In this letter, we propose a contraction-based variable gain nonlinear control scheme for the laser-beam stabilizing (LBS) servo-system, which guarantees that the closed-loop system is convergent. With the variable gain acting on the velocity error, the well known waterbed effect of the low-frequency/bandwidth trade-off can be overcome. Moreover, the contraction-based framework allows us to extend the linear control performance metrics for analyzing the closed-loop nonlinear system behavior. The closed-loop system's performance is evaluated in numerical simulations under input disturbances and/or white noise measurements and its efficacy is compared to that using PID and LQG controllers.