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]

Core Insights - Elastic Security achieved Certified status in the AV-Comparatives Endpoint Prevention and Response (EPR) Test 2025, demonstrating a 99.3% effectiveness in both Active Response and Passive Response [1] Group 1: Performance Metrics - Elastic Security excelled in 50 targeted attack scenarios, showcasing low false positives and zero workflow delays [1] - The solution also provided a favorable total cost of ownership (TCO) [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 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] - Non-GAAP operating margin was 16%, with a gross margin of 79% [32] Business Line Data and Key Metrics Changes - Subscription revenue growth was driven by both cloud and self-managed offerings, with strong performance across all solution areas [28] - The company ended the quarter with over 1,550 customers spending more than $100,000 annually, indicating strong enterprise adoption [7] - The number of Elastic Cloud customers using Gen AI use cases exceeded 2,200, with over 330 customers spending $100,000 or more annually [12] Market Data and Key Metrics Changes - In the U.S. Public sector, signs of stabilization were noted, with a strategic agreement signed with the U.S. General Services Administration [9] - The company reported strong customer commitments and competitive success in the security segment, with one-third of new and expansion deals coming from competitive displacements [28][51] Company Strategy and Development Direction - The company is focused on leveraging its Search AI platform to drive growth in Gen AI and platform consolidation across various industries [23] - The strategic alignment of the sales team towards expanding enterprise accounts and high-potential mid-market customers is proving effective [10] - The introduction of new capabilities, such as the Elastic AI SOC engine (EASE), aims to enhance threat detection and drive further adoption [28][60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong execution and market position, despite operating in a complex macro environment [34] - The company raised its fiscal 2026 revenue guidance, reflecting better-than-expected macro conditions and strong demand for its solutions [34] - Management highlighted the importance of search relevance and context in the AI era, positioning the company as a leader in data retrieval and context engineering [15][101] Other Important Information - The company achieved an adjusted free cash flow margin of 28% in Q1, with expectations to maintain and expand this margin over time [33] - The current remaining performance obligations (CRPO) grew 18% year-over-year, reaching approximately $956 million [30] Q&A Session Summary Question: Customer spend uplift related to AI usage - Management noted that as customers utilize AI applications, workloads tend to be more compute-intensive, leading to increased overall consumption [42] Question: Impact of price increases on guidance - The price increase implemented in May is expected to provide a year-over-year benefit, but the majority of growth is attributed to performance rather than price [46] Question: Growth mix across business segments - Management indicated strong performance across all solution areas, with Gen AI driving growth in search, security, and observability [50] Question: Predictability of the business model - Management expressed confidence in the predictability of sales-led subscription growth, noting strong execution and consistency in performance [52] Question: Competitive displacements in security - Management highlighted a growing trend of customers recognizing security as a data problem, leading to increased migrations to the company's platform [58] Question: Federal business stabilization - Management confirmed stabilization in the U.S. Public sector, with expectations for continued execution and alignment with customer needs [90][94]