Elastic’s first-quarter earnings beat expectations

Elastic NV (ESTC -26.49%)known for its Elasticsearch distributed analytics and search engine, reported its 2025 Q1 earnings on August 29. The company revealed strong performance, with revenue and profitability beating expectations. Revenue came in at $347 million, compared with expectations of $343 million to $345 million, marking an 18 percent year-over-year increase. Non-GAAP (generally accepted accounting principles) diluted earnings per share (EPS) came in at $0.35, beating the consensus range of $0.24-$0.26.

While the quarter looks strong, forward guidance for the second quarter suggests subdued growth, with revenue between $353 million and $355 million, up 14% year-over-year.

Source: Expectations based on management guidance as provided in the 5/30/2024 earnings report.

Understanding the Elastic NV business

Elastic NV develops Elasticsearch, a distributed search and analytics engine. It primarily offers search-based solutions, including Elastic Cloud, that help organizations leverage the power of search across use cases such as enterprise search, observability, and security.

Recently, the company has focused heavily on expanding its cloud services and integrating advanced AI and machine learning capabilities into its solutions. Key factors to its success include continuous innovation, customer expansion, and maintaining technology leadership through features such as the Elasticsearch Relevance Engine (ESRE).

Elastic’s business is based on several critical areas, including revenue growth, customer expansion, cloud adoption and product innovation. The company has demonstrated consistent revenue and customer growth by expanding its Elastic Cloud offerings, which are hosted on major platforms such as AmazonAWS, Google Cloud and Microsoft Azure.

Quarterly highlights

Elastic’s Q1 2025 revenue totaled $347 million, beating the guidance range of $343 million to $345 million, reflecting 18% year-over-year growth. Elastic Cloud revenue was particularly strong, coming in at $157 million, up 30% year-over-year, indicating increased adoption of its cloud services. Non-GAAP diluted EPS was $0.35, beating the expected range of $0.24-$0.26.

Operating margins for the quarter were also noteworthy. Non-GAAP operating margin came in at 11%, above the forecast of 9.2%-9.4%. On a GAAP basis, the company reported an operating loss of $34 million and a net loss per share of $0.48. To provide a holistic view, it is essential to consider both GAAP and non-GAAP metrics.

Cash flow was also strong with operating cash flow of $53 million and adjusted free cash flow of $64 million. As of July 31, the company had $1.147 billion in cash and marketable securities, providing a solid liquidity position.

In terms of customer values, Elastic has continued to expand its base. Customers with an annual contract value (ACV) exceeding $100,000 increased to more than 1,370, up from 1,190 a year ago. The total number of subscription customers also saw an increase to around 21,200.

The company has made notable progress in product innovation. Key updates include introducing automatic import for SIEM (Security Information and Event Management) data integration and enhancing their AI platform with new integrations. Significant advancements such as the new Elastic Cloud Serverless offering have further strengthened its technology leadership.

Redirect Outlook

Looking ahead, Elastic provided cautious guidance for the fiscal second quarter. The company expects total revenue to be between $353 million and $355 million, representing 14% year-over-year growth. For the full fiscal year 2025, Elastic projects revenue between $1.436 billion and $1.444 billion, an increase of 14%. This tempered outlook suggests potential challenges in customer segmentation and broader economic conditions. Investors should keep an eye on how Elastic addresses these anticipated challenges and continues to leverage its technological advances to maintain growth.

Management remains bullish on long-term growth driven by continued adoption of AI capabilities and new product offerings such as Elastic Cloud Serverless. The company plans to reinvest in engineering, sales and marketing to capitalize on these opportunities. Going forward, investors should monitor any further updates on revenue forecasts and key product developments, as these will be critical to Elastic’s future performance.