Elastic(US:ESTC)2025-11-20 23:02Financial Data and Key Metrics Changes - The company reported total revenue of $423 million for Q2, representing a growth of 16% year-over-year and 15% on a constant currency basis [24] - Sales-led subscription revenue was $349 million, growing 18% as reported and 17% on a constant currency basis [24] - The current remaining performance obligation (CRPO) was approximately $971 million, growing 17% as reported and 15% in constant currency [25] - Subscription gross margins were 82%, total gross margins were 78%, and operating margin was 16.5% [28] - Adjusted free cash flow was approximately $26 million, representing a margin of 6% [29] Business Line Data and Key Metrics Changes - The company saw strong execution in sales-led subscription revenue, with a notable increase in large commitments, including over 30 commitments greater than $1 million in annual contract value [24][26] - The number of customers spending over $100,000 annually grew to more than 1,600, with 23% of this cohort utilizing Elastic for GenAI use cases, up from 17% a year ago [27][33] Market Data and Key Metrics Changes - The company experienced broad-based demand across all geographies, supported by healthy consumption trends [23] - Despite a government shutdown impacting some renewals, the company closed significant deals, including a $26 million commitment with CISA [26][29] Company Strategy and Development Direction - The company is focusing on AI and platform consolidation as top priorities for enterprises, which is driving sustained momentum in demand [23] - The introduction of new products like Agent Builder aims to enhance the company's capabilities in AI and context engineering, further differentiating its offerings [15][19] - The acquisition of Jina AI is expected to accelerate the company's strategy in AI and vector search [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's momentum, citing strong consumption and commitments as key drivers for future growth [38][41] - 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 at the midpoint [32] Other Important Information - The company initiated a $500 million share repurchase program, returning approximately $114 million in cash to shareholders during Q2 [29] - The company plans to participate in upcoming conferences, including the Barclays Global Technology Conference and the Needham Growth Conference [5] 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 [36] Question: Billings lagging behind other metrics - Management explained that seasonality and a government shutdown impacted renewals, but overall commitments and consumption remained strong [40][42] 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 the self-serve segment [49] Question: Growth in GenAI revenue contributions - Management emphasized that consumption growth is driven by various factors, including new workloads and platform efficiency, rather than pricing alone [53][56] Question: Competitive landscape in security - Management highlighted that the company is successfully displacing incumbents in the security space, leveraging its data platform and AI capabilities [85][90]