Core Viewpoint - Elastic is preparing to present at an investor conference to highlight its strategic initiatives, financial health, and future growth plans, which could significantly influence investor sentiment and stock price [1] Group 1: Financial Performance - Morgan Stanley has set a price target of $80 for Elastic (ESTC), indicating a potential price increase of about 31.08% from its current price of $61.03 [2] - The stock currently trades at $61.55, reflecting a slight increase of 0.85% or $0.52 [2] - Elastic's market capitalization is approximately $6.49 billion, with a trading volume of 557,374 shares, indicating the company's size and investor interest [4] Group 2: Stock Volatility - The stock's trading range today has been between $60.05 and $62.31, indicating some volatility [3] - Over the past year, ESTC has experienced a high of $117.49 and a low of $56.70, showcasing its fluctuating nature [3]

Core Viewpoint - Elastic is set to announce its third quarter fiscal 2026 earnings results on February 26, 2026, after the U.S. market closes, followed by a conference call to discuss the financial results and business outlook [1]. Group 1: Earnings Announcement - The financial results for the third quarter fiscal 2026, which ended on January 31, 2026, will be released after market close on February 26, 2026 [1]. - A conference call will be held at 2:00 p.m. PT / 5:00 p.m. ET on the same day to review the financial results and business outlook [1]. Group 2: Company Overview - Elastic, known as the Search AI Company, integrates search technology with artificial intelligence to transform data into actionable insights [1]. - The Elastic Search AI Platform supports various solutions, including search, observability, and security, and is utilized by over 50% of Fortune 500 companies [1].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 208.73 CNY per share, compared to the current price of 180.30 CNY [3]. Core Insights - The company is expected to achieve a total revenue of 420 million to 450 million CNY in 2025, representing a year-on-year growth of 13.06% to 21.13%. The net profit attributable to shareholders is projected to be between -250 million to -220 million CNY [7]. - In Q4 2025, the company anticipates revenue of 190 million to 220 million CNY, with a year-on-year growth rate of 20.4% to 38.9%, significantly higher than the 7.4% growth rate in the first three quarters of 2025 [9]. - The demand for the company's AI foundational software products, such as TDH and Sophon LLMOps, is robust, reflecting a strong market need for digital transformation solutions [9]. - The company is actively investing in the research and development of new AI database technologies, which are expected to enhance its competitiveness in the AI foundational software sector [9]. - The ArgoDB joint solution, based on Haiguang Information's CPU, has been successfully implemented in key industries such as finance, energy, and government, indicating strong market acceptance [9]. Financial Forecast and Investment Recommendations - Revenue projections for 2025 to 2027 are estimated at 440 million, 500 million, and 580 million CNY, respectively, with growth rates of 17.3%, 15.8%, and 14.8% [10]. - The net profit attributable to shareholders is expected to improve from -240 million CNY in 2025 to -70 million CNY in 2027, with corresponding EPS estimates of -1.99 CNY, -0.87 CNY, and -0.58 CNY [10]. - The company is compared to peers such as MongoDB, Snowflake, and Elastic, with a premium valuation due to the scarcity of A-share big data companies and the promising future of AI software tools [15][14].

Core Insights - Elastic has launched the Elastic Inference Service (EIS) via Cloud Connect, enabling self-managed Elasticsearch deployments to access cloud-hosted inference capabilities without the need for GPU infrastructure management [1][3] - The EIS allows organizations to implement advanced semantic search capabilities efficiently while keeping their existing architecture and data on-premises [2][3] Group 1 - The EIS is now available for self-managed customers using Elastic Stack 9.3, providing access to GPU-based embedding and reranking models, including those from Jina.ai [2][3] - This service simplifies the adoption of semantic search for self-managed customers by eliminating the complexity associated with GPU infrastructure [3] - Users can benefit from a range of cloud services, including automated diagnostics and fast AI inference, while maintaining data security on-premises [3] Group 2 - Elastic integrates its expertise in search technology with artificial intelligence to transform data into actionable insights, serving thousands of companies, including over 50% of the Fortune 500 [4]

Core Insights - Elastic has introduced two Jina Rerankers on its Elastic Inference Service (EIS), enhancing its capabilities in providing fast and high-quality inference for users [1] Group 1: Product Development - The new Jina Rerankers offer low-latency and high-precision multilingual reranking, which is a significant improvement for the Elastic ecosystem [1] - EIS is a GPU-accelerated inference-as-a-service that simplifies the process of running inference without the need for complex setup or hosting [1] Group 2: Market Context - As generative AI prototypes transition into production-ready search and retrieval-augmented generation (RAG) systems, users are increasingly facing challenges related to relevance and inference [1]

Core Insights - The article discusses the investment potential of Elastic N.V. (ESTC), highlighting it as undervalued with an estimated 30% upside from its stock price of approximately $74.5 to the author's Fair Value estimate [1] Group 1: Investment Strategy - The investment style is described as "Fundamental Options," which combines fundamental analysis with options trading strategies [1] - The author employs various strategies including income-oriented investments, growth at a reasonable price, deep value based on discounted cash flow, and dividend aristocrats [1] - The author typically invests for the long term but also utilizes 20-25 options strategies for purposes such as hedging, bullish substitutes, neutral trades, trading volatility, and earnings-related trades [1] Group 2: Background and Experience - The author has a background in software development, which informs their focus on technology investments [1] - Teaching is mentioned as a passion, with experience in both formal and informal education, including authoring a free local investing newsletter [1]

Core Insights - Elastic N.V. (ESTC) is identified as undervalued, with a potential upside of approximately 30% from its stock price of around $74.5 to the estimated Fair Value [1] Group 1: Investment Strategy - The investment style is described as "Fundamental Options," combining fundamental analysis with options strategies [1] - Various investment strategies are pursued, including income-oriented investments, growth at a reasonable price, deep value based on discounted cash flow, and dividend aristocrats [1] - The analyst employs 20-25 options strategies for purposes such as hedging, bullish substitutes, neutral trades, trading volatility, and earnings-related trades [1] Group 2: Background and Teaching - The analyst has a background in software development, which informs their focus on technology investments [1] - Teaching is a passion, with experience in both formal and informal education, including authoring a free local investing newsletter [1]

Core Insights - The discussion features a fireside chat with Elastic's GVP of Finance, Eric Prengel, focusing on cybersecurity and infrastructure software [1]. Group 1 - The lead analyst from Needham & Company, LLC, Michael Cikos, is facilitating the conversation [1]. - The session aims to be interactive, encouraging audience questions during the discussion [1].

Summary of Elastic's Conference Call Company Overview - **Company**: Elastic - **Industry**: Cybersecurity and Infrastructure Software - **Key Executive**: Eric Prengel, Global Vice President of Finance - **Background**: Eric Prengel has been with Elastic for three years and previously worked as an investment banker at JP Morgan, where he took Elastic public and managed its debt deal [2][3] Core Business and Value Proposition - **Platform Functionality**: Elastic specializes in handling unstructured data, enabling ingestion, management, and search capabilities [4] - **Key Use Cases**: - **Observability**: Ingesting and searching through logs for monitoring and troubleshooting [5] - **Security**: SIEM (Security Information and Event Management) and XDR (Extended Detection and Response) capabilities [5] - **Vector Search**: Elastic has been a pioneer in vector search and databases, positioning itself well for the GenAI revolution [6][9] Market Dynamics and Trends - **GenAI Impact**: The search business has become the fastest-growing segment due to increased customer adoption of GenAI technologies [11] - **Customer Segmentation**: Engagement with customers has shifted to include board-level discussions about GenAI, enhancing the company's market presence [19] - **Competitive Landscape**: Elastic competes effectively in the SIEM and XDR markets, winning significant deals against established competitors [21][22] Financial Performance and Guidance - **Revenue Growth**: Elastic raised its top-line guidance by $34 million, reflecting strong demand and successful customer engagements [72] - **Large Deals**: The company is increasingly closing larger deals, with a shift towards $5-$10 million contracts becoming more common [51][52] - **Federal Exposure**: Elastic has a similar level of federal exposure as other infrastructure software companies, with recent deals being closed post-government shutdown [73][80] Go-to-Market Strategy - **Restructuring Sales Teams**: Elastic resegmented its sales teams to focus on high-potential customers, resulting in improved sales productivity [32][34] - **Greenfield Territories**: The company is investing in new territories with no prior revenue, aiming to capture new business [42] - **Sales Incentives**: Sales teams are incentivized based on new and expansion business, with accelerators for exceeding quotas [56] Observability and Security Integration - **Convergence of Security and Observability**: Elastic has been advocating for the integration of security and observability solutions, which is gaining traction in the market [28][29] - **Competitive Differentiation**: The unified data platform allows Elastic to offer efficiencies that competitors with separate platforms cannot match [29] Customer Engagement and Adoption - **Cross-Selling Opportunities**: Elastic is focusing on deepening relationships with existing customers to sell additional solutions [63] - **Customer Base**: Approximately 20% of customers use multiple solutions, contributing to 80% of annual recurring revenue (ARR) [63] Conclusion - **Future Outlook**: Elastic is well-positioned for growth with its innovative solutions in GenAI, security, and observability, supported by a strong go-to-market strategy and increasing customer engagement [72][74]

Group 1 - Elastic (NYSE: ESTC) has experienced a decline in investor favor due to slowing growth, despite its product being increasingly relevant in the current market [1] - The company's offerings are positioned well within the tech landscape, indicating potential for future growth [1]