Elastic(US:ESTC)2025-08-28 22:02Financial 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]