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Elastic(ESTC) - 2025 Q4 - Earnings Call Transcript
ElasticElastic(US:ESTC)2025-05-29 22:00

Financial Data and Key Metrics Changes - In Q4, total revenue reached $388 million, growing 16% year-over-year on both reported and constant currency basis [29] - Subscription revenue for Q4 totaled $362 million, also growing 16% as reported and 17% in constant currency [29] - Elastic Cloud revenue grew 23% on both reported and constant currency basis [29] - Non-GAAP operating margin for Q4 was 15%, with a gross margin of 77% [34][35] - For FY 2025, subscription revenue excluding Monthly Cloud was $1,195 million, growing 20% as reported and 21% in constant currency [31] 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 [32] - Customers spending over $100,000 annually increased by approximately 14%, with around 180 net new customers added [32] - The self-managed business performed solidly, contributing to overall revenue growth [30] Market Data and Key Metrics Changes - APJ region showed the fastest growth, followed by EMEA and The Americas, while there was some pressure in the U.S. public sector [32] - The U.S. public sector faced constraints, leading to elongated sales cycles, particularly in federal civilian agencies [33][34] Company Strategy and Development Direction - The company is focusing on driving customer adoption of the Elasticsearch AI platform, leveraging Gen AI and consolidation as key growth drivers [9][10] - Elastic aims to strengthen its position as the preferred platform for enterprises building Gen AI applications, emphasizing innovation and performance [10][19] - The company is committed to maintaining a balance between growth and profitability while continuing to invest in its sales capacity and security sales specialists [74] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential uncertainties in the macro environment but expressed confidence in a healthy pipeline and ongoing demand for their solutions [16][39] - The company expects continued growth and strong margins in FY 2026, projecting total revenue between $1.655 billion and $1.670 billion, representing 12% year-over-year growth at the midpoint [40][41] Other Important Information - The company announced a new five-year strategic collaboration agreement with AWS to enhance solution integrations and simplify Elastic adoption [24] - Elastic's AI capabilities are being integrated into various sectors, including security, observability, and customer support, with a focus on automating workflows [20][88] Q&A Session Summary Question: Guidance and Metrics - The guidance was described as conservative due to macro uncertainties, with a focus on balancing positive demand signals against potential consumption headwinds [45][46] - Key metrics for assessing business health include subscription revenue less Monthly Cloud and CRPO, which showed positive momentum [49] Question: Partnerships and Market Position - The company is positioning itself as a leading vector database through partnerships with hyperscalers like AWS and NVIDIA, enhancing its go-to-market strategy [53][55] Question: AI Commitments and Use Cases - 25% of customers with over $1 million in annual contract value are utilizing Elastic for AI workloads, indicating strong adoption within this cohort [95] - Emerging use cases for AI include sales automation, marketing automation, and legal e-discovery, reflecting a broadening of applications beyond initial use cases [97]