The AI Loser That Isn’t: Why We’re Buying the GitLab ($GTLB) Recovery
Sept $60/75 calls
In the current market, the label AI Loser is often thrown around with more recklessness than rigor. GitLab ($GTLB) has been one of the primary victims of this narrative, with the stock recently touching 52-week lows on fears that AI agents would replace human coders, thereby shrinking the market for DevSecOps seats.
We believe this narrative is fundamentally flawed. In fact, we see the opposite: More code means more need for GitLab. To capitalize on what we view as a massive valuation disconnect, we are moving into a long-dated bullish position: Buying the 60/75 Call Spread expiring September 18, 2026, for a net debit of $1.10.
The Thesis: The Integrated Advantage
The core of the bull case for GitLab lies in its all-in-one philosophy. While its main competitor, Microsoft’s GitHub, offers an extensible ecosystem that requires stitching together various tools, GitLab provides a unified platform.
The AI Multiplier: GitLab isn’t just a code repository; it’s an AI-native DevSecOps platform. Their Duo AI suite is woven through the entire lifecycle—from planning and coding to security scanning and monitoring.
Security & Compliance: In an era where AI-generated code might introduce new vulnerabilities, GitLab’s integrated security (SAST/DAST) becomes a non-negotiable for enterprise customers. This is why 54% of their revenue now comes from their Ultimate tier.
The “Seat Expansion” Myth: Contrary to the AI will replace coders fear, GitLab is seeing existing clients upgrade tiers and expand seats. AI is currently acting as a productivity multiplier, not a replacement for the platform that governs the code.
The Mechanics of the 60/75 Spread
By utilizing a vertical call spread, we are able to take a high-conviction position with a strictly defined risk profile.
At a cost of $1.10, we are risking a small amount of capital for a potential 12.6x return if the stock recovers to the $75 level by late 2026, a price it traded at as recently as early 2024.
Why the Late 2026 Horizon?
We chose the September 2026 expiration to give the market time to digest two critical shifts:
The New CFO & Pricing Strategy: The company recently shifted to a hybrid pricing model. While this caused short-term uncertainty in the stock, it is designed to align costs with the massive value their AI tools provide.
Profitability Inflection: GitLab has already turned the corner on non-GAAP profitability, posting an 18% operating margin in their most recent quarter. As they scale toward $1 billion in revenue, the operating leverage of a single-platform model should become undeniable.
“More code means more of a need for GitLab.” — Bill Staples, CEO
Risks to Consider
The primary risk is competitive pressure from Microsoft. GitHub is a formidable opponent with a massive user base. However, GitLab’s cloud-agnostic and model-neutral stance makes it the preferred choice for enterprises that want to avoid vendor lock-in with Azure or AWS.
The Bottom Line
GitLab is currently trading at a forward Price-to-Sales multiple near its all-time lows, despite growing revenue at a 25% clip. By buying the 60/75 call spread, we are placing a leveraged bet that the AI Loser narrative will be exposed as a market misunderstanding by the time the 2026 fiscal year wraps up.
We are buying the infrastructure for the next generation of software development.
Hey, great read as always. Your point about AI multiplying the need for robust DevSecOps, especially with security for AI-generated code, really resonnates. Do you think the market is adequatly pricing in the long-term educational shifts needed for developers to fully leverage these AI-native platforms? Super insightful analysis, you really cut through the noise.