SAN FRANCISCO--(BUSINESS WIRE)--Elastic (NYSE: ESTC), the Search AI Company, today announced a new integration for Amazon Bedrock AgentCore that brings observability for AI agents and applications directly into the Elasticsearch platform. The integration allows site reliability engineers (SREs) and developers to monitor, optimize and troubleshoot agents running on Amazon Bedrock AgentCore. Elastic Observability monitors AI agents and applications by ingesting all logs and metric signals to help. ...

Financial Data and Key Metrics Changes - Total revenue for Q2 was $423 million, representing a growth of 16% year-over-year and 15% on a constant currency basis [21] - Sales-led subscription revenue was $349 million, growing 18% as reported and 17% in constant currency [21] - Current remaining performance obligation (CRPO) was approximately $971 million, growing 17% as reported and 15% in constant currency [22] - Subscription gross margins were 82%, total gross margins were 78%, and operating margin was 16.5% [24] - Adjusted free cash flow was approximately $26 million in Q2, representing a margin of 6% [25] Business Line Data and Key Metrics Changes - Strong execution in sales-led subscription revenue growth of 18%, with significant contributions from both Elastic Cloud and self-managed offerings [5][21] - Over 30 commitments greater than $1 million in annual contract value were secured, with five exceeding $10 million [23] - The number of customers spending over $100,000 annually increased to more than 1,600 [5] Market Data and Key Metrics Changes - The company saw a 13% increase in the number of customers with annual contract values over $100,000, indicating strong market demand [23] - 23% of customers in the greater than $100,000 cohort are utilizing Elastic for GenAI use cases, up from 17% a year ago [24] Company Strategy and Development Direction - The company is focusing on AI and platform consolidation as top priorities for enterprises, driving demand for its solutions [20] - The introduction of new products like Agent Builder aims to enhance user interaction with data and simplify the operational lifecycle of AI agents [13] - The acquisition of Jina AI is part of the strategy to enhance capabilities in multilingual and multimodal embedding and re-ranking models [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the market opportunity, driven by robust growth and a unique platform built for the AI era [19] - The company raised its full fiscal year 2026 revenue guidance, expecting total revenue in the range of $1.715 billion to $1.721 billion, representing approximately 16% growth [28] - Management noted that the business is seeing strong commitments and consumption, with a healthy sales pipeline [20][29] Other Important Information - The company initiated a $500 million share repurchase program, returning approximately $114 million in cash to shareholders during Q2 [25] - The company will begin providing guidance for sales-led subscription revenue, a key metric for measuring success with larger strategic accounts [26] Q&A Session Summary Question: Performance of non-AI-native customers - Management noted strong consumption trends across all customer segments, including traditional businesses, driven by increased commitments and consolidation onto the platform [30][31] Question: Billings lagging behind other metrics - Management acknowledged variability in billings due to seasonality and a government shutdown impacting renewals, but emphasized strong commitments and consumption [32][33][34] Question: Composition of sales-led subscription revenue guidance - Management clarified that the guidance focuses on commitments from both cloud and self-managed environments, with expectations for flat growth in self-serve monthly cloud [36][37] Question: Growth contributions from GenAI revenue - Management emphasized that consumption growth is driven by new workloads and increased data, rather than pricing changes alone [38][39][40] Question: Go-to-market changes and productivity - Management confirmed that changes made to the sales strategy are yielding positive results, with strong execution and commitments [41][42] Question: Competitive landscape in security - Management highlighted that the company is displacing incumbents in the security space, leveraging its data platform and AI capabilities [53][54][55] Question: Observability and security as two sides of the same coin - Management reiterated the importance of data in both observability and security, emphasizing the company's advanced capabilities in these areas [57][58]

Business Overview and Growth - Elasticsearch is the world's most popular open-source data platform for unstructured data, evidenced by 55 billion downloads and ranking as the 1 search engine and VectorDB[10, 11] - Elastic's total revenue has grown consistently, reaching $1483 million in FY25, with a year-over-year growth of 17%[16] - The company is targeting a $296 billion total addressable market (TAM) by 2029, driven by Search, Security, Observability, and GenAI[52] AI and Technology - Elastic has a strong foundation for AI, with 15 years of development in native vector search and AI workloads[22, 23] - The Elasticsearch platform ingests 30 petabytes of raw data per day and handles 30 billion queries per day on Elastic Cloud[13] - Elastic Cloud has over 2200 customers using AI[32] Customer Adoption and Expansion - Elastic has over 21550 total customers, with over 1550 customers spending more than $100K ACV[56] - 50% of Fortune 500 companies are paid customers of Elastic[56] - 90% of Elastic Cloud observability customers use log analytics, and 35% use beyond log analytics[38] - 95% of Elastic Cloud security customers use Elastic as a SIEM, and 20% use it beyond SIEM for use cases like XDR[45] Financial Performance and Targets - Elastic aims for a medium-term sales-led subscription revenue growth of 20%, comprising 15% base growth and 5% GenAI tailwinds[265, 267] - The company is targeting a non-GAAP operating margin of over 20% and an adjusted free cash flow margin of over 20% in the medium term[267] - Elastic's adjusted free cash flow reached $286 million in FY25, representing a 19% margin[271]

Financial Data and Key Metrics Changes - Total revenue in Q4 was $388 million, growing 16% year-over-year on an as-reported and constant currency basis [30] - Subscription revenue in Q4 totaled $362 million, also growing 16% as reported and 17% in constant currency [30] - Elastic Cloud revenue grew 23% on an as-reported and constant currency basis [30] - Non-GAAP operating margin for Q4 was 15%, with a gross margin of 77% [35][36] - Adjusted free cash flow margin improved by approximately 600 basis points to end the year at 19% [36] Business Line Data and Key Metrics Changes - The number of customers with over $1 million in annual contract value grew approximately 27%, adding about 45 net new customers [34] - Customers with over $100,000 in annual contract value grew approximately 14%, adding about 180 net new customers [34] - Subscription revenue excluding Monthly Cloud was $315 million, growing 19% in Q4 [32] Market Data and Key Metrics Changes - Strong growth was observed in the APJ region, followed by EMEA and The Americas, while some pressure was noted in the U.S. Public sector [34] - Over 2,000 Elastic Cloud customers are using Elastic for Gen AI use cases, with over 30% of these customers spending $100,000 or more annually [12] Company Strategy and Development Direction - The company is focusing on leveraging AI to automate business processes and drive innovation, positioning itself as a strategic partner for enterprises [11][18] - Elastic aims to strengthen its position as the preferred vector database, enhancing its offerings with new technologies like better binary quantization [13][19] - The company is committed to maintaining a balance between growth and profitability while continuing to innovate and expand its product offerings [40][43] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential uncertainty in the macro environment but expressed confidence in the healthy pipeline and demand signals [39] - The company expects continued growth and strong margins in FY 2026, projecting total revenue in the range of $1.655 billion to $1.670 billion [42] Other Important Information - Elastic Cloud now accounts for over 50% of subscription revenue, with strong growth in cloud adoption [18] - The company announced a strategic collaboration agreement with AWS to enhance solution integrations and accelerate AI innovation [25] Q&A Session Summary Question: Guidance and Metrics - Inquiry about the conservativeness of guidance and leading indicators of business performance [45] - Response highlighted the balance of positive demand signals with macro uncertainty, emphasizing the importance of CRPO and subscription revenue metrics [46][49] Question: Partnerships and Market Opportunities - Question regarding the impact of recent partnerships, particularly with AWS and NVIDIA, on market opportunities [53] - Management noted the growing acceptance of Elastic as a leading vector database and the importance of partnerships for driving cloud adoption [54] Question: Retrieval Augmented Generation (RAG) - Inquiry about the durability of RAG architectures and Elastic's positioning [59] - Management affirmed the critical role of retrieval in enterprise data management and the growing adoption of their vector database for RAG use cases [60][61] Question: Cloud Performance and Consumption Hesitation - Question about the sequential growth in cloud performance and the impact of the leap year [62] - Management clarified that the leap year and fewer days in Q4 affected consumption rates, but normalized growth rates remained strong [64][66] Question: Go-to-Market Strategy and Changes - Inquiry about the effectiveness of go-to-market changes made in the previous fiscal year [69] - Management confirmed that the changes have settled and are yielding positive results, with plans to continue hiring sales capacity [70][72] Question: AI Commitments and Emerging Use Cases - Question about the $1 million AI commitments and emerging use cases [93] - Management clarified that 25% of $1 million customers are using Elastic for AI workloads, with a variety of sophisticated use cases emerging across industries [94][96]