GitLab, whose single platform handles source control, automated testing and security scanning for enterprise engineering teams, has not published a financial figure since 2 June. Its next report is due 1 September. In the intervening three months the market has raised what it pays for each dollar of GitLab's trailing gross profit from 5.19x to 8.00x — a 54% rerating — while that gross profit grew 4.5%.

That gap is the story across a rung of software companies billed on traffic, data and transactions rather than headcount. All six of a closely watched group — Fastly, Elastic, Q2 Holdings, Lightspeed Commerce, GitLab and Five9 — have held an uptrend since the summer, their 50-day averages above their 200-day, five of them having sat in outright downtrends as recently as February. Q2 Holdings was the last to cross, on 18 August. The group's headline twelve-month gain of roughly 40% is one stock: Fastly is up 235.8%, three of the six are still down over a year, and the median member has gone almost nowhere.

The seat business that gave the capability away

GitLab's last reported quarter showed revenue up 23.1% to $264.2m — a fourth straight deceleration. Gross margin compressed 211 basis points to 85.8%, so gross profit grew only 19.6%, slower than revenue. Dollar-based net retention was 117% and customers above $100,000 of annual recurring revenue rose 18% to 1,519, with no dollar figure disclosed for Duo, its artificial-intelligence assistant. Consensus now has fiscal 2027 earnings per share of $0.81, some 8.9% below the prior year's $0.89.

The strategic problem is that GitLab prices per developer seat, the unit autonomous coding agents are supposed to eliminate, and it has chosen to defend the seat rather than meter the agent — putting Duo in front of free-tier users. JFrog, which bills by the volume of software binaries it stores and distributes, saw growth accelerate to 28.7%. Atlassian, meanwhile, is positioning its Jira work-tracking system as the place where coding agents are assigned and audited, with GitLab appearing in Atlassian's own investor letter as a repository feeding someone else's graph. Git repositories are portable; database formats are not. On 7 August GitLab rose 9.7% as investors revisited its AI story, with no company news; Truist lifted its target to $30 from $25 and kept a Hold. The shares closed at $41.29 on 21 August.

Fastly earned its acceleration, from ten customers

Fastly runs an edge network — servers between websites and their users that deliver pages and video, filter attacks and run code close to the viewer. June-quarter revenue rose 23.3% to $183.3m against guidance of $170–176m, the fourth consecutive acceleration. GAAP gross margin reached 63.3% from 51.3% a year earlier. Net revenue retention hit 117%, up from 104%. And unlike its peers Fastly quantifies the AI-attached lines: security revenue of $41.7m grew 43%, compute-led other products $7.7m grew 69%.

The qualifications are severe. The top ten customers grew 48%, now supply 37% of revenue and delivered 87% of sequential growth; everything else grew 12%. Roughly $10m of the beat was episodic, and only a quarter of World Cup matches fall in the current quarter against three-quarters in the last. Diluted shares rose 8.1% year on year against a free-cash-flow yield near 1%. Fastly operates roughly 80 points of presence against Cloudflare's 335-plus cities and Akamai's 4,100-plus embedded locations, with no federal security authorization. The market sold the print — down 13.5% on 6 August — then delivered the entire month's gain in one news-free session on 10 August, up 20.8% on analyst target hikes.

The control has the best numbers and no AI revenue

Q2 Holdings sells digital-banking, lending and fraud software to regional banks and credit unions, on multi-year contracts that have nothing to do with inference workloads. June-quarter revenue grew 13% to $219.8m and ending backlog rose 17% to $2.8bn. Gross margin climbed 566 basis points to 59.2%, so gross profit grew 24.5% on decelerating revenue — the reverse of GitLab. Operating income tripled to $29.3m. The company repaid $304m of convertible notes and ended debt-free, with a further $350m of buyback authorized. Its AI products reach general availability only in the fourth quarter; the AI revenue line today is effectively zero. Bank software must clear examinations by the Office of the Comptroller of the Currency (OCC) and the Federal Financial Institutions Examination Council (FFIEC), which is why its rivals are nCino, Jack Henry and Fiserv rather than any AI tool.

If the group's turn were purely a rate-driven bounce in beaten-down software, this AI-free name should have led. It did not: over 90 days Q2 Holdings gained 37.4% against GitLab's 61.2% and Elastic's 59.8%. But its multiple expanded 30% too, from 6.32x trailing gross profit to 8.22x, on gross profit up 5.6%.

Elastic, which sells the search and log-analytics stack behind many corporate security operations, posted the largest 30-day gain of the six despite having reported nothing since February; it jumped 11.5% on 14 August on agentic security-product news around the Black Hat conference, with several targets raised to $100. Five9, in cloud contact-center software, disclosed AI revenue up 78% to about $39m — but gross margin fell to 53.4% and operating income collapsed to $2.0m from $18.5m a quarter earlier, so its AI mix is currently dilutive. Lightspeed Commerce, in point-of-sale and payments, grew reported revenue 5.8% with 17% organic growth and has diverged from the rest, up 2.4% in a month.

The crack

The repricing began unwinding at the expensive end first. The 30-year Treasury yield topped 5.33% on 18 August, a 19-year high, applying a higher discount rate to exactly the distant cash flows these multiples assume; reports the same week that Anthropic is preparing an IPO revived the substitution fear. Fastly fell 12.7% and 9.9% on consecutive sessions with no company news, and is down 18.9% from its 14 August peak. The other five have given back under 5%.

The setup

Where it stands — All six trade well above their spring levels on multiples that expanded three to ten times faster than their gross profit. Would confirm — GitLab's 1 September quarter showing net retention above 117% and gross margin stabilizing near 86%. Would invalidate — Fastly's September quarter revenue growth falling below 18% as World Cup traffic rolls off. Watch next — GitLab reports fiscal second-quarter results on 1 September 2026. Valuation — GitLab 8.07x trailing and 7.27x forward gross profit, against 5.19x three months ago and 5.59x in February.