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Recently, GitLab and its executives have faced another investor lawsuit on suspicion of false advertising of the company's artificial intelligence (AI) capabilities and market demand.
This is the third lawsuit against GitLab in five months, with the initial securities investor lawsuit filed on September 9, 2024 and subsequently revised on February 5, 2025, detailing more. Immediately afterwards, two derivative lawsuits were filed on February 14 and February 19, 2025 respectively. Derivative litigation is usually initiated by shareholders on behalf of the company against executives or board members for mismanagement or breach of fiduciary liability.
These lawsuits mainly involve the period from June 5, 2023 to June 3, 2024. GitLab launched an AI feature called "Duo" at this stage, claiming it can provide powerful capabilities in code advice, security vulnerability explanations, and value stream forecasts. However, while Duo reached general availability and enterprise version availability in April and August 2024, the lawsuit noted that GitLab executives exaggerated AI adoption and misled investors about customer demand.
In the lawsuit, the plaintiff claimed that GitLab's co-founder and CEO Sytse Sijbrandij and CFO Brian Robins frequently promoted the market demand and supported a 53% increase in price for Premium subscription services. Against this backdrop, GitLab announced in March 2023 that it would increase its Premium subscription price from $19 per user to $29 per month, while about 60% of its revenue was from this service at that time.
However, management's guarantees failed to be fulfilled, customers' acceptance of new pricing and AI integration is not ideal, and the market's demand for GitLab's AI products is seriously inconsistent with publicity, mainly due to security and data privacy concerns. The lawsuit pointed out that GitLab received mostly negative feedback after launching AI features, resulting in sales difficulties and rising customer churn.
In March 2024, GitLab released its financial report for fiscal year 2024. Although revenue reached US$163.8 million, a year-on-year increase of 33%, its revenue forecast for 2025 is only US$725 million to US$731 million, with a significant slowdown in growth. The stock fell 21% immediately.
