GitLab Inc., a developer tooling provider that competes with Microsoft Corp.’s GitHub unit, is reportedly exploring a sale.

Reuters today cited sources as saying that the publicly traded company has hired investment bankers to manage the process. GitLab reportedly started looking into a sale after receiving takeover interest from several companies. Datadog Inc., a major provider of observability software, is reportedly among the prospective buyers.

GitLab launched in 2011 with a GitHub-like platform designed to help developers manage their code files they produce as part of software projects. A decade later, the company went public on the Nasdaq at a $11 billion valuation. GitLab’s market capitalization stood at about $8 billion on Tuesday before the report about the potential sale. 

The company’s year-over-year revenue growth has declined from nearly 70% at the time of its initial public offering to 33% in the three months ended April 30. Nevertheless, GitHub easily topped the consensus sales estimate during the quarter. Its adjusted profit of four cents per share exceeded analyst expectations as well.

GitLab has maintained its growth by expanding beyond the code management market, its original focus area, into numerous adjacent segments. Today, it offers tools for tasks ranging from fixing application vulnerabilities to processing technical support tickets.

One of the newest additions to GitLab’s product portfolio is an artificial intelligence assistant called Duo. When a developer writes a new piece of code, Duo recommends colleagues with relevant skills who can review the code for errors. The AI is also capable of performing some programming tasks on its own: it can generate code, check software for bugs and explain how application components work.

Datadog, the company reportedly interested in buying GitLab, has adopted a similar product strategy. Since going public in 2019, the former company has introduced a range of new tools across multiple product categories to maintain its revenue growth. Datadog now competes in more than a half dozen markets including the observability, cybersecurity and software testing segments.

Buying GitLab would enable the company to expand into an array of new markets. Moreover, such a deal would create potentially significant upselling opportunities: Datadog could market its tools to GitLab’s customers and vice versa. GitLab has more than 30 million registered users, including developers at over half the Fortune 100.

It’s believed that an acquisition agreement with Datadog or another buyer could be inked in a matter of weeks. However, Reuters’ sources cautioned that there’s a chance GitLab will eventually opt against a sale. The company’s stock price nevertheless jumped more than 7% on the report today, suggesting investors are optimistic about the acquisition’s chances of materializing. 

Image: GitLab