Elastic(US:ESTC)2026-02-26 23:02Financial Data and Key Metrics Changes - Total revenue for Q3 was $450 million, representing an 18% growth year-over-year and 16% on a constant currency basis [24][25] - Sales-led subscription revenue grew to $376 million, an increase of 21% as reported and 19% on a constant currency basis [25] - Current remaining performance obligations (CRPO) reached approximately $1.06 billion, growing 19% as reported and 15% on a constant currency basis [25][26] - Non-GAAP operating margin was 18.6%, with subscription gross margins at 82% and total gross margins at 78% [28][29] Business Line Data and Key Metrics Changes - Sales-led subscription revenue accelerated, with a notable increase in commitments from both self-managed and cloud offerings [25][27] - The number of customers with an annual contract value (ACV) over $100,000 grew to over 1,660, marking a 14% increase [26] - 28% of customers in the greater than $100K cohort are utilizing Elastic for AI, indicating strong demand for AI capabilities [27] Market Data and Key Metrics Changes - The company experienced strong deal momentum across all geographies, with multi-year commitments indicating customer confidence in the Elastic platform [26] - The demand for AI solutions is driving customer expansion, with significant growth in AI-related use cases [27][86] Company Strategy and Development Direction - The company is focused on becoming a critical data platform in the age of AI, leveraging its capabilities to support both cloud and self-managed environments [24][27] - The introduction of new features like Agent Builder and Elastic Workflows aims to enhance the platform's capabilities for context-driven AI applications [19][22] - The strategy emphasizes bridging the gap between LLMs and proprietary data, positioning Elastic as a leader in context engineering for AI applications [13][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing market demand and the company's ability to drive profitable growth, with expectations for continued strong performance in the upcoming quarters [29][34] - The company anticipates total revenue for fiscal 2026 to be in the range of $1.734 billion to $1.736 billion, representing approximately 17% growth at the midpoint [32] - Management highlighted the importance of AI adoption among customers, suggesting that as more customers reach the $100K ACV mark, growth could accelerate [40][75] Other Important Information - The company has made significant progress on its $500 million share repurchase program, returning approximately $186 million to shareholders during Q3 [30] - The introduction of the Elasticsearch GPU plugin aims to enhance AI application deployment speed and efficiency [18] Q&A Session Summary Question: Insights on AI customer growth and potential acceleration - Management noted that trends for generative AI customers remain strong, with potential for accelerated growth as more customers reach the $100K mark [39][40] Question: Importance of context in AI applications - The CEO emphasized the need for a comprehensive data platform that can handle various data types and provide accurate context for AI applications [42][43] Question: Performance of self-managed versus cloud customers - Management highlighted the strength in self-managed business, particularly as customers prefer to keep sensitive data within their control [48][49] Question: Future competition from frontier models - The CEO stated that AI models will not displace Elastic but rather depend on it for providing the necessary context for effective AI applications [56][57] Question: Impact of recent CISA win on government contracts - Management confirmed that the CISA win is expected to lead to additional agency engagements, enhancing the company's position in the government sector [68] Question: Concerns about CRPO growth rates - Management reassured that CRPO growth is strong, with expectations for continued improvement as AI adoption increases among customers [73][75]