Recently, GitLab and its executives have once again become the focus of investor lawsuits because they are accused of false propaganda on artificial intelligence (AI) capabilities and market demand. This incident has attracted widespread attention, especially in the technology industry and investment sectors.
This is the third lawsuit against GitLab in five months. The initial securities investor lawsuit was filed on September 9, 2024 and was subsequently revised on February 5, 2025 to add more details. Immediately afterwards, two derivative lawsuits were filed on February 14 and February 19, 2025. Derivative litigation is usually filed by shareholders on behalf of the company against executives or board members, alleging that they are mismanagement or breach of fiduciary liability.
These lawsuits mainly involve the period from June 5, 2023 to June 3, 2024. During this period, GitLab launched an AI feature called "Duo", claiming its powerful capabilities in code advice, security vulnerability explanations, and value stream forecasting. However, while Duo reached general availability and enterprise version availability in April and August 2024, respectively, the lawsuit noted that GitLab executives exaggerated AI adoption and misled investors’ perceptions of customer needs.
In the lawsuit, the plaintiff accused GitLab's co-founder and CEO Sytse Sijbrandij and CFO Brian Robins of frequent publicity about the AI capabilities that will drive market demand and supported a 53% increase in price for the Premium subscription service. In March 2023, GitLab announced 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 were not fulfilled and customers' acceptance of new pricing and AI integration was not ideal. The market 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 the 2024 fiscal year. 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, and the stock fell 21%.
In summary, GitLab and its executives have been sued again by investors for false AI propaganda and price increases. The company's Premium subscription price rose 53%, but it faced the challenge of poor customer acceptance. Financial expectations slowed, and GitLab's stock price fell 21%.