GitLab shares surged roughly 22% in premarket trading after a quarter that gave investors something software companies have struggled to deliver lately: faster commercial momentum without abandoning profitability.

The headline numbers were solid. Fiscal second-quarter revenue rose 21% to $286.3 million, non-GAAP operating margin reached 15%, and adjusted earnings were $0.24 per diluted share. But the more important signal came from bookings. Management said net annual recurring revenue growth exceeded 40% year over year and first-order growth more than doubled.

That combination suggests GitLab may be moving from an AI story built on product announcements toward one supported by actual customer commitments.

Software revenue is a backward-looking measure because much of it comes from contracts signed in earlier periods. Bookings and remaining performance obligations offer a better view of what customers are committing to now.

GitLab ended the quarter with total remaining performance obligations of $1.2 billion, up 16%, and current RPO of $744.7 million, up 20%. Customers generating more than $100,000 in annual recurring revenue increased 17% to 1,571.

Those figures do not prove that every AI initiative will succeed, but they indicate that larger enterprises are still consolidating development, security and governance workflows on GitLab’s platform.

GitLab is positioning itself as the control layer for software created by both people and autonomous agents. Its new products connect source code, work items, deployment pipelines and production signals so AI agents can operate with more context and tighter governance.

That strategy matters because enterprises are unlikely to give agents unrestricted access to sensitive code and infrastructure. A platform that already manages identity, permissions, security scanning and audit trails has a credible advantage.

The commercial question is whether customers will pay materially more for those capabilities or simply expect them to be included in existing subscriptions.

The quarter was not uniformly strong. GAAP gross margin declined to 84% from 88%, while non-GAAP gross margin fell to 86% from 90%. Operating cash flow was negative $3.1 million, compared with positive $49.4 million a year earlier. Adjusted free cash flow dropped to $9.8 million from $46.5 million.

Some of that cash-flow decline reflected nonrecurring items, but the direction still matters. GitLab is investing aggressively in products and go-to-market capacity at the same time that infrastructure costs and stock-based compensation remain significant.

A premium valuation will require both strong growth and evidence that the economics of AI features improve as adoption scales.

For the third quarter, GitLab expects revenue of $281 million to $283 million and non-GAAP operating income of $35 million to $37 million. Full-year revenue guidance is $1.129 billion to $1.133 billion, with adjusted earnings of $0.85 to $0.87 per share.

The sequential revenue outlook is restrained, which gives investors a reason not to extrapolate one strong bookings quarter indefinitely. The bull case depends on commitments converting into recognized revenue over several quarters.

GitLab’s rally is understandable because the report provided evidence that AI is increasing the strategic value of an integrated DevSecOps platform. Record bookings, stronger net retention and rapid first-order growth point to improving demand.

Still, the company must prove that this demand can translate into durable cash generation. The most important metric next quarter will not be how many AI products GitLab launches. It will be whether those products lift expansion rates and revenue without another meaningful step down in gross margin.