Recently, GitLab and its executives are facing another investor lawsuit, accused of misleading claims regarding the company's artificial intelligence (AI) capabilities and market demand.
This is the third lawsuit against GitLab in five months. The initial securities investor lawsuit was filed on September 9, 2024, and was subsequently amended on February 5, 2025, detailing more information. Following this, two derivative lawsuits were filed on February 14 and February 19, 2025. Derivative lawsuits are typically brought by shareholders on behalf of the company against executives or board members for mismanagement or breach of fiduciary duty.
These lawsuits primarily involve the period from June 5, 2023, to June 3, 2024. During this time, GitLab launched an AI feature called "Duo," claiming it could provide strong capabilities in areas such as code suggestions, security vulnerability explanations, and value stream forecasting. However, although Duo achieved general availability and enterprise availability in April and August 2024 respectively, the lawsuits indicate that GitLab's executives exaggerated the adoption rate of AI and misled investors regarding customer demand.
In the lawsuits, the plaintiffs claim that GitLab's co-founder and CEO Sytse Sijbrandij and CFO Brian Robins frequently promoted the AI features as a driver of market demand, which supported a 53% price increase for the Premium subscription service. In this context, GitLab announced in March 2023 that it would raise the Premium subscription price from $19 to $29 per user per month, while at that time, about 60% of its revenue came from this service.
However, management's assurances did not materialize, as customer acceptance of the new pricing and AI integration was not ideal. The market demand for GitLab's AI products was severely mismatched with the promotions, mainly due to concerns over security and data privacy. The lawsuits noted that the feedback received after launching the AI features was largely negative, leading to sales difficulties and an increase in customer churn.
In March 2024, GitLab released its financial report for the fiscal year 2024. Although revenue reached $163.8 million, a 33% year-over-year increase, the revenue forecast for 2025 was only $725 million to $731 million, indicating a significant slowdown in growth, resulting in a 21% drop in stock price.
Key Points:
🌐 GitLab and executives sued again by investors for false advertising of AI and price increases.
📉 The company raised Premium subscription prices by 53%, but faced challenges with customer acceptance.
📊 Financial forecasts slowed, causing GitLab's stock price to drop by 21%.
