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01/11 06:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents strong financial performance with significant revenue growth and improved margins. Despite competitive pressures and macroeconomic uncertainties, the company shows resilience with strategic expansions and innovations. The Q&A reveals a cautious yet optimistic stance, with management focusing on clarity and strategic growth. The absence of a shareholder return plan is a slight drawback, but overall, the positive guidance and strong financial metrics, especially in cloud revenue growth, suggest a positive stock price movement in the short term.
Total Revenue Q4 2025 388 million, growing 16% year-over-year.
Subscription Revenue Q4 2025 362 million, growing 16% year-over-year.
Elastic Cloud Revenue Q4 2025 Grew 23% year-over-year.
Subscription Revenue Excluding Monthly Cloud Q4 2025 315 million, growing 19% year-over-year.
Current Remaining Performance Obligations (CRPO) Q4 2025 Approximately 1 billion, growing 18% year-over-year.
Customers with >$1 million ACV Q4 2025 Grew approximately 27% year-over-year.
Customers with >$100,000 ACV Q4 2025 Grew approximately 14% year-over-year.
Gross Margin Q4 2025 77% of revenue.
Operating Margin Q4 2025 15%, with a 400 basis points improvement year-over-year.
Adjusted Free Cash Flow Margin FY 2025 19%, growing approximately 600 basis points year-over-year.
Better Binary Quantization (BBQ) Technology: Elastic announced the general availability of its pioneering BBQ technology, which compresses vectors for faster retrieval, improving performance and accuracy for enterprise customers.
Elastic Cloud Serverless: Elastic Cloud serverless is now generally available on AWS and Google Cloud, allowing customers to quickly launch and scale without managing underlying infrastructure.
AI Assistant: The AI Assistant feature has been deployed by customers, demonstrating value by identifying anomalies in data.
Expansion in GenAI Applications: Over 2000 Elastic Cloud customers are using Elastic for GenAI use cases, with 310 customers spending over $100,000 annually.
Strategic Partnerships: Elastic announced a five-year strategic collaboration agreement with AWS and strengthened its partnership with Google Cloud, enhancing integration and marketing initiatives.
Sales Strategy: Sales segmentation changes implemented at the start of the fiscal year have started to pay off, with significant breakthroughs in enterprise and commercial accounts.
Operational Efficiency: Elastic achieved a non-GAAP operating margin of 15% in Q4, with a focus on maintaining strong free cash flow generation.
Focus on GenAI and Consolidation: Elastic is positioning itself as a strategic partner for enterprises focusing on GenAI and technology consolidation.
Market Positioning: Elastic's solutions are being recognized for their flexibility and ability to accommodate both cloud and self-managed environments.
U.S. Public Sector Pressure: There was noted pressure in the U.S. public sector, particularly affecting federal civilian agencies, which faced personnel and budget constraints, leading to elongated sales cycles.
Macro Economic Uncertainty: The company acknowledged potential uncertainty amidst evolving macro conditions, which could impact revenue guidance and overall business performance.
Competitive Pressures: Elastic faces competitive pressures in the market, particularly in the areas of search, observability, and security, where they are working to differentiate their offerings.
Regulatory Issues: The company referenced regulatory uncertainties that could affect their business operations and revenue projections.
Supply Chain Challenges: While not explicitly detailed, the discussion around operational efficiency and cost control suggests potential supply chain challenges that could impact service delivery.
Investment Prioritization: There is a risk that prioritizing investments to support higher top-line growth may moderate the rate of margin improvement.
Revenue Growth: In Q4, revenue grew 16%, with Elastic cloud revenue growing 23%.
Customer Expansion: Ended FY 2025 with more than 210 customers over a million dollars in committed annual contract value.
Sales Strategy: Sales segmentation changes implemented at the start of the fiscal year have started to pay off.
GenAI Adoption: Over 2000 Elastic Cloud customers are using Elastic for GenAI use cases.
Partnerships: Announced a five-year strategic collaboration agreement with AWS and strengthened partnership with Google.
Product Innovation: Released new features like BBQ technology for vector database and Automatic Migration tool for SIEM.
Q1 FY 2026 Revenue Guidance: Expect total revenue in the range of $396 million to $398 million, representing 14% year-over-year growth at the midpoint.
FY 2026 Revenue Guidance: Expect total revenue in the range of $1.655 billion to $1.67 billion, representing 12% year-over-year growth at the midpoint.
Operating Margin Guidance: Expect non-GAAP operating margin for FY 2026 to be approximately 16%.
Earnings Per Share Guidance: Expect non-GAAP diluted earnings per share in the range of $2.24 to $2.32.
Free Cash Flow Guidance: Expect to sustain the fiscal year 2025 level of adjusted free cash flow margins in fiscal 2026.
Shareholder Return Plan: None
The earnings call reveals strong financial performance with raised revenue guidance and significant shareholder returns. The Q&A section addresses concerns about seasonality and government shutdown impacts, but emphasizes strong commitments and consumption. The company's focus on AI capabilities and market expansion is promising, despite some renewal delays. The positive sentiment is reinforced by a robust shareholder return plan and optimistic guidance, suggesting a positive stock price movement over the next two weeks.
The earnings call highlights several concerns: a decline in quarterly net income due to lower revenue, reluctance to provide guidance amid market uncertainties, and delays in project greenlighting. Despite some positive aspects, like improved full-year net income and strategic plans for IP development, the lack of guidance and revenue decline overshadow these. The Q&A section further underscores uncertainties, especially with tariffs and market disruptions, leading to a negative sentiment overall. The absence of market cap data limits the impact assessment, but the overall sentiment is negative.
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