• Total Revenue: $382 million, up 17% year over year.
• Subscription Revenue: $358 million, up 16% year over year.
• Elastic Cloud Revenue: $180 million, growing 26% year over year.
• Professional Services Revenue: $24 million, growing 18% year over year.
• Non-GAAP Operating Margin: 16.8% of revenue.
• Gross Margin: 76.7%.
• Diluted Earnings Per Share: $0.63.
• Adjusted Free Cash Flow: Approximately $99 million, translating to a 26% margin.
• Customers with ACV over $100,000: Over 1,460.
• Net Expansion Rate: Approximately 112%.
• Q4 Revenue Guidance: $379 million to $381 million, representing 13% year over year growth at the midpoint.
• Full Fiscal Year Revenue Guidance: $1.474 billion to $1.476 billion, representing 16% year over year growth at the midpoint.
• Full Fiscal Year Non-GAAP Operating Margin Guidance: Approximately 14.7%.

• Warning! GuruFocus has detected 3 Warning Sign with ESTC.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Elastic NV (NYSE:ESTC) reported a 17% year-over-year increase in total revenue, with cloud revenue growing by 26%.
• The company saw a significant increase in customers spending over $100,000, reaching over 1,460, demonstrating strong customer engagement.
• Elastic NV (NYSE:ESTC) signed multiple seven-figure deals, including a notable contract with a digital native career platform, showcasing its competitive edge.
• The company is experiencing strong momentum in its GenAI applications, with over 1,750 Elastic Cloud customers using these solutions.
• Elastic NV (NYSE:ESTC) achieved a non-GAAP operating margin of 16.8%, exceeding expectations and reflecting strong financial discipline.

Negative Points

• Elastic NV (NYSE:ESTC) faced sales execution issues in Q1 due to field segmentation changes, which impacted early fiscal year performance.
• The company anticipates a sequential revenue headwind of approximately $10 million in Q4 due to having three fewer days in the quarter.
• Elastic NV (NYSE:ESTC) is cautious about the sustainability of its Q3 cloud strength and has provided prudent guidance for Q4.
• The self-service cloud business, targeted at SMBs, remained flat, indicating challenges in this market segment.
• The company faces potential headwinds from the recent strength of the US dollar, impacting revenue by an estimated $1 to $2 million.

Q & A Highlights

Q: Can you explain the unexpected strength in cloud revenue despite earlier concerns about moderation due to Q1 execution issues? A: Eric Prengel, Interim CFO: The Q3 outperformance was driven by strong customer commitments and healthy consumption levels in the cloud, particularly from enterprise and commercial accounts. While we saw strength from larger customers, we are being prudent with our Q4 guidance and do not expect the same sequential strength as seen between Q2 and Q3.

Q: What is the long-term vision for the serverless product, and how might it impact the P&L? A: Ashutosh Kulkarni, CEO: Serverless offers a better user experience with minimal management effort and a more efficient pricing model. Our long-term vision is for serverless to become the primary way customers experience Elastic Cloud. Over time, we will provide migration tools and expand functionality, which should lead to more workloads moving to serverless, potentially improving our gross margins.

Q: How is the self-service part of the business performing, and what impact did sales changes have on it? A: Ashutosh Kulkarni, CEO: The self-service cloud business, targeting the SMB segment, remained consistent and flattish, reflecting market conditions rather than sales changes. Our sales-led motion focuses on enterprise and mid-market customers, and we are pleased with the sales execution and pipeline progression.

Q: How is the security event management space evolving, and what are customers looking for? A: Ashutosh Kulkarni, CEO: Customers are seeking more AI-led automation and the ability to analyze data at scale. Our innovations in efficient data storage, machine learning, and AI functionalities like attack discovery differentiate us. Customers are consolidating onto our platform due to these capabilities and our value-for-cost advantage.

Q: How is Gen AI impacting Elastic's business, and what opportunities does it present? A: Ashutosh Kulkarni, CEO: Gen AI is a significant driver across all parts of our business, including search, observability, and security. We see customers using Elastic as a runtime platform for Gen AI applications, leveraging our vector database and other functionalities. This broad-based strength is helping us consolidate workloads and expand our market opportunity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.