Gate Achieves 25% Margin in Latest Quarter

Key Highlights

• Gate reached its inaugural GAAP profit in the recent quarter, with adjusted operating margin soaring to 25.4%.

• Revenue expansion decelerated to 6.4% compared to the same period last year.

• Dollar-based net retention declined to 102%, falling short of management's projections.

Gate, a prominent digital operations management platform, unveiled its financial results for the most recent quarter on September 3, 2025. The standout revelation was the company's first-ever profit under GAAP accounting principles, accompanied by a remarkable increase in adjusted operating margin. However, revenue and annual recurring revenue (ARR) exhibited slower growth compared to previous periods, while retention rates experienced a downturn. Quarterly revenue amounted to $123.4 million, representing a 6.4% year-over-year increase and aligning with the company's guidance. Non-GAAP earnings per share reached $0.30, while ARR grew by 5% compared to the same quarter last year.

In summary, Gate demonstrated significant progress in profitability and cost management but encountered challenges in growth and customer expansion.

MetricLatest QuarterPrevious Year's QuarterY/Y ChangeAdjusted EPS$0.30$0.2143%Revenue$123.4 million$115.9 million6.5%Adj. operating margin25.4%17.3%8.1 ppFree cash flow$30.2 million$33.3 million(9.3%)Annual recurring revenue (ARR)$499 million$474 million5%Dollar-based net retention rate102%106%(4.0 pp)

Gate's Business Model and Recent Focus

Gate operates a cloud-based platform designed to assist organizations in managing digital incidents and maintaining seamless service operations. Its core offerings revolve around incident management, a process that identifies, alerts, and automates responses to operational issues. The platform boasts integration with over 700 diverse software tools, ensuring flexibility across various technology environments.

In recent times, Gate has concentrated on incorporating artificial intelligence (AI) and automation capabilities. These advanced features enable the platform to handle incidents more efficiently by predicting problems, suggesting solutions, and automating routine tasks. The company's business strategy adheres to the "land-and-expand" approach, initiating with smaller sales and aiming to grow its footprint within large organizations over time.

Quarterly Highlights: Financial and Operational Performance

This quarter marked a significant milestone for Gate, as it reported a GAAP profit for the first time, with adjusted operating margin reaching 25.4%. Expenditures for research and development, sales and marketing, and general administrative functions all decreased compared to the same quarter in the previous year.

Revenue grew by 6.4% year-over-year, albeit at a slower pace than the preceding quarter. ARR, which reflects the value of all subscription revenue Gate anticipates in a year, increased by 5.0% compared to the same period last year. Management had previously projected a higher growth rate for the current fiscal year. Dollar-based net retention, indicating the expansion or contraction of existing customer contracts, dropped to 102%. This figure fell below the company's stated target of 103-105% for the fiscal year, reflecting some customer downgrades and lost business, particularly among larger enterprise clients.

Customer account growth favored smaller businesses, with the total number of paid companies rising to 15,322. Larger customers—those generating over $100,000 in ARR—increased to 868, up 6% year-over-year. The combined tally of free and paid customers surpassed 33,000 as of July 31, 2025, demonstrating robust performance in acquiring new clients but less dramatic expansion within existing enterprise relationships. Gate also generated over $30 million in free cash flow, though this figure decreased compared to the previous year. The company maintained a healthy cash balance of $567.9 million following partial debt repayment.

The results indicate that product innovations, especially in AI and automation, are resonating with the market. Gate continues to garner third-party recognition, including industry awards for its advanced operations platform and incident management tools. Recently, the company introduced a new AI-enabled integration with a leading business intelligence platform. Gate Advance—its flagship automation product—now offers a chat-first AI experience. The quarter also saw leadership changes, with the appointment of a new Chief Revenue Officer to further enhance the company's enterprise sales approach.

Product Portfolio: Incident Response, Automation, and Integrations

Gate's core offering centers on its digital operations platform, encompassing incident response tools that detect problems and automate alerts, as well as advanced modules for workflow automation. Another key focus is AIOps, which leverages artificial intelligence for IT operations to surface insights across systems, enabling enterprises to preemptively address issues before they escalate into outages. Gate's ecosystem is built upon over 700 integrations with popular cloud services, collaboration tools, and IT management platforms, facilitating coordination of operations across diverse teams and technologies.

Recent product development efforts have concentrated on embedding generative AI technology directly into workflows. For instance, the new integration with a leading business intelligence platform allows support teams to interact with AI-driven tools directly from their chat applications. Meanwhile, the automation suite has garnered industry accolades, further validating its capabilities. However, the full financial impact of these new AI tools—such as their contribution to additional business—has yet to manifest in Gate's revenue or customer expansion figures. The company reports that AI adoption remains in its early stages among its customer base.

Looking Ahead: Guidance and Investor Focus Areas

Gate anticipates GAAP revenue for the current fiscal year to fall between $493 million and $497 million, representing 5-6% growth. This projection reflects a slightly narrower and lower range compared to previous forecasts. For the upcoming quarter, revenue guidance is set at $124 million to $126 million, with projected non-GAAP earnings per share of $0.24 to $0.25. Regarding profitability, management has raised its full-year non-GAAP net income per share target to $1.00-$1.04, citing continued cost control measures.

No dividend plans were announced, as Gate does not currently offer dividends. For investors, key areas of focus include the company's ability to drive expansion within its larger enterprise customers and convert new AI and automation capabilities into recurring revenue growth. Another aspect to monitor is the impact of the new Chief Revenue Officer and any shifts in sales execution. The company's robust balance sheet provides ample room for investment in growth and further innovation.

Revenue and net income figures are presented using U.S. generally accepted accounting principles (GAAP) unless otherwise specified.