ESTC

Elastic N.V. (NYSE:ESTC) delivered a quarter that should have won over Wall Street. An earnings beat, growing enterprise adoption of its AI-powered search and cloud platform, and guidance pointing to continued revenue growth through fiscal 2027. The AI-fueled beat led shares spiking more than 15% in after-hours trading, but DA Davidson chose to remain Neutral on the stock. On August 28, the firm raised its price target on Elastic NV (NYSE:ESTC) shares to $100 from $80 while maintaining a Neutral rating. For first quarter of fiscal 2027 ending July 31, 2026, the Search AI Company announced total revenues of $478 million, an increase of 15% year-over-year. Total subscription revenue also rose by the same percentage year-over-year to $449 million. Sales-led subscription revenue was $399 million, an increase of 18% year-over-year. Sales-led subscription revenue is a reflection of Elastic’s progress with its larger customers, a segment management is explicitly focused on to improve for achieving its long-term financial and product milestones. The company also reported adding more than 80 customers with annual contract value above $100,000, bringing the total to over 1,800. Firm Da Davidson particularly mentioned the company’s improving demand for Elastic’s Security solution backed by a heightened threat landscape. Looking ahead, it forecast fiscal 2027 revenue of $1.998 billion to $2.010 billion, with an expected non-GAAP operating margin of estimated 19.4%. Elastic also repurchased about $40 million of shares during the quarter. This brought total buybacks under its $500 million program to $380 million. Even though the numbers and shares surge point to growing optimism toward Elastic, DA Davidson has chosen to remain Neutral on Elastic on one key execution risk: consistency. The firm acknowledged that Elastic has started to prove its AI story, but the accelerating quarter proceeds the prior year that came with execution disappointments. Plus, the improving demand environment also leaves less room for execution mistakes. The real test, therefore, is whether the company can continue its sales growth, security momentum, and guidance increase beyond the current quarter. Overall, bears believe the recent business acceleration may be a temporary spike rather than a lasting trend. This, they believe, may leave the stock overpriced following its massive rally. Elastic’s rally came after Q2 filings from Insider Monkey’s hedge fund data base, which shows hedge funds cutting back holdings from 50 in Q1 to 42 in Q2 2026. As of mid-August, the stock reported moderate level of bearish skepticism, with short interest of 6.34 million shares sold short, a representation of 6.98% of the public float. Overall, Elastic’s quarter has strengthened the bull case for the company characterized by accelerated growth, raised guidance, and improving enterprise demand. However, one quarter of accelerating growth isn’t enough to gain back the credibility it has lost over the previous year. For now, it needs to prove that its strong growth is going to sustain over the next quarters. While we acknowledge the potential of ESTC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: NVIDIA (NVDA): What Foxconn and Super Micro Are Telling Us about the AI Boom  and Snowflake (SNOW) Stock: AI Growth Is Real, But Is the Valuation Already Priced In? Disclosure: None. Follow Insider Monkey on Google News.

Elastic (ESTC) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company. Analysts' growing optimism on the earnings prospects of this software developer is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. Consensus earnings estimates for the next quarter and full year have moved considerably higher for Elastic, as there has been strong agreement among the covering analysts in raising estimates. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: The company is expected to earn $0.81 per share for the current quarter, which represents a year-over-year change of +26.6%. Over the last 30 days, the Zacks Consensus Estimate for Elastic has increased 91.13% because two estimates have moved higher while three have gone lower. The company is expected to earn $3.33 per share for the full year, which represents a change of +29.6% from the prior-year number. The revisions trend for the current year also appears quite promising for Elastic, with eight estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 155.4%. Thanks to promising estimate revisions, Elastic currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. Investors have been betting on Elastic because of its solid estimate revisions, as evident from the stock's 30% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Elastic N.V. (ESTC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, Aug. 27, 2026 at 5:00 p.m. ET Vice President of Investor Relations - Alex Kurtz Chief Executive Officer - Ashutosh Kulkarni Chief Financial Officer - Navam Welihinda Operator: Good afternoon, and welcome to the Elastic First Quarter Fiscal 2027 Earnings Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Alex Kurtz, Vice President of Investor Relations. Please go ahead. Alex Kurtz: Good afternoon, and thank you for joining us on today's conference call to discuss Elastic's first quarter fiscal 2027 financial results. On the call, we have Ash Kulkarni, Chief Executive Officer; and Navam Welihinda, Chief Financial Officer. Following the prepared remarks, we will take questions. Our press release was issued today after the close of the market and is posted on our website. Slides, which are supplemental to the call, can also be found on Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements, which may include predictions, estimates or expectations regarding the demand for our products and solutions and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as of the date of this call and are subject to risks and uncertainties that could cause actual results to differ materially. We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website, and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and the slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. Webcast replay of this call will be available on our company website under the Investor Relations link. Our second quarter fiscal 2027 quiet period begins at the close of business on Friday, October 16, 2026. We'll be hosting a virtual public webinar highlighting our improved metrics capability on September 22 at 8 a.m. Pacific Coast Time, which will be made available on our IR website for viewing. See the Elastic Investor Relations website for more details. With that, I'll turn it over to Ash. Ashutosh Kulkarni: Thank you, Alex. Good afternoon, everyone. Thank you for joining us to discuss our first quarter fiscal 2027 results. We are pleased to report a strong start to the year with continued strength in sales execution. We beat across all guided metrics and demonstrated the constant currency growth acceleration in revenue and sales-led subscription revenue that we called out last quarter. Q1 total revenue was $478 million, growing 15%. Sales-led subscription revenue grew 18% to $399 million and we delivered a non-GAAP operating margin of 16.2%. As we previously noted, we entered fiscal 2027 with a plan to accelerate our sales-led subscription revenue growth on a constant currency basis over the course of the year, and our Q1 results demonstrate that we are off to a good start. Customer demand was strong across all solution areas, especially in search and AI and security. We ended Q1 with more than 1,800 customers spending $100,000 or more in ACV. This is the highest quarter-over-quarter net additions to this $100,000 metric that we have ever seen. Our 21% CRPO growth and 27% RPO growth signal that customers are continuing to make multiyear commitments to our platform as long-term AI transformations are taking hold. AI is reshaping the stack that developers build upon. The focus is no longer on token maxing. It is on building agentic applications that leverage the reasoning and influencing power of LLMs on a business's proprietary data. This requires the highest possible retrieval accuracy at the lowest possible cost. That shift plays directly to Elastic's strength, and we have invested accordingly in critical areas. First, we have invested in a highly optimized data store and retrieval for AI. Our goal is for Elasticsearch to be the best store for all data that our customers care about, enabling text, vector and hybrid search across structured and unstructured data, spanning text, vectors, images, audio, video and more. We released Vector DB index mode and auto calibration this quarter giving developers a high-quality vector search experience out of the box with no manual tuning required, one platform with support for every data type AI demands. Second, in precisely accurate context, we continue to be one of the world's most powerful context platforms for AI. This quarter, we brought Jina's multimodal and multilingual semantic search capabilities, including first-party embedding and reranker models to on-premises and air-gapped environments. This extends the power of our first-party models to the world's most sensitive, regulated and security-conscious deployments. Our agent builder harness continues to mature as well, enabling developers to build agents directly on top of data in Elasticsearch. Agent Builder now offers advanced agent observability, monitoring and enhanced human-in-the-loop approval workflows, giving enterprises the control and visibility they need to deploy AI agents with confidence at scale. Our investments are translating directly into competitive wins, a Global 2000 semiconductor company selected Elasticsearch serverless in a 7-figure new logo win to power a personalized AI-driven knowledge search experience for its customers. Elasticsearch will serve as the context layer transforming the company's vast product catalog into real-time grounded AI context. When a customer queries a chip specification, compatibility requirement or part number agent builder returns an accurate answer with per user document level security, ensuring each customer sees only what's relevant to them. In a competitive RFP against pure-play vector databases and other platform players our hybrid semantic retrieval and natively integrated agent capabilities were the decisive differentiator. AI is also changing the arena of observability as organizations build and deploy more agents, it requires more scalable monitoring of the entire application stack at a lower cost. And the speed and scale of AI deployments is requiring more automation for SRE teams to streamline the process of detecting, investigating and remediating issues. We are pushing the frontier in these areas through targeted investments. This quarter, we relaunched our metrics offering. We released columnar mode in Elasticsearch 9.5, now in technical preview. Columnar mode is an entirely new index mode, purpose-built for time series data. It delivers extremely efficient compression, storage and querying of time series in a columnar data structure, pushing storage costs down 20% to approximately 3 bytes per metric sample while still using the same ES|QL query language. With these innovations, we are now an optimized engine for multiple types of data, including documents, vectors, logs, metrics and more. Columnar mode makes the Elastic platform a highly competitive solution for metrics and infrastructure monitoring, an area where we historically have not had a major presence. Additionally, we now support native Prometheus ingestion with PromQL support, simplifying the migration from Prometheus into Elastic. No new tooling or retraining is needed. We are giving teams full visibility across metrics, logs and traces at 1 unified platform, all at a very compelling price compared to incumbent competitors. We also acquired Deductive AI, a leader in the emerging space of AI SRE. Deductive has built a reinforcement learning or RL harness that automates the task of complex investigations. It pairs upstream data like code repositories and Elastic alerts with downstream signals from Slack, PagerDuty and ServiceNow to dynamically construct decision trees as it learns from past and ongoing investigations. It then uses these to drive automated investigations for new incidents based on past learnings. This allows SRE teams to significantly reduce the time to investigate and remediate problems to achieve the goal of an AI-led SRE organization. By integrating Deductive's reasoning capabilities into our Observability platform, we are building a true agentic SRE, one that can autonomously detect, investigate and guide remediation across the full signal stack. This quarter, Gartner recognized Elastic as a leader for the third consecutive year in the Gartner Magic Quadrant for Observability Platforms, reflecting the strength of where we already stand. Illustrating the power of this unified platform approach, a leading global insurance company added Elastic Observability to its existing security deployment in a 7-figure expansion win. The customer had been running a fragmented environment with application logs in Elastic and metrics and traces in another incumbent solution, preventing effective root cause analysis across tens of thousands of annual incidents half attributable to application issues. The deciding factor was Elastic's newly released native Prometheus ingestion and PromQL support, which met their heavily metrics-driven environment where it was. And combined with our migration tooling, enabled full consolidation onto a single OpenTelemetry-first platform without any costly rip and replace. Looking ahead, the ability to apply Elastic AI agents across all signal types to intelligently identify root cause was a key driver of the expansion. In a post-Mythos world, organizations are facing an increasingly challenging landscape, where vulnerabilities are being discovered at an alarming rate and weaponized at machine speed. This requires cyber defenders to detect, investigate and mitigate at speeds well beyond human capacity alone. To bridge this gap, AI-driven automation has become an absolute necessity for cyber defenders. Accordingly, we have invested in several areas to help our customers achieve their end goal of an AI-driven SOC. Attack discovery reached a new milestone this quarter. It now investigates and validates threats autonomously allowing SOC teams to move at machine speed. Attack discovery turns a wall of alerts into a prioritized list of real attacks and moving security teams closer to Alert Zero. Alert Zero is the SOC version of Inbox Zero, a queue worked down to the attacks that actually matter with agents and analysts operating together. This quarter, we were named a leader in the IDC Marketscape for worldwide SIEM and a strong performer in the Forrester Wave for extended detection and response. Forrester specifically recognized that Elastic's strategy envisions an open agentic SOC that will automate operations. Elastic XDR integrates seamlessly with our SIEM and attack discovery capabilities, enabling protection and remediation on infected systems to counter AI scale threats. And on endpoint protection, Elastic Security is the only vendor to achieve 14 consecutive months of 100% detection rates in AV-Comparatives independent testing. Our strength in security is also allowing us to rapidly grow our footprint in the U.S. public sector through the CISA SIEM-as-a-Service offering. This relationship continues to serve as a powerful channel across the U.S. government opening new opportunities. A large U.S. public sector agency chose Elastic Security and Observability to begin unifying its fragmented data estate onto a single platform, replacing disparate SIEM data. Elastic's newly achieved FedRAMP High authorization, unlocked the opportunity and our ability to monitor both on-premises and multi-cloud environments from one managed deployment made us the strongest candidate. Where the agency's previous vendor had stalled on innovation, Elastic's pace of development and LLM-agnostic AI integration gave them a clear path forward for modern threat detection and response. Our efficiency and AI features were key drivers of this win. What is exciting about this customer is that we were able to migrate their very complex data platform from their incumbent solution onto Elastic in under 1 month taking advantage of all of the automated migration tooling that we have built for this purpose. We see the same momentum in the private sector. A global semiconductor manufacturer chose Elastic Security Serverless as its security analytics platform to protect against insider threat and secure its intellectual property using our AI capabilities. The customer intends to move hundreds of dashboards from an incumbent solution into Elastic to leverage our natural language search and analytics capabilities. Now moving away from manual workflows, the customer is adopting our agent capabilities across their full data estate. When competitors offered AI as an add-on, Elastic's fully integrated platform gave the customer exactly what they needed, one product built for the age of AI. All of these innovations, combined with the consistent sales execution are driving rapid growth in AI usage within our customer base. Over 37% of our 100,000-plus ACV customers are now using Elastic for AI, up from approximately 21% a year ago. That is more than 670 high-value customers now using Elastic for AI use cases with 70 net additions quarter-over-quarter in Q1. Our ability to deliver all of this with an open platform across both cloud and self-managed deployments is proving to be an enduring advantage as AI adoption grows across AI natives, enterprises, regulated industries and government agencies around the world. This includes our support for both proprietary models and open models like GLM from Z.ai, our adherence to standards like OpenTelemetry, our ability to support sovereign deployments through our self-managed offering and our partnerships with NVIDIA and Dell around their AI factory and with Google distributed cloud. We entered this fiscal year with 7 successive quarters of strong sales execution and continuing momentum for our platform. Our pace of growth in search and AI and security has continued. And with our most recent innovations in the areas of metrics and AI SRE, we are excited about the prospects of our Observability business. As AI adoption grows across the enterprise, we expect to continue driving acceleration of our business toward our midterm revenue and profitability targets. I also want to take a moment to recognize a board transition. I want to thank Caryn Marooney, who will be stepping off our Board after a long tenure. We are grateful for her partnership and she will continue to be a friend to Elastic. I am pleased to announce that Julia Liuson has been nominated to join our Board. Julia has seen Elastic grow as a leader in the areas of search, AI, observability and security. In her prior role as President of developer tools at Microsoft, she brings a unique perspective around AI and at scale infrastructure development that will be invaluable as we continue to execute on our strategy. I want to thank our customers and partners for their trust, our shareholders for their continued partnership and our employees for their focus and execution. With that, I will turn the call over to Navam. Navam Welihinda: Thank you, Ash. On our last earnings call in May, we expressed confidence that our commitments we secured in fiscal '26, combined with our continued sales execution, will drive revenue acceleration over the course of fiscal '27 on a constant currency basis. While it's still early in the fiscal year, our Q1 results put us on track to achieve this goal. Our total revenue in the first quarter was $478 million. We grew approximately 15% as reported and on a constant currency basis. On a constant currency basis, Q1 growth accelerated quarter-over-quarter, up from 14% in Q4. Sales-led subscription revenue in the first quarter was $399 million. We grew 18% as reported and 17% on a constant currency basis. Similar to total revenue, sales-led subscription revenue accelerated quarter-over-quarter in constant currency, up from 16% in Q4. Our CRPO in the first quarter was $1.2 billion, representing 21% growth as reported and 20% on a constant currency basis. Our constant currency CRPO growth sustained 20% growth for the second consecutive quarter. Our RPO for the first quarter was $1.9 billion, representing 27% growth, both as reported and on a constant currency basis. As Ash mentioned, the continued strength in RPO reflects customers deepening their long-term commitments to Elastic as a core part of their AI infrastructure. Our Q1 revenue acceleration on a constant currency basis, both for total and for sales-led subscription revenue as well as our second straight quarter of 20% constant currency CRPO growth provides validation for acceleration trajectory. Three core dynamics are powering our fiscal '27 sales-led subscription revenue growth. First, our strategic investments in sales capacity over the past year are driving the pipeline improvements we expected. Building on 7 quarters of go-to-market improvement, we continue to see year-over-year gains in both ramp sales head count and productivity this quarter. Additionally, the strength in our second quarter pipeline and buildup of out quarter pipeline reinforce our confidence in securing new and expanded commitments as well as achieving our planned renewals. Second, as we discussed last quarter, a portion of our fiscal '27 revenue is made up of commitments from fiscal '26, now being consumed and converted into revenue. We are pleased with the healthy consumption activity we saw this quarter. The net expansion rate or NER remained strong, though it moved from 112% to 111% this quarter. As a reminder, our NER is a 4-quarter trailing metric impacted by historical growth. The NER we reported in Q1 reflects the lower constant currency growth rate in the trailing 4 quarters as compared to the 4 quarters preceding it. We expect NER to improve within 4 quarters as constant currency revenue acceleration builds through fiscal '27. Third, we saw continued improvements in our new and expansion commitments as seen in our greater than $100,000 customer count, that segment now contributing 90% of sales-led subscription revenue, up from 87% a year ago. This quarter, we added more than 80 net new customers to this tier, our largest increase to date. This reflects the effectiveness of our sales team in both winning new logos and expanding within our existing base. Now turning to Q1 margins and profitability. I will discuss all measures on a non-GAAP basis. We delivered subscription gross margins of 81%, total gross margins of 77% and an operating margin of 16.2%, exceeding our guidance from last quarter. The improvement in margins reflect the operating leverage in our model as revenue scales. We achieved an adjusted free cash flow margin of 30% despite onetime charges related to organizational changes we announced in June. These amounted to $13 million of cash paid for restructuring and other charges. As a reminder, adjusted free cash flow fluctuates quarter-to-quarter due to booking seasonality, and we manage free cash flow on a full year basis. During the first quarter, we returned approximately $40 million to shareholders, representing purchases of approximately 800,000 shares. Since the $500 million share repurchase program launched in October 2025, we used $380 million and repurchased 5.2 million shares cumulatively as of the end of last quarter. Now turning to our outlook for the second quarter and for the fiscal 2027. Building from the momentum we experienced in Q1, we are raising our previous guidance for the full year. For the second quarter of fiscal '27, we expect total revenue in the range of $486 million to $487 million representing 14.9% growth at the midpoint or 15% constant currency growth at the midpoint. We expect Sales-led subscription revenue in the range of $407.5 million to $408.5 million representing 16.9% growth at the midpoint or 17.1% in constant currency growth at the midpoint. We expect non-GAAP operating margin for the second quarter to be approximately 19%. We expect non-GAAP diluted earnings per share in the range of $0.80 to $0.82, using between 108 million and 109 million diluted weighted average ordinary shares outstanding. For fiscal '27, given our strong Q1 results, we are raising our outlook for the year. We expect total revenue in the range of $1.998 billion to $2.010 billion, representing approximately 15.2% growth at the midpoint or 15.3% constant currency growth at the midpoint. We expect Sales-led subscription revenue in the range of $1.682 billion to $1.694 billion representing 17.4% growth at the midpoint or 17.5% in constant currency growth at the midpoint. We expect non-GAAP operating margin to be approximately 19.4%. We expect non-GAAP diluted earnings per share in the range of $3.29 to $3.37, using between 108.5 million and 109.5 million diluted weighted average ordinary shares outstanding. We continue to expect our fiscal 2027 adjusted free cash flow margin to be 21.5%. We are growing revenue efficiently while maintaining disciplined investments and are making progress towards Rule of 40. Before I close, a few more financial items worth highlighting related to this year. We incurred approximately $20 million of restructuring-related charges during the first quarter, and we expect to incur an additional $2 million to $5 million of restructuring charges for the remainder of the fiscal year. We expect our GAAP operating margin to be positive in the second quarter and for the full year. We also expect to maintain GAAP operating margin profitability going forward. And last, as we said last quarter, we expect total revenue and sales-led subscription revenue growth to accelerate in the second half with Q4 having the highest year-over-year growth for the year. To summarize, we are executing well across our fiscal year priorities and are firmly on track to meet our medium-term financial targets of both accelerating our sales-led subscription revenue growth to 20% plus and improving our Rule of 40 as measured as a sum of revenue growth and adjusted free cash flow. The sustained progress we see in CRPO, sales productivity pipeline and operating leverage reinforce our confidence in our revenue growth and margin expansion plans. Elastic continues to be the essential platform for enterprises looking to derive value from their data, and we look forward to the opportunities ahead. Thank you for your continued support and for joining us today. With that, I'll open it up for Q&A. Operator: [Operator Instructions] Our first question today comes from Matt Hedberg with RBC Capital Markets. Matthew Hedberg: First of all, congrats on the quarter. The acceleration especially after a 4Q was impressive. Ash, there's a lot of things that stood out to me, the strength in 100,000 customers. I think you said the largest sequential add you've ever seen was impressive. I guess, you talked about a lot of things on the call about execution and product traction and just better sales capacity. But I'm wondering if you can put a finer point on the success there. Why now? And just kind of the sustainability of that large customer growth would be great. Ashutosh Kulkarni: Matt, thank you very much for the question. And like you said, it was a great quarter in terms of the net adds. We added 80 customers to that cohort, the highest ever number of additions that we've had. Fundamentally, the way I think about it is that our new and expand motion, especially in our enterprise and mid-market high-propensity customers is working really well. If you remember, about 2 years ago, a little over 2 years ago, we made a change to the way we did segmentation within the organization, within the sales organization. And since then, you have seen us continue to improve in this area. And what you're seeing is customers are making bigger commitments customers are making longer-term commitments. And that's resulting in this cohort really growing very nicely. By the way, this $100,000 cohort now represents 90% of our sales-led subscription revenue. So it just gives you a sense both of how important this cohort is, but also how well they are doing. And the thing that excites me the most is the AI penetration in this cohort. So 37% of this 100,000 cohort is now using our AI features. That number was about 21% in the past. And like we explained even at our Financial Analyst Day, the more this high-value customer cohort uses our AI capabilities, the more they use more and more solutions within our platform, that really becomes the enduring growth driver for us. So very excited about it, and it just shows that the go-to-market motion is working and the platform strength and differentiation is holding very well. Matthew Hedberg: Well, if I could, as a follow-up, the 37% of those customers using the AI, it was another thing that stood out to me. Is there any way to think about what that means from an NRR perspective? I have to imagine it's obviously additive and maybe it's part of the NRR reacceleration. But just any way to think about what that means from like a customer ACV or NRR perspective? Navam Welihinda: That question. So net, the NRR is obviously a strong metric across the board for all our 100,000 customers. But when you think about the cohort of customers that are that are using AI, the dynamics that we talked about during the financial Analyst Day still stand, which is they have a higher growth propensity compared to customers not using AI, so that dynamic exists today among that AI cohort group the same way it existed when we talked about in the Financial Analyst Day. Operator: The next question comes from Tyler Radke with Citi. Tyler Radke: Tyler, can you guys hear me okay? Operator: We can now. Tyler Radke: Sorry about that. I was on mute there. Can you just talk a little bit, obviously, really strong cloud performance. And I know you alluded to the strength in the cloud bookings last quarter. But any one-off dynamics we should be mindful of? And can you just comment on sort of the bookings mix this quarter, how that cloud sort of looked relative to historicals? And just any color on how we should be thinking about the growth of cloud from here? Navam Welihinda: Yes. Thanks, Tyler. It's Navam here. So look, we're very pleased with the way cloud has been performing in the quarter, both in terms of the commitment volume. And also, more importantly, the consumption against the annual commitments we have, the aggregate annual commitments we have. And as a reminder, cloud is not a guided metric and there's always going to be quarter-over-quarter variability because it's consumption. But our annual cloud growth improved to 27% this quarter, up from 26% last quarter. On the monthly cloud side, that number, we expected it to remain flat and it remained roughly flat for the quarter. So the dynamics are roughly the same in terms of the growth on the sales-led cloud side and the SMB smaller customers remaining flat. At the end of the day, though, we win because we have flexibility in our deployment model, right? And we meet the customers where they are and where they want to deploy our software, and we are one of the very few players that can actually do that. And that's the reason we continue to focus on sales-led subscription revenue. In terms of bookings dynamics, we expect to, like I said, meet customers where they are. There isn't much to call out this quarter in terms of one-offs. We talked about the mix in Q4 being a good cloud quarter. Q1 remained a solid quarter with no unusual activity one way or the other. Ashutosh Kulkarni: And by the way, Tyler, just to put a finer point on what Navam said. The fact that we can deliver all the capabilities that we provide through the platform, whether it's for AI, whether it's for security, whether it's for observability in environments ranging from commercial cloud to people running it in their own data centers to air-gapped environments, we have -- we mentioned last quarter that Google Distributed Cloud has OEMed our capability as well. So that flexibility, that range is a significant enduring moat. Because if you think about the markets that we play in, there are very few vendors that have that ability to deliver across all of those form factors, and that is a big advantage for us. And that's the reason why as Navam said, sales-led subscription revenue is a very important metric. And by the way, cloud self-managed, all of those are things that we look at, and we are very happy about the performance overall. Tyler Radke: Great. And Ash, maybe just get a follow-up for you. Obviously, some pretty remarkable events going on in security as it relates to some of the new attack vectors and agents going rogue. Like can you just talk to us about the Elastic Security business, how do you see it participating in some of these new agentic security fronts? Ashutosh Kulkarni: Yes. Our security business is something that we are very, very excited about. Even in my prepared remarks, Tyler, I talked about several customers, right, that are using us in security. I talked about the semiconductor company. I talked about the government did the very large government agency. We've talked to you in the past about our CISA SIEM-as-a-Service. I just mentioned Google Distributed Cloud. All of these are already driving our SIEM business and our XDR business. And what's great about this is we are able to help our customers because it's never been harder to be a CISO. Threats are -- vulnerabilities are being discovered faster. Threats are being activated faster. So sort of working at human speed is just not sufficient. You have to figure out how to use AI on the Defender side, to be able to detect, investigate and remediate at machine speed and you know how early we invested in sort of the AI-led capabilities like attack discovery and so on. And all of that, the maturity, the continuous innovation that we are driving there, we are already seeing all of this turn into strong commitments, and you're seeing now the consumption against those commitments. So I expect the momentum to continue for us in security. Operator: The next question is from Miller Jump with Truist Securities. William Miller Jump: Congrats on the strong results here. You mentioned customers choosing you for flexibility and highlighted some of the enhancements to Jina on-prem capabilities this quarter. I'm wondering if you can give any more color on how you're seeing the distribution of customer AI deployments developing specifically across cloud, on-prem and hybrid and if there's any difference versus your other use cases? Ashutosh Kulkarni: Yes. It's -- so what we are seeing is that there is still the majority of customer deployments tend to be first and foremost in cloud, that's where they typically start because that's the fastest way for customers to get started but enterprise customers and government agencies. And I say enterprise customers I'm specifically referring to customers in regulated industries, whether it's banking, whether it's telco, especially in international markets for us outside of the Americas, what we are seeing there is a greater desire to not just have data sovereignty but also to have operational sovereignty. And in those environments, they want solutions where they can run these capabilities within their own enclaves, within their own control. And again, like that's where we have such a great strength because there aren't too many companies that are able to provide that kind of functionality. And in the past, our genome models, you had availability of those of the commercial genome models through our inference service, which was cloud only, but there was no way if you're an air gap customer or a customer running things within your own enclave to take advantage of the Jina models, we didn't have a pricing model in place for sort of the commercial capabilities there. So that's what we launched. And there's a lot of interest. We launched it because we're seeing a lot of interest. So going forward, what I would expect is AI deployments are going to be based on factors like the criticality of the data, the sensitivity of the data, the kind of customer in their geo location, so those will be bigger factors, but you're going to see AI adoption both in cloud and in self-managed? William Miller Jump: Really exciting. If I could just squeeze in a follow-up for Navam. You all highlighted the strength in the SSA deal but just given that we're coming off on the anniversary, I'm wondering if you can give any more color on how the Fed vertical is being treated in the Q2 guide and if there's any headwinds or tailwinds we should consider this year? Navam Welihinda: Nothing specific at this point in terms of guidance for the Fed vertical, Miller. The global public sector remains an important sector for us. When we think about our guidance, we obviously look at a prudent risk-adjusted view as to forward numbers. Very pleased with how the SSA contract is performing and the continued activity there. So we expect that to continue to gain momentum as more agencies come on board. But nothing specific to call out in terms of a big tailwind coming in or a big headwind coming in from the Federal segment. Operator: The next question is from Brian Essex with JPMorgan. Brian Essex: Congrats from me as well on the results. It's great to see that acceleration. Maybe ask for me, I'd love to get your view on how you see your customers deploying AI and coding around AI, specifically around leveraging your platform to build their own harness in context windows to get more control around the ability to protect that context IP and proprietary data as opposed to using OEM harnesses and coding platforms? And how that -- how you're positioned for or your view on how that portion of the market is going to evolve over the next few years? Ashutosh Kulkarni: Yes. And yes, the first thing to appreciate is, at the end of the day, when you're building any kind of agenetic solution the most important element in that is going to always be the large language model; the model that does reasoning, that does inferencing and so on and so forth. But that model, unless what the agent that you're trying to build only depends on external data, only depends on like publicly available information, is going to need to somehow be coupled with your proprietary information. Now if you think about any enterprise, you think about any large agency, the biggest challenge is, now you're talking about many, many petabytes, if not exabytes of information, information that's constantly being created, information that's constantly changing and so this really ends up being a situation where you have to bring the model to the data. The data is just too much to take to the model. And more importantly, that data is your secret sauce. So you never want to have it completely exit your organization anyways. And so that's really why as you think about what people are building with harnesses and so on, the most important element in that is sort of the data retrieval or the context layer and when you are trying to get that context for your LLM, for your agent, you have to worry about accuracy. You have to worry about speed and you have to worry about cost. And what that means is you really want to try and precompute as much of that context ahead of time as possible so your model isn't just constantly trying to sift through all of the data every single time, which is a very expensive, very inefficient, very slow approach. And that's what we do. That's where we fit in. That's the reason why customers turn to us because we're able to make their agents perform better. We are able to make their agents more secure in how they operate, we are able to provide just the right context to their agents, and we are able to reduce cost and give them that balance of both using proprietary models where it makes sense, using open models where that's the best approach. So that flexibility, that deployment choice, all of this is how people are using us today. And that's why we believe that this is something that's an enduring motion for us. It's an enduring area for us to grow on. Brian Essex: Got it. Maybe that's super helpful color. And maybe just for a follow-up. Security as a percentage of total revenue and in a post Mythos world, how do we think about contribution from that business relative to the rest of the Elastic platform? Navam Welihinda: As a percentage of revenue, we don't disclose that, Brian. But in terms of growth, security remains a very strong growth vector for us. And we've highlighted this in the press earnings call as well as to the contracts and the customers that we have on the security side. So very pleased with how that's performing, and it remains to be a high-performing, high-growth segment for us. Ashutosh Kulkarni: Even this quarter, if I may just add to what Navam said, we had -- security was -- grew incredibly well. The order roughly was security, AI, search AI and then observability and with observability with what we're doing around metrics, the deductive acquisition, like that's the third pillar of the stool, if you will. That's what gives us a lot of optimism in the future. So really, like we feel really good about the way our platform story is evolving here. Operator: The next question is from Rob Owens with Piper Sandler. Robbie Owens: Thanks for the question, Alex. In your prepared remarks early on, you talked about success in the quarter. You talked about search and AI and security. And I know you've got new capabilities in observability, Ash, and you just mentioned some them, but maybe you can drill down relative to the metrics opportunities, some of the new pricing dynamics that you offer and just what customer feedback or acceptance has been at this point? Ashutosh Kulkarni: Yes. Thanks for the question. And Rob, the way we have built our absorbability business over the years is starting with logs. As you know, log analytics was where we started because the messier the logs, the more capable our solution has been in giving you the ability to do full tech search through those logs, to do analytics on those logs. And so our strength in log analytics continues. It's been a huge area for us. And over the years, we've continually made our platform more efficient for log analytics, which is another reason why we continue to do well in that area. But sort of expanding from there has been an area where, as we've looked at the market, what we realized was metrics because of AI and what's been going on in terms of people building these agents, that's an area where we didn't have that same kind of strength. We didn't have that same kind of performance. And so about 1.5 years ago or so, we started working on a completely novel back-end to Elastic Search that allowed us to have not just the regular document store model that we had in Elastic search but also a columnar store backend and all accessible through the same API because again, we want to make it easy for people to adopt this columnar backend. And this columnar backend has been really tuned for basically all kinds of time series data. So metrics, and even simple logs, and this columnar approach makes it possible for us to store the data in a much more efficient way. So the storage efficiency is massively higher. The ingest performance is better. The query performance is better. So we get a ton of benefits and it's going to show up most in metrics. And in the past, it used to take us double-digit bites to store metrics. We are now able to store a single metric in around 3 bites, which is a huge difference. And now we are incredibly competitive in the market. This is going to allow us to really take on this area head on. And we are early, like I have to say, but the early feedback that we've gotten from customers because we are going to our existing log analytics customers and upselling there, has been very good. So we are excited about the feedback that we are getting. But the way I see it is if we do this right over the next year, multiple years, this is going to be a pretty significant and meaningful area of growth for us. Robbie Owens: Great. And speaking of early, you mentioned a number of autonomous innovations this quarter across both security and observability. So curious, just early feedback from customers. Obviously, the security landscape is changing rapidly. So for those on the bleeding edge, how are they consuming? What does overall consumption look like? Or what's that relative state of change for those that are moving to some of these autonomous capabilities? Ashutosh Kulkarni: Our AI SoC capabilities on the security end have been a big reason for our success in security. So you've been seeing us do very well in security for the last many quarters. And I attribute a lot of that to the investments that we made and the differentiation that we have in our agentic capabilities when it comes to security. And the biggest differentiation that I still hear from our customers is not only do we have a very, very complete set of capabilities out of the box, but unlike others who have a black box approach to AI we have more of an approach where we allow you to see what's under the covers. You can see the skills. You can see the tools inside the harness, inside the security harness that we built. So you can complement it, you can enhance it, you can do more with it. That is a big differentiator because at the end of the day, we believe that models are going to keep getting better and for different tasks, some tasks, you're going to prefer to use Claude, for others you're going to prefer to use Gemini, for something else you might use an open source model. Also skills will continue to evolve. Harnesses will continue to get better and we believe that giving that openness in choice to our customers will be an enduring differentiator. And that's what we are seeing so far. Unknown Executive: And just as a reminder about our metrics webinar on September 22, that information is going to be posted on the IR website. And with that, let's go to the next question. Operator: The next question is from Raimo Lenschow with Barclays. Raimo Lenschow: Congrats from me as well, a great quarter. A couple of weeks ago, you launched Kubernetes capabilities on the observability side. Can you speak to the importance of that because that seems to be closing a really important gap in the offering? And maybe just speak to what's possible now. Ashutosh Kulkarni: Yes. A lot of it has to do, Raimo, with our focus on having a great end-to-end experience. And the areas that we want to make sure customers adopt us increasingly for is using us for metrics, using us for infrastructure monitoring. And as you know, a lot of agents are being deployed on Kubernetes environments and getting that right with a great end-to-end experience with dashboards that light up out of the box with sort of native support, not just for OpenTelemetry-based ingestion and analytics, but also support for Prometheus data and PromQL, like these are areas where we've invested a lot. Even in the prepared remarks, the customer that I talked about that chose us for metrics, that customer moved to us because we made it so easy for them to bring their Prometheus data directly into Elastic without having to transform things, without having to change things. And that's a big differentiator. So you're absolutely right to look at that and see that, that is a key element. It is one of many investments that we've been making on the observability side. And that's what is quite -- we find that to be quite exciting for the days ahead. Raimo Lenschow: Perfect. Same view here. And Navam, one for you, like it's like you only had your Q1, but you raised the full year by more than the beat and Q1 nowadays in software, everyone is very conservative, et cetera. What gives you the confidence there? What are you seeing in terms of pipeline, et cetera? Navam Welihinda: Yes. Thanks, Raimo. I don't think the guidance philosophy has changed much compared to what we've done in the past. We've always taken a prudent and risk-adjusted view to guidance. But like you said, it is only Q1, but it was a good start to fiscal '27, and we got some strong data points from that quarter. Our cRPO, obviously, which was a good number and the RPO number as well as the $100,000 adds. Apart from that, there were 3 specific drivers that we saw internally as well. First is the strong pipeline build, both for the second quarter and the full year, the out quarter pipeline build is looking good. Second is the consumption against the cRPO, committed cRPO number performed well. And then third, we expected a certain productivity and capacity increase given the hiring that we did, and we're seeing that, and that's allowing us to have the confidence on the go-get number that we need to do for the net new revenue side for the rest of the year. So that's the reason we guided the way we did, and we're encouraged about the revenue trajectory for the year. So it hasn't changed. The philosophy hasn't changed, but we feel good about what we need to go achieve for the rest of the year. Operator: Next question is from Howard Ma with Guggenheim. Howard Ma: I want to add my congratulations too on a strong quarter. My question is, is the acceleration that you're seeing, would you say that, that's directly attributable to higher multiproduct adoption driven by the realization that Elastic is an attractive solution for both context engineering and managing the agentic-driven proliferation in telemetry data as opposed to point solutions. And does your guidance factor in material acceleration in cross-sell among various use cases? Ashutosh Kulkarni: Yes. Maybe let me touch upon that and then Navam might -- I'll let Navam talk about all things related to guidance. But just if you think about our motion, it's always, Howard, been very similar, right? So we have a platform that allows customers to do multiple things. And what we focus on is making sure that our platform is incredibly good in each of those areas. So each of our solutions, our focus is on making sure that those solutions are able to be differentiated and stand on their own and win on their own. And that becomes the tip of the spear for us. It's our land and then expand strategy because once we land with one solution, then the goal becomes how do we get the other solution in there and the third solution in there. And obviously, like we had talked even at our Analyst Day, our last Analyst Day, the customers that grow the fastest are the ones that adopt us for all 3 solutions. So that land and expand motion has continued. And it's not that necessarily that, that has inflected in any way, but this is what you're seeing here is just the right kind of progression. This is a motion that we've been driving. Probably the biggest thing that has happened is as our focus on our enterprise selling motion, the segmentation change that we did 2 years ago, as that has matured, we are seeing the benefits of that play out very, very nicely. So our land and expand is working. In all 3 solution areas, we are seeing the right kind of movement. And look, it comes down to making sure that you are positioning your platform, your product in the right way. And then our sales teams know how to position the multiple platform -- the multiple product strategy within that platform. And that's why we feel so good about what this is going to mean for the future. Navam Welihinda: In terms of the guidance, Howard, there's nothing different implied in how our land and expand motion works. Obviously, there's a lot of our revenue comes from expand more than land. Land is the entry point and then expansion is where the dollars come in over time. And that dynamic comes from both expansion of the existing product that you bought and also cross-sell. So there isn't anything in the guidance that we've taken into account a different behavior from our customers from what we currently see. Operator: The next question is from Radi Sultan with UBS. Radi Sultan: Ash, in your prepared remarks, you called out a SIEM migration, which I believe you said got done under a month with some of your automated migration tooling. I just wanted to ask how much of a benefit are you seeing to cloud consumption from AI accelerating migrations on the SIEM side, but also maybe just more broadly? Ashutosh Kulkarni: Yes. So the consumption that we saw was -- the strength in consumption that we saw this quarter was broad-based. It was not related to any one customer. But what I talked about there, which is really important to understand is, at the end of the day, SIEM has never been sort of greenfield, right? SIEM as a space has been around for a long time. And our motion has been to displace the incumbents who are not innovating at the same rate. What's really changing there, to be honest, is the environment. People are really worried about what it means to protect your environment, protect your agencies and so on in a post-Mythos world. And it's not just Mythos. There are so many very, very capable models out there, not just commercial models, but open source models that give you the ability to really discover vulnerabilities and then act upon them. So you have to assume that people who are trying to do harm now have the ability to access these models. So defenders are having to move faster and so on. So that is driving the momentum for our business. and the ability with our tooling, with our automated tooling to migrate these customers from their incumbent solution to our product, our platform, we have gotten really, really good at it. This was a very significant sized agency, and we were able to move their massive real estate over in 1 month, in under 1 month. And that is just the thing that gives our field a lot of confidence. It is what gives our customers a lot of confidence because as they see these things happening over and over again, it gives them confidence that they can safely move to Elastic and that we will be able to make them successful quickly. Operator: The next question is from Shrenik Kothari with Robert Baird. The next question is from Mike Cikos with Needham. Matthew Calitri: This is Matt Calitri on for Mike Cikos over at Needham. And you gave some great color on that $100,000 cohort and some of the AI adoption, which we appreciate. Are there any other clear underlying expansion trends you can share regarding older cohorts versus newer ones or smaller customers versus larger ones? Or is it more so just expansion across the board and you're waiting for that trailing 12-month net expansion number to catch up, as you mentioned in the prepared remarks? Navam Welihinda: Yes. Thanks, Matt. So the trailing 12-month number on the NER -- the NER side is impacted by the trailing 12-month constant currency growth. So that's a separate factor. And as constant currency growth improves alongside guidance that we've provided, it's going to take a lagged effect for the NER to catch up. So that's the comment on the NER side that I was making. But on the cohort behavior, the cohort behavior that we talk about is basically a durable land-expand motion, so we get our customers in. And there's a long period of durable expansion that we expect from every one of those cohorts, and that's continuing. And we also expect to see and we see the AI cohort show a differential in our growth, meaning the customers who are using our AI features are effectively expanding at a slightly higher rate than the ones that aren't. So those are the 2 dynamics that we see in our expansion rates. And those trends are continuing. And as I mentioned, the NERs, which is trailing, ticks up alongside the revenue growth rate that we expect to post for the year. Operator: The next question is from Sanjit Singh with Morgan Stanley. Sanjit Singh: Ash, I see a lot of the passion on the SIEM side and obviously throughout the other core parts of the business as well. I wanted to come back to the AI search part of the business. We have a lot of data platform players trying to solve that context semantic problem. I think Palantir has said it in a proprietary way. So from the Elastic perspective, in terms of getting that agent performance and building that map for that agent, why is Elastic able to do that better than some of the other data platform peers that are trying to solve with that similar problem? Ashutosh Kulkarni: The simple answer, Sanjit, is because we've always been optimized for dealing with messy data for dealing with unstructured data. Most of the data platforms that you're talking about that you might be thinking about were all designed to work with structured information. And fundamentally, although they might have had a sort of no SQL view of the world, it was still sort of designed with strict schema structure in mind. Elastic has always been different in that sense. If you think about Elastic, we started as a document store with an inverted index that allows you to put any and all kind of information in it, which is why we were always used for search, which is why we then moved into log analytics because all of these things end up being very unstructured. The schema keeps evolving. And if you think about the kind of information that is being used primarily, a lot of it in AI is this kind of unstructured data. So our strength in terms of being able to bring in this data, being able to then analyze it, search across it, the capabilities that we've built, not just with vector search, but also around hybrid search, the harnesses that we've built on top of it, all of this, the Jina models, our ability to do reranking and so on. We are way ahead of the competition, especially when you look at things from this unstructured lens. And frankly, Sanjit, we feel that we are still very early in this overall phase of AI adoption. Most organizations are only now starting to really deploy things in a meaningful way. So as that grows, as we have more penetration within our customer base, I think that's going to be what really helps us continue this momentum for a very long time. Operator: The next question is from Ryan MacWilliams with Wells Fargo. Ryan MacWilliams: One for Navam. How should we think about the gross margins in the quarter? It looks like they were just slightly lower versus previous quarter. I mean, perhaps some impact from the mix shift from cloud here, but anything else worth calling out? And maybe how should we think about gross margins for the rest of the year? Navam Welihinda: Yes. Look, we're very pleased with how our subscription gross margins are performing. It's remained above 80%. Really, there's nothing specific in terms of a trend that emerged this quarter. But over the longer term, what we expect is that these gross margins are expected to improve as we see benefits from things like serverless as it gets to scale. So there's going to be fluctuations quarter-over-quarter, but nothing specific this quarter from a trend perspective on margins. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ash Kulkarni for any closing remarks. Ashutosh Kulkarni: Thank you very much for joining our call today. We are pleased to report a strong start to the year. We are extremely proud of our results and very excited about the opportunity ahead. Lastly, please join us on September 22 for our public webinar on metrics. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Elastic. The Motley Fool has a disclosure policy. Elastic (ESTC) Q1 2027 Earnings Call Transcript was originally published by The Motley Fool

Anytime a stock jumps 20% in a single session after earnings, Wall Street analysts have a choice to either chase the move or hold their ground. Morgan Stanley chose the latter. Elastic (ESTC) closed the week ended Aug. 28 at $99.91, up 19.31% following its Aug. 27 first-quarter fiscal 2027 earnings release, according to Yahoo Finance. The jump isn’t just about one strong quarter. Elastic is riding two trends that are becoming hard for businesses to ignore: the rapid rise of artificial intelligence (AI) and the growing need to make sense of all the data companies collect. That’s where Elastic comes in. Its platform helps companies search, analyze, and visualize data across cloud, private, and hybrid environments, increasingly giving businesses the tools to put AI to work. Many refer to it as the Google of corporate search. The 14-year-old Elastic beat guidance across every key metric, raised its full-year outlook, and delivered record customer additions in its highest-value cohort. Morgan Stanley reviewed the results in a note shared with me at TheStreet. The note’s headline, “Now That’s More Like It,” was unusually candid for a firm maintaining a neutral stance. Morgan Stanley raised its price target to $75 from $66 while keeping its Equal-weight rating. With the stock already trading at $99, Morgan Stanley is essentially saying that, although it’s a great quarter, they are not chasing it here. Also Read: Elastic N.V. Latest News and Stories As mentioned, the Q1 fiscal 2027 results, reported Aug. 27, were strong across every metric that matters for an enterprise software company. Total revenue of $478 million grew 15% year over year. (YoY) Cloud revenue of $235.2 million grew 20% on a constant-currency basis, accelerating from 19% in Q4. Sales-led subscription revenue of $398.5 million grew 17% on a Constant-currency basis, accelerating from 16% in Q4. Current remaining performance obligations grew 21% year over year to $1.153 billion. Total RPO grew 27% YoY to $1.854 billion. Adjusted free cash flow was $143 million. One customer metric stands out. Elastic added 80 customers with more than $100,000 in annual contract value sequentially, the highest net addition quarter on record. The cohort now totals more than 1,800 customers, up 16% year over year. “AI is reshaping the enterprise technology stack,” said CEO Ash Kulkarni in the earnings statement. “Our record quarter-over-quarter net customer additions reflect the durability of that demand.” Full-year fiscal 2027 revenue guidance was raised by approximately $12 million, between $1.998 and $2.010 billion, exceeding the $9 million first-quarter beat. Management said they expect acceleration in the second half, with Q4 carrying the highest year-over-year growth rate. Morgan Stanley’s note was quite specific about both the positives and its remaining hesitation. On the positive side, Morgan Stanley likes cloud acceleration to 20% constant currency despite a tough year-over-year comparison, sales-led subscription growth accelerating for the second consecutive quarter, a strong pipeline from recent go-to-market investments, and a fiscal 2027 guidance raise that exceeded the Q1 beat. More AI: Nvidia just made a move Wall Street wasn’t ready for Microsoft just took sides in AI policy fight OpenAI just disclosed something genuinely alarming The specific callout on Elastic’s business mix is this. Management cited Search and Security as growing above the overall company growth rate, while Observability is growing more slowly. Morgan Stanley flagged that it wants to see more traction in Observability specifically before gaining confidence in a multi-year acceleration. That is the one missing piece preventing the firm from upgrading. The key concern is familiar in enterprise software: Consumption-based cloud revenue is notoriously difficult to extrapolate. Bears point to Elastic’s history of one-off acceleration quarters that failed to sustain. Bulls point to the contracted backlog already sitting in the cRPO balance that provides revenue visibility for the sales-led subscription segment. “A cc accel across rev, cloud and sales-led subscription plus a raise to the FY27 rev outlook that was initially deemed aggressive should get rewarded,” Morgan Stanley wrote. “The debate ahead is whether the cloud accel is fundamentally durable and we are not yet convinced on that front.” Let’s step out of financials for a minute. Elastic’s product announcements during Q1 show that it has found its footing in the AI infrastructure stack. The company delivered general availability of native Prometheus and PromQL support, introduced Columnar Mode for analytics workloads, launched VectorDB index mode for instant vector search, and introduced an agentic Kubernetes investigation workflow. In security, Attack Discovery and Alert Zero both advanced, targeting the AI-powered security operations center. Elastic also unveiled its collaboration with OpenAI to bring advanced reasoning models with governed enterprise context into Elasticsearch. Related: Morgan Stanley sees big change coming for Alphabet stock The Gartner recognition validates the progress. Elastic became a leader in the Observability Platforms Magic Quadrant for the third consecutive year, and in the IDC MarketScape for SIEM 2026, according to Elastic’s Q1F27 results. The Deductive AI acquisition, which brings AI-powered production issue investigation to Elastic Observability, addresses the one segment Morgan Stanley is still watching. ESTC is up 32.44% year to date and 13.81% over the past year, according to Yahoo Finance. Morgan Stanley’s $75 price target implies the stock has run meaningfully ahead of where the firm is comfortable endorsing it at this stage of the acceleration debate. My read of that stance is that the quarter was genuinely impressive and that the setup for 2H is credible. Yet a 19% single-day move takes the stock well above the valuation that Morgan Stanley is willing to support with an Overweight. For investors willing to bet that the cloud acceleration is durable rather than a one-off, Elastic’s Q1 gave the bull case its strongest evidence. Morgan Stanley is encouraged by the strong start to FY27, but is asking for one more quarter of proof before it agrees. Related: Morgan Stanley sends a blunt Tesla message to investors This story was originally published by TheStreet on Aug 29, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.

Elastic (ESTC) shares ripped higher on Friday after the search and data analytics firm delivered a stronger-than-expected fiscal Q1 and raised its full-year outlook. ESTC recorded $0.70 per share of earnings (EPS) for its first financial quarter on $478.1 million in revenue, handily beatingthe  $0.58 a share and $469.75 million that analysts had forecast. Why Options Traders Are Betting That Marvell Technology Stock Could Soon Hit $300 Sandisk Stock Could Nearly Double to $3,000, According to Wall Street Nancy Pelosi Buys Intel. What Comes Next and If You Should Buy INTC Stock Too. Stop Missing Market Moves: Get the FREE Barchart Brief – your midday dose of stock movers, trending sectors, and actionable trade ideas, delivered right to your inbox. Sign Up Now! Following the post-earnings rally, Elastic stock is trading at more than 2x its price in early April. Elastic’s quarterly numbers point to broad-based strength rather than a one-off earnings beat. Most importantly, the firm’s current remaining performance obligations (cRPOs) jumped 21% on a year-over-year basis to $1.153 billion in its fiscal Q1. Plus, ESTC added more than 80 customers with annual contract values above $100,000, bringing that cohort to more than 1,800. In the earning release, management also confirmed that artificial intelligence (AI) adoption among enterprise clients is expanding as Elastic pushes deeper in Search & AI, Security, and Observability. Note that Barchart currently holds an “88% BUY” technical opinion on ESTC shares, indicating technical momentum also favor continues upside ahead. Elastic did not simply beat expectations, it raised the bar for the remainder of fiscal 2027. The company now expects about $2 billion in revenue this year on at least $3.29 a share of adjusted earnings (EPS), both comfortably ahead of Street estimates. With $1.46 billion in cash, cash equivalents, and marketable securities, and pending authorization for $460 million in buybacks, ESTC stock has several reasons to remain on investors’ radar. Even in terms of valuation, Elastic is currently trading at a price-sales (P/S) multiple of less than 5x, which doesn’t look particularly stretched given the company’s overall growth profile. Heading into the quarterly print, Wall Street rated Elastic shares at “Moderate Buy” and the mean price target was roughly $83. However, now that the company has reported an impressive quarter and raised guidance, it’s well within reason to expect the analyst community to upwardly revise their estimates in the weeks ahead. On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com

Elastic (ESTC) came out with quarterly earnings of $0.7 per share, beating the Zacks Consensus Estimate of $0.58 per share. This compares to earnings of $0.6 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +20.69%. A quarter ago, it was expected that this software developer would post earnings of $0.56 per share when it actually produced earnings of $0.61, delivering a surprise of +8.93%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Elastic, which belongs to the Zacks Internet - Software industry, posted revenues of $478.11 million for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 1.82%. This compares to year-ago revenues of $415.29 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Elastic shares have added about 5.1% since the beginning of the year versus the S&P 500's gain of 12.1%. While Elastic has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Elastic was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.83 on $483.02 million in revenues for the coming quarter and $3.25 on $1.99 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 35% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. DocuSign (DOCU), another stock in the same industry, has yet to report results for the quarter ended July 2026. The results are expected to be released on September 3. This provider of electronic signature technology is expected to post quarterly earnings of $1.08 per share in its upcoming report, which represents a year-over-year change of +17.4%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. DocuSign's revenues are expected to be $868.04 million, up 8.4% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Elastic N.V. (ESTC) : Free Stock Analysis Report Docusign Inc. (DOCU) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

cRPO growth of 21% as reported and 20% on a constant currency basis Q1 net additions to our >$100K ACV customer cohort reach the highest level to date SAN FRANCISCO, August 27, 2026--(BUSINESS WIRE)--Elastic (NYSE: ESTC), the Search AI Company, announced financial results for its first quarter of fiscal 2027 ended July 31, 2026. First Quarter Fiscal 2027 Financial Highlights Total revenue was $478 million, an increase of 15% year-over-year, as reported and on a constant currency basis Total subscription revenue was $449 million, an increase of 15% year-over-year, as reported and on a constant currency basis Sales-led subscription revenue (calculated as subscription revenue excluding Monthly Elastic Cloud) was $399 million, an increase of 18% year-over-year, or 17% on a constant currency basis Current remaining performance obligations were $1.153 billion, an increase of 21% year-over-year, or 20% on a constant currency basis Remaining performance obligations were $1.854 billion, an increase of 27% year-over-year, as reported and on a constant currency basis GAAP operating loss was $24 million; GAAP operating margin was -5% Non-GAAP operating income was $77 million; non-GAAP operating margin was 16.2% GAAP net loss per share was $0.16; non-GAAP diluted earnings per share was $0.70 Operating cash flow was $132 million with adjusted free cash flow of $143 million Cash, cash equivalents, and marketable securities were $1.461 billion as of July 31, 2026 "Elastic delivered a strong start to fiscal 2027, beating our guidance across all key metrics," said Ash Kulkarni, chief executive officer, Elastic. "AI is reshaping the enterprise technology stack, and organizations are making deliberate choices about where to build and how to observe and secure their applications and data. Our record quarter-over-quarter net customer additions to our >$100K ACV cohort and continued strength in cRPO and RPO growth reflect the durability of that demand. We enter the year with growing momentum across Search & AI, Security, and Observability and confidence in the trajectory of our business." First Quarter Fiscal 2027 Key Metrics and Recent Business Highlights Key Customer Metrics Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 1,800 compared to over 1,720 in Q4 FY26, and over 1,550 in Q1 FY26 Net Expansion Rate was approximately 111% Product Innovations and Updates Delivered general availability of native Prometheus and PromQL support, out-of-the-box Kubernetes agentic investigations, and automated migration features in our unified platform for metrics and logs Introduced Columnar Mode in technical preview, combining the efficiency of columnar analytics with Elasticsearch’s best-in-class search across all data, with especially significant improvements to the cost and performance of metrics and log analytics Introduced general availability of VectorDB index mode and Auto Calibration for DiskBBQ, enabling instant vector search out of the box, no setup or index tuning required Delivered Jina AI embedding and reranker models for on-premises and air-gapped environments through Jina On-Prem Introduced an agentic Kubernetes investigation workflow and MCP-based observability skills that analyze logs, metrics, anomalies, and cluster events, surfacing root causes and next steps automatically Expanded Attack Discovery, broader endpoint protection, and enhanced native workflow automation with Alert Zero, an AI-driven alert triage and attack investigation for the agentic SOC Other Business Highlights Acquired Deductive AI, an AI-powered investigation platform that helps engineering teams identify and resolve production issues faster, bringing more AI-powered investigation and automation to Elastic Observability Recognized as a Leader for the Third Consecutive Year in the Gartner® Magic Quadrant™ for Observability Platforms Recognized as a Leader in the IDC MarketScape: Worldwide SIEM 2026 Recognized as a Strong Performer in The Forrester Wave™: Extended Detection And Response Platforms, Q2 2026 Achieved the industry’s 100% malware protection score in AV-Comparatives 2026 Business Security Test, tied for the highest score in the Real-World Protection Test with a 99.8% protection rate, and earned the AV-Comparatives Approved Business Product Award Announced our collaboration with OpenAI to bring OpenAI’s advanced reasoning models with governed enterprise context in Elasticsearch across AI applications, security operations, and observability Achieved the AI Security distinction in the Amazon Web Services (AWS) Security Competency Engaged with thousands of customers and partners at Black Hat and the RAISE AI Summit in Paris Share Repurchase Program In October 2025, Elastic announced a share repurchase program pursuant to which the Company may repurchase up to $500 million of the Company’s outstanding ordinary shares. As part of this program, during the first quarter of fiscal 2027, Elastic repurchased approximately 0.8 million ordinary shares at an average price per share of $49.71 on the open market, representing an aggregate value of approximately $40 million. Financial Outlook The Company is providing the following guidance: For the second quarter of fiscal 2027 (ending October 31, 2026): Total revenue is expected to be between $486 million and $487 million, representing 14.9% year-over-year growth at the midpoint (15.0% year-over-year constant currency growth at the midpoint) Sales-led subscription revenue is expected to be between $407.5 million and $408.5 million, representing 16.9% year-over-year growth at the midpoint (17.1% year-over-year constant currency growth at the midpoint) GAAP operating margin is expected to be positive Non-GAAP operating margin is expected to be approximately 19.0% Non-GAAP diluted earnings per share is expected to be between $0.80 and $0.82, assuming between 108.0 million and 109.0 million diluted weighted average ordinary shares outstanding For fiscal 2027 (ending April 30, 2027): Total revenue is expected to be between $1.998 billion and $2.010 billion, representing 15.2% year-over-year growth at the midpoint (15.3% year-over-year constant currency growth at the midpoint) Sales-led subscription revenue is expected to be between $1.682 billion and $1.694 billion, representing 17.4% year-over-year growth at the midpoint (17.5% year-over-year constant currency growth at the midpoint) GAAP operating margin is expected to be positive Non-GAAP operating margin is expected to be approximately 19.4% Non-GAAP diluted earnings per share is expected to be between $3.29 and $3.37, assuming between 108.5 million and 109.5 million diluted weighted average ordinary shares outstanding Adjusted free cash flow margin is expected to be approximately 21.5%, excluding any acquisitions or other one-time charges The diluted weighted average ordinary shares outstanding reflect only share buybacks completed as of July 31, 2026. The guidance assumes, among others, the following exchange rates: 1 Euro = 1.166 US Dollars; and 1 Great British Pound = 1.361 US Dollars. See the section titled "Forward-Looking Statements" below for information on the risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. We present historical and forward-looking non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. See the section entitled "Statement Regarding Use of Non-GAAP Financial Measures" below for an explanation of these non-GAAP measures. A reconciliation of forward-looking non-GAAP measures to the corresponding GAAP measures for sales-led subscription revenue, operating margin, net (loss) earnings per share, and adjusted free cash flow margin is not available without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of the costs and expenses that may be incurred in the future. These items necessary to reconcile such non-GAAP measures could be material and have a significant impact on the Company’s results computed in accordance with GAAP. Conference Call and Webcast As previously announced, Elastic’s executive management team will host a conference call today at 2:00 p.m. PT / 5:00 p.m. ET to discuss the Company’s financial results and business outlook. A live audio webcast of the conference call will be available through Elastic’s Investor Relations website at ir.elastic.co. A presentation containing financial and operating information will be available at the same website. The replay of the webcast will also be available on the investor relations website. About Elastic Elastic (NYSE: ESTC) integrates its deep expertise in search technology with artificial intelligence to help everyone transform all of their data into answers, actions, and outcomes. The Elasticsearch Platform, which is the foundation for its search, observability, and security solutions, is used by thousands of companies, including more than 50% of the Fortune 500. Learn more at elastic.co. Elastic and associated marks are trademarks or registered trademarks of Elastic N.V. and its subsidiaries. All other company and product names may be trademarks of their respective owners. Forward-Looking Statements This press release contains forward-looking statements that involve substantial risks and uncertainties, which include, but are not limited to, statements regarding our expected financial results for the fiscal quarter ending October 31, 2026 and fiscal year ending April 30, 2027, the expected performance or benefits of and demand for our offerings, our product strategy and innovation, and the impacts of AI on enterprise technology, our industry and organizational decision-making. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements due to uncertainties, risks, and changes in circumstances, including but not limited to, those related to: our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit or gross margin, operating expenses (which include changes in sales and marketing, research and development and general and administrative expenses), and our ability to achieve and maintain profitability; the success of our AI initiatives; competition we face in the AI landscape; market understanding and valuation of AI technologies; the use of AI by our workforce; the impact of the evolving macroeconomic and geopolitical environments on our business, operations, hiring and financial results, and on businesses and spending priorities of our customers and partners; the impact of our pricing model strategies on our business; the impact of foreign currency exchange rate fluctuations, the uncertain inflation and interest rate environment, and tariffs and other international trade policies on our results; our ability to continue to deliver and improve our offerings and develop new offerings; customer acceptance and purchase of our new and existing offerings; the expansion and adoption of our offerings; our ability to realize value from investments in the business, including acquisitions; our ability to maintain and expand our user and customer base; our international expansion strategy; the impact of our licensing model on the use and adoption of our software; our operating results and cash flows; the sufficiency of our capital resources; our ability to successfully execute our go-to-market strategy; our forecasts regarding our business; risks affecting continuation of our share repurchase program; our plan to align our investments more closely with our strategic priorities that we announced earlier this year; and general market, political, economic and business conditions. Any additional or unforeseen effects from the evolving macroeconomic and geopolitical environments may exacerbate these risks. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those expressed or implied in our forward-looking statements are included in our filings with the Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K for the fiscal year ended April 30, 2026 and subsequent quarterly and current reports filed with the SEC. SEC filings are available on the Investor Relations section of Elastic’s website at ir.elastic.co and the SEC’s website at www.sec.gov. Elastic assumes no obligation to, and does not currently intend to, update any such forward-looking statements, except as required by law. Statement Regarding Use of Non-GAAP Financial Measures In addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), we believe the non-GAAP measures discussed below are useful in evaluating our operating performance. We use these non-GAAP financial measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Investors are encouraged to review the differences between GAAP financial measures and the corresponding non-GAAP financial measures, and not to rely on any single financial measure to evaluate our business and financial results. Reconciliations of historical GAAP financial measures to their respective historical non-GAAP financial measures are included below. In relation to constant currency non-GAAP financial measures, the only reconciling item between GAAP financial measures and non-GAAP financial measures is the effect of foreign currency rate fluctuations. Further details on how we calculate such effects can be found in the definition of "Constant Currency" below. Sales-led Subscription Revenue Sales-led subscription revenue is a non-GAAP financial measure that we calculate as total subscription revenue excluding Monthly Elastic Cloud. We believe sales-led subscription revenue provides management and our investors with a consistent metric with which to measure the health of our business. Non-GAAP Gross Profit and Non-GAAP Gross Margin We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense and related employer taxes, and amortization of acquired intangible assets. We believe non-GAAP gross profit and non-GAAP gross margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance. Non-GAAP Operating Income and Non-GAAP Operating Margin We define non-GAAP operating income and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, respectively, excluding stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, acquisition-related expenses, and restructuring and other related charges. We believe non-GAAP operating income and non-GAAP operating margin provide our management and investors consistency and comparability with our past financial performance and facilitate period-to-period comparisons of operations, as these metrics generally eliminate the effects of certain variables from period to period for reasons unrelated to overall operating performance. Non-GAAP Net Income and Non-GAAP Earnings Per Share We define non-GAAP net income as GAAP loss, excluding stock-based compensation expense and related employer taxes, amortization of acquired intangible assets, acquisition-related expenses, restructuring and other related charges, and the income tax benefit from the release of any valuation allowance against deferred tax assets. Additionally, non-GAAP net income and non-GAAP earnings per share are adjusted for an assumed provision for income taxes based on a projected non-GAAP annual effective tax rate in fiscal 2027 and 2026 of 12% and 13%, respectively. We define non-GAAP earnings per share, basic, as non-GAAP net income divided by weighted average shares outstanding and non-GAAP earnings per share, diluted, as non-GAAP net income divided by weighted average diluted shares outstanding, which includes the potentially dilutive effect of the company’s employee equity incentive plan awards. We believe non-GAAP earnings per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of certain variables from period to period for reasons unrelated to overall operating performance. Adjusted Free Cash Flow and Adjusted Free Cash Flow Margin Adjusted free cash flow is a non-GAAP financial measure that we define as net cash provided by operating activities adjusted for cash paid for interest on long-term debt less cash used for investing activities for purchases of property and equipment. Adjusted free cash flow margin is calculated as adjusted free cash flow divided by total revenue. Adjusted free cash flow does not represent residual cash flow available for discretionary expenditures since, among other things, we have mandatory debt service requirements. Constant Currency We compare the percent change in certain results from one period to another period using constant currency information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. In presenting this information, current and comparative prior period results are converted into United States dollars at the exchange rates in effect on the last day of our prior fiscal year, rather than the actual exchange rates in effect during the respective periods. Contact Information Elastic Investor [email protected] Elastic Corporate [email protected] Elastic N.V. View source version on businesswire.com: https://www.businesswire.com/news/home/20260827269815/en/ Contacts Elastic Investor [email protected] Elastic Corporate [email protected]