Microsoft Faces AI Demand Questions as GitLab Posts Eighth Straight Beat

• GitLab (GTLB) beat Q3 estimates with 25% revenue growth and operating margin reaching 18% from negative a year ago.

• GitLab insiders sold heavily with Director Matthew Jacobson offloading $45M in September and the stock now trading at $42.

• Microsoft (MSFT) cut sales quotas for Azure AI products after reps struggled to hit growth targets despite spending $19.4B on capex last quarter.

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GitLab (NASDAQ: GTLB) and Microsoft (NASDAQ: MSFT) both reported recent quarters with contrasting stories. GitLab beat estimates on December 2 with 25% revenue growth and expanding margins. Microsoft reported solid September results but faces questions about whether enterprise AI demand justifies its massive infrastructure spending.

GitLab delivered $244.4 million in revenue for Q3 FY2026, beating the $239.3 million estimate. Non-GAAP EPS came in at $0.25 versus $0.20 expected. This marks the eighth consecutive quarter of earnings beats, with an average surprise of 56% over two years. Operating margin reached 18% non-GAAP, up from negative territory a year ago. Free cash flow hit $27.2 million compared to negative $177 million in the prior year quarter.

Customers spending over $100,000 annually grew 23% year over year. Dollar-based net retention sits at 119%, meaning existing customers are expanding usage. CEO Bill Staples said “More code means more of a need for GitLab” on the earnings call, pointing to the company’s position as AI drives more software development.

Microsoft reported $77.7 billion in Q1 FY2026 revenue, up 18.4% and ahead of the $75.4 billion estimate. Azure grew 40%, driving the Intelligent Cloud segment to $30.9 billion. Operating margin reached 48.9%. The company generated $45.1 billion in operating cash flow, up 31.8%.

But a December 2 report from The Information changed the narrative. According to Reddit user u/Illustrious_Lie_954, “Microsoft shares dipped a bit today after a report suggested the company cut sales quotas for some of its AI software offerings.” The post noted that “many sales reps in Azure’s AI unit struggled to hit last year’s growth numbers, especially around the Foundry product.” The post asked whether this signals “growing pains, or an early sign that AI adoption inside large companies is slower than the narrative suggests.”