Last week, Gitlab announced that it will raise its price of its Premium tier from $19 per month to $29 starting next month. Existing customers will have a price of $24 per month applied to their upcoming renewals until April 2024.
Premium represents Gitlab’s second tier offering. Notably, there was an extensive difference between its price when compared to the Ultimate tier ($99 p/month)
There was extensive backlash within developer communities such as Reddit and Ycombinator. Most posters have expressed dissapointment and intention to switch to Github (Microsoft’s competing product) or a competing product.
That said, this is Gitlab’s first price increase in 5 years, and clearly marks its intention to continue acquiring enterprise customers.
As suspicions grow that the growth of Gitlab’s Ultimate tier will drop below 100% for the first time, it will be interesting to see the degree of price elasticity that they hold on their customers based on this move.
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From an investment standpoint, my guess is that it will drive a higher 2023 guidance than previously modeled, as the majority of customers will remain. This probably somewhat explains its +16% share price surge after the announcement.
I understand that some may view price increases as the least accreditive way to compound growth and show revenue endurance; but it is an important lever to pull when times are tough.
So far, it seems that the companies that have faired the best in their Q4 earnings have been (a) those moving upmarket, and (b) those with subscription pricing. Gitlab ticks both of those boxes, but we’ll have to wait until next week to see for ourselves!
-RMTZP