GitLab has recently announced that it will lay off around 350 employees, which is about 14% of its total workforce, as part of a major restructuring effort influenced by the rising demands of artificial intelligence. The company is also exiting operations in 22 countries, streamlining its management structure, and shifting its investments towards infrastructure that is ready for AI.
What Is GitLab Act 2?
The CEO of GitLab, Bill Staples, has detailed this transformation in a plan he calls GitLab Act 2. He views this change as a crucial step for what he terms the “agentic era,” where AI-driven software agents are becoming essential to the functioning of development platforms. Staples explains that these AI agents operate at a machine scale, creating a level of traffic and demand that GitLab’s current systems were not built to manage. To address this, the company has teamed up with an undisclosed AI lab to completely overhaul its core systems.
Growing Revenue, Shrinking Headcount
What makes this situation particularly striking is the financial context. GitLab reported a first-quarter revenue of $264 million, marking a 23% increase from the same time last year, with gross margins at 88%. Despite this impressive performance, the company is still reducing its workforce, a trend that is becoming more common in the tech industry.
GitLab is not the only one making these cuts. Other major companies like Amazon, Microsoft, Meta, Cisco, and Oracle have also pointed to AI transformation as a reason for downsizing their human workforce, even as they report record profits. Industry data indicates that the tech sector has already shed over 100,000 jobs in 2026, and it is on track to surpass the layoff figures from both 2024 and 2025.
What Changes Is GitLab Making?
In addition to workforce reductions, GitLab is implementing a significant internal reorganization:
-> Some departments are reducing management layers by as much as three levels to enhance decision-making speed.
-> Research and Development teams are being reorganized into about 60 smaller, more independent units—almost double the previous number—each responsible for their own projects from start to finish.
-> The company’s geographic presence is decreasing by roughly 37%, although it will continue to support customers in exited markets through its partner network.
-> AI agents are being utilized to automate internal processes, managing reviews, approvals, and handoffs.
Most of the savings from these changes will be reinvested into AI research and infrastructure development, rather than being distributed to shareholders.
The Bigger Picture
Staples recognized that the challenges facing developer infrastructure are common across the industry. Competing platforms like GitHub have also faced difficulties in managing the influx of AI-generated code submissions, which impact platform stability. GitLab’s strategy is to completely rebuild its foundation—introducing new APIs tailored for AI agents, overhauling CI/CD pipelines, and integrating governance tools directly into the platform.
The layoffs are projected to cost the company between $30 million and $35 million in restructuring expenses.
What This Means for the Industry
GitLab’s actions signify a larger trend in how tech companies are reevaluating their workforce in an AI-driven environment. The message from Silicon Valley is becoming increasingly evident: AI is not just a product anymore; it’s also a justification for reducing headcount. For those employees affected, this shift presents a challenging reality. Investors have had mixed reactions, with shares initially rising sharply after the earnings announcement, only to fall back as the full extent of the layoffs became clear to the market.
As AI continues to transform the landscape of software development, the pressing question for the industry has shifted from whether these changes will occur to how quickly they will happen and what impact they will have on people.
GitLab Act 2 — by CEO Bill Staples
