software life cycle. When it comes to AI, we aim to build upon this foundation, enhancing the collaborative experience with numerous interactions between humans and agents. We are also leveraging our reputation in open source and co-creation to extend our strategy into agentic AI. Additionally, we will offer comprehensive extensibility and flexibility through an open community approach for agent discovery and development. Furthermore, we are committed to maintaining our standards for security and privacy, serving our clients with cloud neutrality and support for self-hosted models. Our agentic approach will support top-tier security and privacy standards across the software life cycle. Another advantage we have is our single database platform, which allows us to create a knowledge graph that integrates all relevant context for tasks, whether performed by a human or an agent. For instance, our team is currently implementing a deep research feature that enables an agent to access the entire hierarchy of context related to a project, including all issues, work items, code, personnel, security scans, test cases, and more, facilitating a summary that helps engineers and leaders understand the project's status. This capability is unique to a platform like GitLab's. Lastly, we are focusing on integrating software life cycle agents directly into GitLab, enabling every Premium and Ultimate customer to collaborate with them seamlessly right out of the box. One significant step we’ve taken is introducing Duo Chat and Duo Code Suggestions in the last quarter for Premium and Ultimate users to set the stage for enhanced human-agent collaboration in the upcoming quarters.

Great. Thanks, Bill. Next question goes to Nick Altmann with Scotiabank.

Awesome. Bill, you mentioned seeing a higher mix of customers land in Ultimate. Can you just give us a sense for how much that has changed over the last couple of quarters, and whether we should expect expansion rates to come down a bit just given you're seeing kind of more customers land in the Ultimate tier? And then the follow-up is just any implications on how we should consider the new pricing and packaging model with Duo Enterprise being available to Premium customers? And whether you expect that to impact the cadence of customers landing in Ultimate?

Yes. First part of your question around more customers choosing Ultimate, it's awesome to see. Obviously, when a customer adopts Ultimate, they're getting the very best in capabilities from GitLab from the start, and we love seeing that. And I think it speaks to the strength of our security offerings as part of Ultimate and the real market trend to shift left and really focus on security as part of the DevOps life cycle. And so happy to see that. The reality is most customers still do start with Premium, and Premium and Ultimate are kind of the ultimate 1-2 punch, right? Premium is a great SKU, low-cost, affordable, most capable product, I think, in the market at its price point and very attractive for customers to start with, and that is where the majority of customers do start today and then they mature and scale both the number of engineers and teams using GitLab as well as the level of capability they buy into with that Ultimate upgrade providing a great expansion path for us. I don't see that changing, honestly. It's great to see more customers landing in Ultimate, but I believe that 1-2 land and expand strategy we have is working and will continue. With regard to the second part of your question around the shift to make Enterprise available with Premium or to Premium customers, that's really a change that we've done for a couple of reasons. First, we do see demand from Premium customers for the Enterprise product. There are a number of capabilities there that make a lot of sense for them, including self-hosted models as well as AI capabilities across the software life cycle. Now, they don't have the security capabilities there as part of Ultimate, but the majority of the features that we have in Duo Enterprise do apply to those Premium customers, and we're happy to unlock that for them. As we studied that change, we also saw that while many customers do buy both Ultimate and Enterprise together, the Duo Enterprise SKU was not a driver of the upgrade to Ultimate and so therefore, not a significant risk in terms of expanding the service addressable market by more flexible packaging.

Thanks, Nick. Next question goes to Gray Powell of BTIG.

Okay. Great. Can you hear me okay?

We can.

Awesome. I understand that many questions are focused on top line momentum, but I have to ask. You reported a significant free cash flow number in Q1. Was there anything one-time that contributed to those results? Additionally, if I look at past seasonality, Q4 tends to be the strongest quarter for free cash flow. If that's accurate, it seems like you could potentially achieve over 20% margins again this year in terms of free cash flow. Is there anything you would point out to address my concerns, as it seems like the broader market might be overlooking this?

Yes. Thanks for the question. Q4 is seasonally our strongest quarter, and so we collect that cash in Q1, and we generated over $100 million in free cash flow. So happy with that. But there's nothing anomalistic within the quarter that led to the higher free cash flow collections. It was just normal business operations.

Thanks, Gray. Next question goes to Mike Cikos of Needham.

I just wanted to come back to the earliest comments. It might have been in response to Rob over at Piper. But Bill, when you were talking about the AI experimentation that's going on out there, you rattled off, 'hey, people are testing multiple vendors, whether it's GitLab with Duo versus Cursor, Windsurf.' And I just wanted to see how you guys gain confidence that you're winning in this market, right? We've tiptoed around the new logo growth this quarter, the skinny beat. I just wanted to see like with the strength of the offering here, how do you ensure you're climbing above some of the marketing clutter that's out there or ensure that you're continuing to gain?

Yes. I mean, we actually engage with those customers who are testing multiple vendors, the typical bake-off. And frankly, we see GitLab Duo win out against other leading competitors and some of our largest customers. So I don't have a lot of concern about our ability to compete in the market. I think there's lots of opportunity still ahead of us. As I said earlier, I think we're building on a really strong strategy and some clear differentiation. Our GitLab Duo Workflow product that's been in private beta has been getting really strong feedback as well, and we're on track to make that public beta available later this summer as well as GA to come later in the winter. So I think that will only strengthen our competitive position and put us in a really good spot with customers.

Thanks, Mike. Next question goes to Jonathan Ruykhaver at Cantor Fitzgerald.

Yes. Can you just talk about the enhancements with GitLab 18? Just specifically, what are the features that you see differentiating the most? And then just as a quick follow-up, what are the factors that played into the decision not to charge for those features, especially in light of the comments you've made today around the innovation you're driving around AI, the high-quality context, and improved outcomes, how do you expect to capture that value?

Yes, that's a great question. I've heard some inquiries regarding our introduction of Duo Chat and Duo Code Suggestions as features within Premium and Ultimate, and the reasoning behind that. It's crucial to understand this strategy. The fact is, every engineer is currently seeking AI tools to assist with their work, and we want GitLab Premium or Ultimate to be an easy, seamless option for AI adoption. By including these features, we remove barriers to usage. However, we do have usage limits in place, so it’s not unlimited. Developers can begin using it, get a solid understanding of its usability and features, and we then provide a smooth transition to Pro and Enterprise for all customers. We believe this is a natural progression that will simplify adoption and enlarge the market for GitLab's complete AI capabilities. Regarding your first question about the broader capabilities of the platform with the GitLab 18 launch, I highlighted some of those in the prepared remarks. I strongly encourage everyone to join the June 24 event, as we will showcase some amazing demos and discuss the significant releases. Looking at our innovations, we've introduced over 100 new features for our Premium customers just last year, and even more for our Ultimate customers. The level of innovation is substantial. For core DevOps with version 18, we are focusing on centralizing artifact management, a feature many customers have requested. We're also enhancing our leading CI/CD pipelines for improved speed and security. In terms of security, many customers have upgraded to Ultimate for these tools and are seeking better vulnerability dashboards, more accurate detection, and reduction in false positives; these issues are typical with security tools tending to be overly cautious, and we're addressing those needs. Lastly, in the AI space, I mentioned a bold new vision that we're unveiling, featuring remarkable innovations like agentic chats and new capabilities for asynchronous work and collaborative efforts between humans and agents. This will build on the Duo Chat and Duo Code Suggestions that we’ve now made available to every customer. Hopefully, that provides some insight, Jonathan.

Great. Next question comes from Adam Tindle of Raymond James.

Okay. I just wanted to start, Brian, on Q1, the results versus guidance. I know it was kind of mentioned earlier, the skinny beat, sort of the tightest we can recall in a little while. Just the rationale for that. You mentioned the days in Q1. I don't think you had mentioned that on the Q4 call. So I wonder if that was maybe part of the reason or what would be the rationale for sort of that skinnier beat. And as you thought about guidance for Q2, you noted that you're assuming the macro since April continues, which is a fair assumption. But I just wonder you might reflect on how May and this early part of June have been similar or different from April because we've heard from a lot of vendors that things have sort of bounced back. I just wonder what you might be seeing.

Yes. So let me first hit on days. So going into the quarter, we knew how many days there was. That was just as a reminder that there were fewer days in the quarter. So that didn't really have much to do with guidance. From a guidance perspective, there's been no change in guidance philosophy. The 2 things that happened in the quarter that I mentioned was the mix favored SaaS. From a rev rec self-manage, we recognized more upfront on SaaS; it's 100% ratable. And the linearity was a little bit more back-end weighted. From a sort of an environment perspective, it remains cautious, but people are still buying. We haven't really seen too much difference from a macroeconomic perspective. One also hit a little bit on federal as well. I know that's been out there a lot. We had a really great quarter in first quarter in federal. We over exceeded our expectations and we had good growth year-over-year. And so the federal business continues to do well as well.

Great. Thanks. Last question goes to Steve Koenig at Macquarie.

I wanted to follow up on the last question a bit more. Brian, in your comments about the quarter, you mentioned that there was more SaaS than usual and that the linearity was back-end weighted. Was that due to macro factors, execution issues, or a combination of both? You're not the only company in the DevOps space experiencing this. Could you provide more insight on why you think that occurred? Additionally, as you observe the macro environment and its impacts, what metrics are you tracking internally to assess the situation? Lastly, in your upcoming Q2, will you make any adjustments in your execution or strategy to improve the linearity? That's all I have.

That was a complex question with several parts. From a macro perspective, I participate in our forecast calls, and on rare occasions, there have been discussions about tariffs and potential delays, primarily from the procurement side rather than the actual buyers. It's unclear whether that was a negotiation strategy or a genuine consideration. Looking at the GitLab platform, it has a payback period of less than six months and an ROI exceeding 480% over three years. This indicates that customers are adopting our platform to streamline operations and reduce costs. Overall, we haven't observed significant changes at a macro level. Internally, we monitor various metrics related to the linearity within a quarter, tracking them over several years. We have a plan in place to evaluate our progress. We analyze pipeline creation and movement throughout the quarter. As for execution, it's common in every quarter to anticipate deals closing, and securing the necessary approvals can be unpredictable. This reflects a typical end-of-quarter situation rather than anything particularly unique this quarter compared to previous ones. As CFO, there is always room for improvement in execution, and Ian is dedicated to enhancing our efforts across the organization. However, there were no specific issues to highlight for this quarter.

Great. Thanks. Last question goes to Jason Ader at William Blair.

Can you hear me okay, Kelsey?

We can now.

Bill, where do you see the biggest risk of disruption to the current DevOps toolchain? This toolchain has been in place for a while, and you operate across the entire toolchain. With the rise of AI coding assistants, especially from some new start-ups, how does this affect other parts of the toolchain? You mentioned earlier that it's beneficial for you, but I'm sure certain aspects of the toolchain could be more affected than others. Additionally, would it make sense for you to partner with a Cursor or Windsurf as a way to attract new customers?

Yes, that's a great question. There's a lot of enthusiasm in the market for these tools, and we share that excitement. It can sometimes be unclear where one tool ends and another begins, but I see Cursor and Windsurf as essential for helping engineers create applications and new code. GitLab then takes over where those code assistants stop. The code they generate still requires the robust services that GitLab provides, including testing, securing, analyzing, packaging, building, and deploying. These tools already integrate well with GitLab; both Cursor and Windsurf are successfully driving code into our platform. Many of our customers test these tools alongside Duo. We also offer co-creation capabilities. The Duo Code Suggestions feature, included in every Premium and Ultimate license, provides functionality similar to Cursor and Windsurf in various integrated development environments and tools for coding and application development, and our offerings in this area will continue to strengthen. We are committed to interoperability and maintaining an open platform, which is why we embrace these tools. We are excited about the innovations they bring to developers, and we don't see them as competitors to the core parts of the DevSecOps lifecycle where we excel. Regarding our AI strategy, we are approaching it from a broader perspective. It’s a multi-faceted strategy that spans the entire software lifecycle, and we're enthusiastic about the solutions we have introduced, including agentic AI, our partnership with Amazon Q, and the Duo Workflow product, which is currently in its beta phase before a full launch. Overall, the broader strategy we’re pursuing aligns well with the developing innovations from start-ups, making them complementary and beneficial for our customers in the future. I hope that addresses your question.

Great. Thank you very much to everyone who's participated. This concludes our Q1 FY '26 earnings presentation. Have a great day. And if you have any questions, just follow up with the IR team. Take care. Bye-bye.