Piper Sandler downgraded GitLab to Neutral from Overweight on Wednesday, slashing its price target to $28 from $55 amid concerns about the software company's growth trajectory. The downgrade follows GitLab's weak fiscal 2027 guidance, which has clouded the company's near-term outlook. Shares fell approximately 8% in premarket trading.

GitLab reported fourth-quarter revenue of about $260 million, up 23% year over year, with operating margins reaching roughly 20.5%. While Piper Sandler described the results as "a solid, but not spectacular quarterly result," the company's fiscal 2027 revenue guidance implies around 16% growth, below the expected 19%. The company also projected operating margins near 12%, representing about 500 basis points of year-over-year compression.

The analysts noted that GitLab is positioning fiscal 2027 as a year focused on stabilization and execution, including expanding sales capacity and advancing its AI strategy. However, they cautioned that these initiatives may take time to translate into improved financial performance. "Given these dynamics, we expect that the narrative on fundamentals will remain challenged over the coming two to three quarters," the analysts wrote, adding that decelerating growth and competition risks could continue to weigh on sentiment.