GitLab, a Google-backed cloud developer valued at $8 billion, considers sale as acquisition interest grows

GitLab, a Google-backed software developer renowned for its popular open-source code collaboration platform, is reportedly exploring a potential sale. According to an exclusive report from Reuters, the software developer is working with investment bankers after attracting interest from several companies, including cloud monitoring firm Datadog.

Sources, who requested anonymity due to the confidential nature of the discussions, told Reuters that any potential deal is still weeks away and far from guaranteed. Neither GitLab nor Datadog immediately responded to requests for comment. Alphabet, which holds a 22.2% voting stake in GitLab through its venture capital arm, also did not provide a statement.

“GitLab is working with investment bankers on a sale process that has attracted interest from peers, including cloud monitoring firm Datadog,” Reuters reported, citing the sources.

GitLab, currently valued at around $8 billion, went public in 2021 with an IPO valuation of $16.5 billion, doubling the price Microsoft paid for its main competitor, GitHub. Despite its strong market debut, GitLab’s shares have fallen 16% this year, underperforming the S&P 500 Application Software index’s 3% gain, amid concerns over reduced customer spending.

The company recently reported a 33% year-on-year revenue growth to $169.2 million and achieved its first positive cash flow in the latest quarter. However, GitLab acknowledged challenges in pricing its services competitively against Microsoft, which acquired GitHub for $7.5 billion in 2018.

The tech sector has seen a surge in deal-making, driven by advancements in AI and cloud computing. Alphabet, for instance, is in advanced talks to acquire cybersecurity startup Wiz for approximately $23 billion, following a previous exploration of acquiring marketing software firm HubSpot.

GitLab’s journey highlights its role as a nimble upstart challenging a more established rival. Unlike GitHub, which has a large employee base, GitLab benefits from contributions by hundreds of developers worldwide. “Our competitor GitHub has 270 employees. GitLab has 800 contributors,” a GitLab representative boasted, emphasizing the company’s open-source strengths. “That is why GitHub enterprise has been playing catch-up to our feature set.”

Before its IPO, GitLab secured $268 million in Series E funding to enhance its platform, incorporating features in monitoring, planning, and security. The funding round was led by ICONIQ Capital and Goldman Sachs, with participation from Y Combinator Continuity Fund and other existing investors.