Financial 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 focused on leveraging its AI capabilities across all business areas, with a strong emphasis on security and observability [6][10] - The introduction of new products like Agent Builder aims to enhance the company's offerings in AI and context engineering [15][19] - The company is committed to innovation and strategic acquisitions, such as the acquisition of Jina AI, to strengthen its position in the AI and search markets [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, citing strong consumption and commitment trends [23][38] - 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] - Management highlighted the importance of both cloud and self-managed environments in driving sales-led subscription revenue [30][31] Other Important Information - The company plans to return approximately $500 million to shareholders through a share repurchase program, having already returned $114 million in Q2 [29] - The company will 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][38] Question: Billings lagging behind other metrics - Management explained that seasonality and a government shutdown impacted billings, but overall commitments and consumption remained strong [40][42] Question: Composition of sales-led subscription revenue guidance - Management clarified that the guidance reflects commitments from both cloud and self-managed environments, with expectations for flat growth in the self-serve segment [49][50] Question: Growth opportunities outside of RAG - Management emphasized that relevance and context engineering are core strengths, and new products like Agent Builder will help monetize these capabilities [66] Question: Competitive landscape in security - Management indicated that the company is successfully displacing incumbents in the security space, leveraging its data platform and AI capabilities [85][90]

Financial Data and Key Metrics Changes - The company reported a 30% year-over-year increase in adjusted earnings per share from continuing operations, reaching a record $2.32 per share [4][10] - Adjusted EBIT margin expanded by 100 basis points to 23.9% [10] - Sales for the quarter were $353 million, representing a 29% growth, with organic growth at 8% [10][15] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) segment saw orders grow by 60% on a reported basis and 12% organically, with sales increasing by 72% to just over $170 million [11] - Utility Solutions Group experienced 17% growth in orders, while sales growth was muted at 2% [13] - The test business reported a 10% revenue growth, ending the year with a backlog up nearly 20% compared to the previous year [14] Market Data and Key Metrics Changes - Organic sales for the Navy market increased by 53% in the quarter and 24% year-over-year [6] - The aerospace market saw revenue up over 10% in the quarter and 14% year-over-year, driven by increased production rates from Boeing [7] Company Strategy and Development Direction - The company aims to focus on the aerospace and Navy end markets, which present durable, long-term growth opportunities [5] - The successful acquisition of Maritime and divestiture of VACO are pivotal steps in the evolution of the company's portfolio [4] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the long-term outlook for both the aircraft and Navy markets, expecting increasing production rates to drive growth [6] - The company anticipates another strong financial year in 2026, with reported sales growth projected in the range of 16%-20% [17] Other Important Information - The company achieved record performance in 2025 across all key metrics, with orders finishing in excess of $1.5 billion, a growth of over 56% [15] - Operating cash flow from continuing operations exceeded $200 million, a significant increase from nearly $122 million in the prior year [16] Q&A Session Summary Question: Context on growth rates and margin trends at the segment level - Management provided guidance for A&D business growth at 6%-8%, with expected margin improvements across all segments [21] Question: Update on the integration of SM&T - The integration is on plan, with the Maritime business performing ahead of expectations and positive new order activity noted [22] Question: Details on $200 million in ESCO maritime orders - The orders are associated with U.K. submarine-related programs, expected to generate revenue over two years [27][29] Question: Impact of canceled flights on aerospace - Management indicated no significant impact from shutdowns, with strong growth expected in aircraft manufacturing [30] Question: Thoughts on capital allocation moving forward - The company is actively looking at M&A opportunities, focusing on businesses that fit into aerospace, navy, or utility end markets [42][43]

Financial Data and Key Metrics Changes - Gap Inc. reported Q3 net sales of $3.9 billion, up 3% year-over-year, with comparable sales increasing by 5%, marking the highest quarterly comp in over four years [6][20][22] - Operating margin for Q3 was 8.5%, down 80 basis points from last year, impacted by tariffs, but underlying margin expansion was approximately 110 basis points [24][29] - Earnings per share decreased by 14% to $0.62 compared to $0.72 last year, primarily due to tariff impacts [24][29] Business Line Data and Key Metrics Changes - Old Navy's net sales were $2.3 billion, up 5%, with comparable sales increasing by 6% [22] - Gap brand net sales reached $951 million, up 6%, with comparable sales up 7% [22] - Banana Republic's net sales were $464 million, down 1%, but comparable sales increased by 4% [22] - Athleta's net sales decreased by 11% to $257 million, with comparable sales also down 11% [22][23] Market Data and Key Metrics Changes - Old Navy is now the number five active apparel brand in the U.S. and the number four brand in the women's active space [8] - Gap has improved its ranking in the denim category, now the number six adult denim brand in the U.S., up from eight last year [38] Company Strategy and Development Direction - The company is focused on brand reinvigoration, with a playbook that has resulted in seven consecutive quarters of comp growth [6][7] - Strategic partnerships, such as collaborations with Disney and Anna Sui, are being leveraged to enhance brand relevance and drive sales [9][51] - The company plans to expand into the beauty category, starting with Old Navy, as part of its growth strategy [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum and ability to navigate macroeconomic pressures, particularly in attracting a younger consumer base [4][18] - The company is raising its full-year 2025 net sales growth outlook to the high end of its prior guidance range, expecting growth of 1.7%-2% year-over-year [27][28] - Management emphasized the importance of operational excellence and maintaining a strong value proposition for consumers [31] Other Important Information - The company ended Q3 with cash and short-term investments of approximately $2.5 billion, an increase of 13% from last year [25][26] - The company is implementing cost-saving measures, targeting $150 million in savings to reinvest in growth opportunities [28] Q&A Session Summary Question: What drove the strong comp acceleration at the Gap banner? - Management attributed the strong comp acceleration to effective strategy execution, compelling product assortments, and successful marketing campaigns [36] Question: Can you elaborate on AUR trends and growth plans? - Management noted that AUR improved due to better product offerings and less discounting, with confidence in continuing AUR growth into Q4 [46][47] Question: What are the drivers of top-line inflection at Old Navy? - Old Navy's strong performance was driven by market share gains, compelling product offerings, and successful marketing strategies [50] Question: How is the store fleet performing and what investments are needed? - Management is optimizing the store fleet by closing underperforming locations and testing new store formats to enhance customer experience [56] Question: How is the consumer behaving across different income cohorts? - Management reported consistent strength across all income cohorts, with strong performance from both low and high-income consumers [70]

Financial 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]

Financial Data and Key Metrics Changes - Net revenue for Q4 2025 grew 7.2% year-over-year to $257 million, supported by a 5.7% increase in average total degree enrollment to 79,300 students [14][15] - For the full year, net revenue increased 6% to $1.01 billion, compared to $950 million in fiscal 2024, driven by a 3.7% increase in average total degree enrollment to 81,900 [15][16] - Net income for fiscal 2025 was $135.4 million, up from $115.1 million in the prior year, reflecting strong operating performance and continued margin expansion [15][16] Business Line Data and Key Metrics Changes - Average total degree enrollment grew to nearly 82,000 in fiscal 2025, up from approximately 79,000 in fiscal 2024, with strong retention supporting this growth [7][14] - Enrollment through employer relationships increased to 32% of average total degree enrollment, up from 30% in fiscal 2024, indicating sustained demand from working adults [8] Market Data and Key Metrics Changes - The university's student body primarily consists of working adults, with 75% currently employed while pursuing a degree, and the average age of students is 38 years [5][6] - Over 50% of students are first-generation college attendees, and nearly two-thirds are caring for a family while pursuing their degree [5] Company Strategy and Development Direction - The company aims to expand access to higher education through flexible, career-relevant programs that empower working adults [4][6] - Continued focus on improving student outcomes and increasing operational efficiencies through AI and automation is a key strategy [8][11] - The company plans to maintain capital allocation priorities that support sustainable enrollment growth and invest in initiatives that enhance student outcomes [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for fiscal 2026, expecting revenue in the range of $1.025 billion to $1.035 billion and adjusted EBITDA between $244 million and $249 million [19][20] - The company noted strong retention trends and steady demand across programs, indicating a positive trajectory for future growth [11][30] Other Important Information - The College of Nursing received a 10-year accreditation for its Master of Science in Nursing program, highlighting the commitment to academic excellence [9] - The company has a strong balance sheet with no debt and significant cash flow, supporting continued investment in student initiatives [17] Q&A Session Summary Question: Expectations for FY26 revenue growth - Management explained that while they exited FY25 with strong growth, the guidance for FY26 reflects a conservative outlook due to various factors including timing differences and the impact of a scholarship offered in FY24 that was not repeated [22][23][27] Question: Total degree enrollment by verticals, specifically healthcare - Management confirmed healthy growth in nursing programs and noted that while most programs are growing, education saw flatness due to productivity challenges [34][37] Question: Assumptions for enrollment growth and revenue per student for FY26 - Management indicated that they expect some normalization in revenue per student and highlighted strong new student demand and retention as key drivers for FY26 [41][42][46] Question: Impact of suspicious activity controls on enrollments - Management discussed the effectiveness of their controls in identifying suspicious activity and the improvements seen in enrollment productivity after moving controls to the application process [50][52][54] Question: Technology investment and capacity for future growth - Management stated that the current technology platform has the capacity to manage growth well beyond 10,000 additional students without significant further investment [58][61] Question: Updates on Department of Education policies - Management reassured that there have been no significant changes affecting the university from recent Department of Education announcements and expressed confidence in their ongoing relationship with the department [64][68]

Financial Data and Key Metrics Changes - Total revenue for the quarter was $811 million, with non-GAAP operating income at $365 million, exceeding guidance [5] - CRM revenue has decreased to about 20% of total revenue, down from 25% two years ago, indicating growth in other product areas [8] Business Line Data and Key Metrics Changes - Veeva AI is highlighted as a major initiative, with significant progress expected to benefit customers and the industry [5] - Crossix continues to perform well, contributing to overall revenue growth, with expectations for it to remain a strong growth driver [32][37] Market Data and Key Metrics Changes - The overall health of the pharmaceutical industry remains strong, with no significant changes in customer buying behaviors noted [28] - Digital marketing spending is increasing, which positively impacts Crossix's performance and growth potential [36] Company Strategy and Development Direction - The company is focused on integrating its software, data, and consulting services to provide comprehensive solutions for life sciences [44] - There is an emphasis on innovation in clinical and safety areas, with expectations for AI to drive efficiency and effectiveness [19][48] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the industry, citing ongoing demand for solutions to uncured diseases and a stable market environment [28] - The company expects to continue to meet its 2030 goals despite some customer attrition in the CRM segment, due to the diverse nature of its business [73] Other Important Information - The company is investing in hiring for product and services teams to support growth and innovation [55] - The partnership with IQVIA is seen as beneficial, enhancing customer confidence and providing opportunities for joint solutions [40] Q&A Session Summary Question: Concerns about CRM customer migration - Management acknowledged that CRM is currently about 20% of total revenue and that attrition is not expected to impact long-term goals [8][73] Question: Competitive landscape in EDC market - Management noted that while one customer returned to a previous provider, overall trends in clinical operations remain positive, with opportunities for growth [10] Question: Impact of AI on sales force efficiency - Management indicated that while there have been some reductions in sales force size, the industry is cautious about making significant changes [26] Question: Demand environment in pharma - Management reported that the industry is healthy, with no significant changes in customer buying behaviors despite political and economic challenges [28] Question: Crossix performance and future growth - Management confirmed that Crossix continues to perform well and is expected to be a strong growth driver moving forward [32][37] Question: Balancing go-to-market initiatives - Management stated that dedicated teams are in place to focus on various product areas, allowing for simultaneous advancement in multiple initiatives [68]

Summary of Kelly Services FY Conference Call Company Overview - **Company**: Kelly Services (NasdaqGS: KELY.A) - **Industry**: Staffing Solutions - **Segments**: Enterprise Talent Management, Science, Engineering and Technology (SET), Education - **Market Position**: Second largest temporary staffing provider in the U.S. with a 2% market share [4][18] Key Financial Metrics - **Trailing 12-Month Revenue**: $4.4 billion [4] - **Adjusted EBITDA Margin**: 3% [4] - **Capital Deployment**: $500 million in non-core asset monetization; $900 million redeployed for scale in specialties [2] - **SG&A Cost Reduction**: Over $100 million [2] Strategic Initiatives - **Transformation**: Significant transformation ongoing, including a streamlined operating model and a focus on higher-value solutions [5][20] - **Leadership Changes**: New CEO Chris Laden, an industry veteran, joined in September; first outside CEO in company history [6][7] - **Acquisitions**: $900 million invested in acquisitions, including a $450 million IT services company [13] Segment Performance Enterprise Talent Management (ETM) - Accounts for nearly half of the business with a gross margin of around 20% and EBITDA margin over 2% [8] - Offers a range of solutions including temp staffing, perm staffing, and managed services [9] Science, Engineering, and Technology (SET) - Focused on higher-value positions and solutions, with a gross margin of 26% and EBITDA margin of nearly 6% [14] - Significant growth in project-based work, particularly in telecom and life sciences [12][13] Education - Largest provider of K-12 substitute teachers in the U.S., supporting 8,000 school districts [14] - Business has tripled over the last five years, with a significant growth opportunity as only 30% of school districts currently outsource [15] Market Dynamics - The staffing industry is fragmented, with Kelly Services maintaining a flat revenue despite a declining overall market [19][20] - Shift from staffing to outcome-based solutions, with revenue from staffing decreasing from 70% to 44% [21] Financial Outlook - Anticipated EBITDA margin to remain around 3% amid near-term headwinds [24] - Free cash flow generation of approximately $100 million [26] - Active M&A pipeline with a focus on education and SET areas [27] Additional Insights - The company is focusing on optimizing its finance, HR, and technology functions to drive efficiency [29] - Emphasis on expanding wallet share with existing clients and enhancing service offerings [28] - The company has a dual-class share structure, with B shares having voting rights [42] Conclusion - Kelly Services is undergoing a significant transformation aimed at enhancing shareholder value through strategic acquisitions, operational efficiencies, and a focus on higher-margin segments. The company is well-positioned to capitalize on growth opportunities in the staffing industry, particularly in education and specialized sectors.

Financial Data and Key Metrics Changes - Gap Inc. reported Q3 net sales of $3.9 billion, up 3% year-over-year, with comparable sales increasing by 5%, marking the highest quarterly comp in over four years [21][19] - Operating margin for Q3 was 8.5%, down 80 basis points from last year, impacted by tariffs, but underlying margin expansion was approximately 110 basis points [23][20] - Earnings per share decreased by 14% to $0.62 compared to $0.72 last year, primarily due to tariff impacts [23][22] Business Line Data and Key Metrics Changes - Old Navy's net sales reached $2.3 billion, up 5% year-over-year, with comparable sales increasing by 6% [21] - Gap brand net sales were $951 million, up 6%, with comparable sales up 7%, marking the eighth consecutive quarter of positive comps [21] - Banana Republic's net sales were $464 million, down 1% year-over-year, but comparable sales increased by 4% [21] - Athleta's net sales decreased by 11% to $257 million, with comparable sales also down 11% [22] Market Data and Key Metrics Changes - Old Navy gained market share consistently over the last two years, becoming the number one specialty apparel brand in the U.S. [38] - Gap is now the number six adult denim brand in the U.S., up from eight last year, reflecting strong performance in the denim category [34][35] Company Strategy and Development Direction - The company is focused on brand reinvigoration, with a playbook that has resulted in seven consecutive quarters of comp growth [5][6] - Strategic partnerships, such as collaborations with Disney and Anna Sui, are being leveraged to enhance brand relevance and attract new customers [9][39] - The company plans to expand into the beauty category, starting with Old Navy, as part of its growth strategy [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's momentum heading into Q4 and beyond, with an updated full-year outlook for net sales growth at the high end of the prior range [18][26] - The company is taking a balanced view of the macroeconomic environment, acknowledging potential uncertainties related to consumer behavior [26] - Management emphasized the importance of maintaining a strong value proposition for consumers while managing pricing and inventory effectively [51] Other Important Information - The company ended Q3 with cash and short-term investments of approximately $2.5 billion, an increase of 13% year-over-year [24] - The company is committed to achieving $150 million in cost savings in core operations, with plans to reinvest a portion into future growth projects [28] Q&A Session Summary Question: What drove the strong comp acceleration at the Gap banner? - Management attributed the strong comp acceleration to effective strategy execution, compelling product assortments, and successful marketing campaigns [32][33] Question: What surprised the upside versus initial expectations on gross margin? - The outperformance in gross margin was driven by better-than-expected average unit retail (AUR) and lower discounting [36] Question: How is the store fleet performing and what investments are needed? - The company is optimizing its retail footprint by closing underperforming stores and testing new formats, with plans for selective investments [42][43] Question: How is the consumer behavior across different income cohorts? - Management noted consistent strength in customer behavior across all income cohorts, with strong performance from both low and high-income consumers [50] Question: What is the outlook for Athleta's sales stabilization? - Athleta is undergoing a reset year, focusing on long-term success and aligning inventory with lower sales trends [55]

Financial Data and Key Metrics Changes - The company reported a 30% year-over-year increase in adjusted earnings per share from continuing operations to a record $2.32 per share [4][10] - Adjusted EBIT margin improved by 100 basis points to 23.9% [10] - Sales for the quarter were $353 million, representing a 29% growth, with organic growth at 8% [10][11] Business Line Data and Key Metrics Changes - Aerospace and Defense (A&D) segment saw orders grow by 60% on a reported basis and organic growth of 12%, with sales up 72% on a reported basis [11] - Utility Solutions Group experienced 17% growth in orders, while sales growth was muted at 2% [12] - The test business had a 10% revenue growth, ending the year with a backlog up nearly 20% compared to the previous year [13] Market Data and Key Metrics Changes - Organic sales for the Navy market were up 53% in the quarter and 24% year-over-year [6] - The U.S. and U.K. customer bases are focused on increasing build rates for submarines, positively impacting sales and order rates [6] - The renewables market is currently facing headwinds, but long-term growth drivers remain in place [8] Company Strategy and Development Direction - The acquisition of Maritime and divestiture of VACO are pivotal steps in the evolution of the company's portfolio, enhancing its presence in the Navy market [4][5] - The company aims to focus on aerospace and Navy end markets, which present durable, long-term growth opportunities [5] - The company is actively looking for M&A opportunities that fit into its aerospace, navy, or utility end markets, which are expected to have long-term growth characteristics [41] Management's Comments on Operating Environment and Future Outlook - Management remains positive about the long-term outlook for both aircraft and Navy markets, expecting increasing production rates to drive growth [6] - The company anticipates another strong financial year in 2026, with reported sales growth expected in the range of 16%-20% [17] - Management acknowledges challenges in the renewables market but believes the business is well-managed and positioned for normalized growth in the future [39] Other Important Information - The company achieved record performance in 2025 across all key metrics, with orders finishing in excess of $1.5 billion, a growth of over 56% [15] - Operating cash flow for the year was just over $200 million, significantly up from nearly $122 million in the prior year [16] Q&A Session Summary Question: Context on growth rates and margin trends at the segment level - Management provided guidance for A&D business growth at 6%-8%, with similar expectations for Doble and 3%-5% for test [21][22] Question: Update on the integration of SM&T - Integration is on plan, with the Maritime business performing ahead of expectations and positive new order activity noted [23] Question: Details on $200 million in ESCO maritime orders - Orders are associated with U.K. submarine-related programs, expected to generate revenue over two years [28][29] Question: Impact of canceled flights on aerospace - Management did not see significant impact from recent shutdowns and expects continued growth in aircraft manufacturing [30] Question: Thoughts on capital allocation moving forward - The company is focused on disciplined M&A in aerospace, navy, or utility markets, leveraging a strong balance sheet [41]

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]