Core Insights - Elastic N.V. shares fell over 12% intra-day despite reporting fiscal Q2 2026 results that exceeded analyst expectations, as investors expressed concerns about the company's long-term growth trajectory [1] Financial Performance - The company reported adjusted earnings of $0.64 per share for the quarter ended October 31, surpassing the consensus estimate of $0.58 [2] - Revenue increased by 16% year over year to $423 million, or 15% in constant currency, exceeding expectations of $418.23 million [2] - Elastic Cloud revenue, a key growth component, rose 22% year over year to $206 million [2] Future Outlook - Management described the quarter as "outstanding" and raised the full-year revenue forecast by $18 million, now guiding to $1.715–$1.721 billion, compared to prior consensus expectations of $1.706 billion [3] - For Q3, Elastic projected revenue of $437–$439 million, above the $429.9 million consensus, and adjusted earnings of $0.63–$0.65 per share, ahead of analyst expectations of $0.60 [3]

Core Viewpoint - Elastic N.V. was downgraded to Neutral by Monness due to a perceived lack of excitement in its Q2 performance, despite showing positive financial results [1][5] Financial Performance - Elastic reported adjusted earnings of 64 cents per share, exceeding the analyst estimate of 58 cents [2][5] - The company's quarterly revenue reached $423 million, surpassing the expected $418 million, marking a 16% increase year-over-year, or 15% when adjusted for constant currency [2][5] - Subscription revenue grew to $398 million, reflecting a 17% year-over-year increase, or 16% on a constant currency basis [3][5] Stock Performance - The stock price declined to $82.08, a decrease of 7.02% with a change of $6.20, fluctuating between a low of $82.01 and a high of $91.09 on the earnings call day [3][4] - Elastic's market capitalization is approximately $8.72 billion, with a trading volume of 2,974,153 shares on the NYSE [4]

Core Insights - Elastic reported total revenue of $423 million for the second quarter of fiscal 2026, reflecting a year-over-year increase of 16% or 15% on a constant currency basis [1] - Subscription revenue reached $398 million, marking a 17% year-over-year increase or 16% on a constant currency basis [1] Financial Performance - Total revenue: $423 million, up 16% year-over-year [1] - Subscription revenue: $398 million, up 17% year-over-year [1] - Sales-led subscription revenue was also highlighted, indicating a strong performance in this segment [1]

Core Insights - Elastic has been recognized as a Leader in the IDC MarketScape for Worldwide General-Purpose Knowledge Discovery 2025, highlighting its strong position in the market for search and analytics solutions [1][3]. Company Overview - Elastic is identified as the Search AI company, integrating search technology with artificial intelligence to transform data into actionable insights [8]. - The company has a significant user base, with over 50% of Fortune 500 companies utilizing its solutions [8]. Product Strengths - Elasticsearch is noted for its capabilities as a widely deployed open-source document and vector database, providing a powerful search and analytics engine essential for generative AI applications [1][2]. - The platform supports fast semantic and hybrid search, GPU-accelerated inference-as-a-service, and offers integrated observability and access controls [2][3]. Key Differentiators - Elastic's hybrid, semantic, and reranking models ensure AI systems are grounded in relevant and accurate context, a concept the company pioneered [5]. - The introduction of Agent Builder allows developers to create custom AI agents quickly, enhancing the platform's flexibility and usability [4][5]. - The company has achieved over 5.5 billion downloads of Elasticsearch, indicating a robust open-source community and developer engagement [5]. Strategic Vision - Elastic aims to help organizations unlock the full potential of their data by connecting content, context, and creativity through search and generative AI [5]. - The company emphasizes a unified data platform that combines search, observability, and security, helping organizations reduce costs and achieve faster insights [5]. Market Position - The IDC MarketScape assessment utilizes a rigorous scoring methodology to evaluate technology suppliers, providing a comprehensive overview of their competitive fitness [7]. - Elastic's recognition as a Leader reflects its strong capabilities and strategies in the knowledge discovery market [1][3].

Core Insights - Elastic has announced new capabilities in the Elastic Distribution of OpenTelemetry (EDOT) SDK, aimed at simplifying the management, updating, and deployment of SDKs at scale [1] - The company introduced new features to support OpenTelemetry for the PHP programming language, addressing the needs of developers and observability teams [1] Group 1 - The new capabilities in EDOT SDK are designed to alleviate bottlenecks faced by developers managing thousands of OpenTelemetry SDKs across distributed systems [1] - The enhancements in OpenTelemetry support for PHP are part of Elastic's broader strategy to improve observability and streamline operations for developers [1]

Core Insights - Elastic has completed the acquisition of Jina AI, enhancing its capabilities in retrieval, embeddings, and context engineering for agentic AI [1][2] - The acquisition positions Elastic as a leading Search AI Platform, emphasizing its commitment to open and accessible Search AI solutions [2][3] Group 1: Acquisition Details - The acquisition deepens Elastic's capabilities in vector search, retrieval-augmented generation (RAG), and context engineering [2] - Jina AI's technology adds dense vector, multilingual, and multimodal embeddings models, enhancing Elastic's ELSER model [3] - Advanced rerankers from Jina AI improve retrieval quality for visual and long-context multilingual documents [3] Group 2: Strategic Goals - The integration of Jina AI's models aims to enhance relevance for unstructured data, enabling developers to deliver higher-quality context to generative AI systems [3] - Elastic plans to continue Jina AI's practice of releasing models on Hugging Face and publishing academic research [4] - The models will be available through the Elastic Inference Service (EIS) on Elastic Cloud, allowing enterprise customers to utilize embeddings and rerankers alongside Elastic's vector database [4] Group 3: Leadership and Vision - The former CEO of Jina AI, Han Xiao, has joined Elastic as VP of AI, indicating a strategic alignment in advancing search foundation models [4] - Elastic's CEO, Ash Kulkarni, highlighted the importance of search in generative AI and the expanded capabilities brought by Jina AI [3]

Core Insights - Elastic has been recognized as a Leader in the IDC MarketScape for Worldwide Extended Detection and Response (XDR) Software 2025 Vendor Assessment, highlighting its strong position in the market [1] Company Overview - Elastic is identified as the "Search AI company," emphasizing its foundational strength in search technology [1] - The company has unified Security Information and Event Management (SIEM), XDR, and cloud security capabilities into a single platform, enhancing its competitive edge [1] Market Position - The recognition from IDC indicates that Elastic's differentiation in the XDR market is largely due to its robust search capabilities [1] - Chris Kissel, research vice president at IDC, noted the importance of Elastic's integrated approach in the evolving security landscape [1]

Core Insights - Elastic has launched AutoOps for self-managed enterprise users at no additional cost, enhancing the management of Elasticsearch [1] - The integration with Elastic Cloud allows users to benefit from powerful diagnostics while reducing infrastructure overhead [1] - This development aims to improve resource efficiency and lower hardware costs for self-managed users [1]

Financial Data and Key Metrics Changes - The company reported total revenue of $415 million for Q1 2026, representing a 20% year-over-year growth and an 18% growth on a constant currency basis [27] - Sales-led subscription revenue, excluding monthly Elastic Cloud, was $339 million, growing 22% as reported and 20% on a constant currency basis [27] - The non-GAAP operating margin was 16%, with a gross margin of 79% [33][34] Business Line Data and Key Metrics Changes - The company saw strong performance across both cloud and self-managed environments, with significant customer commitments and key wins in all solution areas [28] - The security business achieved strong results, with one-third of new and expansion deals coming from competitive displacements [19][28] - The number of customers spending over $100,000 annually grew to more than 1,550, indicating strong enterprise adoption [8] Market Data and Key Metrics Changes - In the U.S. public sector, signs of stabilization were noted, with a strategic agreement with the U.S. General Services Administration boosting interest among federal agencies [10][29] - The current remaining performance obligations (CRPO) were approximately $956 million, growing 18% year-over-year [30] Company Strategy and Development Direction - The company is focusing on leveraging its Search AI platform to drive growth in generative AI applications and platform consolidation across industries [24][100] - The introduction of new capabilities, such as the Elastic AI SOC engine (EASE), aims to enhance threat detection and drive competitive advantage in the security market [22][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong execution and momentum heading into the remainder of fiscal 2026, raising revenue guidance due to better-than-expected macro conditions [35][36] - The company anticipates sustained adjusted free cash flow margins and expects total revenue for fiscal 2026 to be in the range of $1.679 billion to $1.689 billion, representing approximately 14% growth [37] Other Important Information - The company is participating in several upcoming conferences, including Citi's Global TMT Conference and the Goldman Sachs Communicopia and Technology Conference [6] - A Financial Analyst Day is scheduled for October 9, where the company will showcase its Elasticsearch AI platform [38] Q&A Session Summary Question: Customer spend uplift related to AI - Management noted that as customers utilize AI applications, workloads tend to be more compute-intensive, leading to increased consumption and spending [41][44] Question: Impact of price increase on guidance - The price increase is expected to lift the floor year-over-year, contributing to overall growth, but the majority of growth comes from performance rather than price increases [46][48] Question: Growth mix across business areas - Management highlighted strong performance across all solution areas, with search driven by generative AI being a significant tailwind, alongside security and platform consolidation [52][53] Question: Predictability of the model - The sales-led subscription side has shown strong execution and predictability, while consumption remains slightly unpredictable on a quarter-over-quarter basis [54] Question: Competitive displacements in security - The shift towards viewing security as a data problem is driving competitive displacements, with customers increasingly consolidating onto the company's platform [60][62] Question: Self-managed growth acceleration - The growth in self-managed solutions was broad-based, contributing significantly to overall subscription revenue growth [68] Question: Federal business stabilization - Management confirmed stabilization in the U.S. public sector, with no significant flush expected in Q2, and the sales team is well-positioned to execute [90][93]

Financial Performance - Total revenue grew by 20% year-over-year to $415 million[116, 118] - Sales-led subscription revenue increased by 22% year-over-year, reaching $339 million[116, 118] - Elastic Cloud revenue grew by 24% year-over-year, totaling $196 million[116, 118] - Sales-led subscription revenue accounted for 82% of total revenue[118] - Non-GAAP operating margin was 16%[116, 130] - Adjusted free cash flow was $116 million, representing 28% of total revenue[131, 141] Customer Base - The company has 1,550 customers with ACV (Annual Contract Value) greater than $100K[117] - The net expansion rate is 112%[128] Future Outlook - The company projects total revenue between $415 million and $417 million for Q2 FY26, representing 14% year-over-year growth[132] - The company projects total revenue between $1.679 billion and $1.689 billion for FY26, representing 14% year-over-year growth[132] Platform and Technology - 72% of organizations have adopted AI in one or more business functions[18] - Elastic's Search AI Lake provides response times in milliseconds[34] - Elastic ingests 400 terabytes of telemetry data per day with Elastic Observability[54]