Executive Summary

Elastic delivered a strong Q1 FY26: revenue $415.3M (+20% YoY) and non-GAAP diluted EPS $0.60, both above the high end of guidance; non-GAAP operating margin was 15.7% with a one-time 1% gross margin benefit from a ~$4M cloud infrastructure credit .
Demand was broad-based across cloud and self-managed; Elastic Cloud revenue grew 24% YoY to $195.8M and sales-led subscription revenue rose 22% YoY to $338.7M; CRPO was $956.5M (+18% YoY) and adjusted FCF margin reached 28% .
FY26 guidance was raised: revenue $1.679–$1.689B and non-GAAP diluted EPS $2.29–$2.35; Q2 FY26 guidance set at revenue $415–$417M and non-GAAP EPS $0.56–$0.58 with ~16% non-GAAP operating margin .
Key narrative drivers: accelerating GenAI adoption (2,200+ Elastic Cloud GenAI customers, more $1M ACV adds), competitive security displacements (~one-third of wins), and serverless traction; public sector stabilized, aided by GSA agreement and FedRAMP High “In Process” status .

What Went Well and What Went Wrong

What Went Well
- Strong beat and broad-based execution: revenue and profitability exceeded guidance, supported by both cloud and self-managed demand; sales-led subscriptions up 22% YoY and non-GAAP operating margin ~16% .
- GenAI tailwinds and relevance moat: “Now over 2,200 Elastic Cloud customers are using Elastic for GenAI use cases” with increased $1M ACV adds; BBQ and ACORN-1 improvements shipped by default for vector search .
- Security momentum via competitive displacements and new EASE offering: ~one-third of new/expansion wins displaced incumbents; EASE provides AI alert correlation atop existing SIEM/EDR stacks .
What Went Wrong
- Consumption variability remains a watch item; management reiterates consumption can be unpredictable QoQ despite a strong Q1 .
- RPO declined sequentially and deferred revenue fell QoQ: total RPO $1,460.7M (-5% QoQ) and deferred revenue $754.7M (-11% QoQ), though YoY trends remain solid .
- Gross margin benefitted from a one-time ~$4M cloud credit (~1%); ongoing margin trajectory should be viewed excluding this temporary lift .

Financial Results

Metric	Q3 2025	Q4 2025	Q1 2026
Revenue ($USD Millions)	$382.083	$388.432	$415.288
Non-GAAP Diluted EPS ($)	$0.63	$0.47	$0.60
GAAP EPS ($)	$(0.16)	$(0.16)	$(0.23)
GAAP Gross Margin (%)	74.6%	74.8%	76.7%
Non-GAAP Gross Margin (%)	76.7%	77.0%	78.7%
Non-GAAP Operating Margin (%)	16.8%	15.3%	15.7%
Elastic Cloud Revenue ($USD Millions)	$179.996	$181.507	$195.774
Total Subscription Revenue ($USD Millions)	$358.198	$361.741	$388.583
Services Revenue ($USD Millions)	$23.885	$26.691	$26.705
Adjusted Free Cash Flow ($USD Millions)	$99.151	$84.862	$116.038
Adjusted FCF Margin (%)	26%	22%	28%
Total RPO ($USD Millions)	$1,354.345	$1,545.412	$1,460.676

Segment revenue mix

Segment	Q3 2025	Q4 2025	Q1 2026
Total Elastic Cloud ($USD Millions, % of Revenue)	$179.996; 47%	$181.507; 47%	$195.774; 47%
Other Subscription ($USD Millions, % of Revenue)	$178.202; 47%	$180.234; 46%	$192.809; 47%
Services ($USD Millions, % of Revenue)	$23.885; 6%	$26.691; 7%	$26.705; 6%
Annual Elastic Cloud ($USD Millions, % of Revenue)	n/a	n/a	$145.912; 35%
Monthly Elastic Cloud ($USD Millions, % of Revenue)	n/a	n/a	$49.862; 12%

KPIs and customer metrics

KPI	Q3 2025	Q4 2025	Q1 2026
ACV >$100K Customers (count)	>1,460	>1,510	>1,550
Total Customers (approx.)	~21,350	~21,500	~21,550
Net Expansion Rate (%)	~112%	~112%	~112%
CRPO ($USD Millions; due within 12 months)	n/a	n/a	$956.494
Operating Cash Flow ($USD Millions)	$88.058	$86.979	$104.835
Cash, Cash Equivalents & Marketable Securities ($USD Billions)	$1.284	$1.397	$1.494

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($USD Billions)	FY 2026	$1.655–$1.670	$1.679–$1.689	Raised
Non-GAAP Diluted EPS ($)	FY 2026	$2.24–$2.32	$2.29–$2.35	Raised
Non-GAAP Operating Margin (%)	FY 2026	~16%	~16%	Maintained
Revenue ($USD Millions)	Q2 2026	—	$415–$417	Initiated
Non-GAAP Diluted EPS ($)	Q2 2026	—	$0.56–$0.58	Initiated
Non-GAAP Operating Margin (%)	Q2 2026	—	~16%	Initiated
Non-GAAP tax rate assumption	FY 2026 methodology	13% projected for non-GAAP (effective)	13% projected for non-GAAP (effective)	Maintained

Notes: Company does not formally guide adjusted FCF; price increases from May are embedded in guidance assumptions .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 FY25)	Previous Mentions (Q4 FY25)	Current Period (Q1 FY26)	Trend
GenAI/Search relevance & vector DB	Serverless on AWS; logsdb; Elastic Rerank Model	BBQ GA; ES	QL joins; Vertex AI RAG/native integration	2,200+ cloud customers using GenAI; more $1M ACV adds; BBQ & ACORN-1 default; MCP server, agentic apps
Security displacements & SIEM/XDR	—	Automatic migration for SIEM rules	~1/3 new/expansion wins displaced incumbents; EASE launched to sit atop SIEM/EDR	Increasing
Serverless adoption	GA on AWS (tech preview Azure)	Expanded to GCP/AWS regions	GA on all three hyperscalers; contribution ahead of targets	Building
Public sector	—	—	Stabilization; GSA strategic agreement; FedRAMP High “In Process”	Stabilizing
Pricing & consumption	—	—	May price increases lift YoY baseline; consumption tailwind from AI workloads	Supportive
Observability leadership	—	—	Gartner MQ Leader (2025), Logs Essentials tier in Serverless	Strengthening

Management Commentary

CEO on Elastic’s AI relevance moat: “Elastic is the world's leading vector database... when you get relevance right, you provide accurate context to LLMs... this accuracy matters even more as agentic AI gets used for automating increasingly more complex business tasks” .
CEO on security strategy and EASE: “Elastic Security unifies SIEM and XDR... EASE... allows you to take all of the alerts... and then use our AI capabilities to identify attacks... an on ramp to Elastic Security” .
CFO on price increases and impact: “A price increase lifts the floor year over year... the majority [of Q1 overperformance] comes from performance rather than price increase” . “Roughly that quantum [~5%] would be on the rough order of magnitude accurate... discounting factors in as well” .
CFO on profitability: “We delivered... gross margin of 79% and an operating margin of 16%. In Q1, we recognized a one time credit of approximately $4,000,000 related to our cloud infrastructure costs. The credit caused a onetime gross margin benefit of 1%” .

Q&A Highlights

AI consumption uplift: workloads are more compute/memory intensive, boosting consumption; still early in AI journey but multi-year tailwind .
Security displacements durability: secular shift to data-first SIEM/XDR driving multi-quarter migrations; EASE eases transitions and positions Elastic to capture share over “many years to come” .
Self-managed strength: broad-based across geographies and solutions; focus remains on sales-led subscriptions across cloud and self-managed .
Public sector: environment stabilized; Q2 typically lacks a “federal flush”; GSA agreement and FedRAMP progress deepen engagement .
Net expansion: not guided, but embedded in outlook; performance and macro stability drove FY raise .

Estimates Context

Item	Consensus*	Actual/Guide
Q1 FY26 Revenue ($USD Millions)	$397.3*	$415.3 (beat)
Q1 FY26 Non-GAAP Diluted EPS ($)	$0.418*	$0.60 (beat)
Q2 FY26 Revenue Guide ($USD Millions)	$418.3*	$415–$417 (slightly below Street midpoint)
Q2 FY26 Non-GAAP Diluted EPS Guide ($)	$0.576*	$0.56–$0.58 (in-line)
FY26 Revenue ($USD Billions)	$1.709*	$1.679–$1.689 (raised vs prior, but below Street)
FY26 Non-GAAP Diluted EPS ($)	$2.350*	$2.29–$2.35 (in-line to modestly below midpoint)

Values retrieved from S&P Global.
*Consensus metrics: Revenue Consensus Mean, Primary EPS Consensus Mean, and # of estimates for periods shown.

Key Takeaways for Investors

Elastic’s Q1 FY26 outperformance was driven by broad-based demand, GenAI-tailwind consumption, and competitive wins in security; margin quality was strong but include the one-time 1% gross margin lift in assessment .
Street beats on both revenue and EPS in Q1 were significant; Q2 revenue guide sits slightly below consensus while EPS guide is in-line—watch estimate revisions post-print.
Security momentum is a notable narrative driver: ~one-third of wins were displacements and EASE reduces friction to migrate; this can sustain growth and mix shift toward platform adoption over coming quarters .
Serverless is gaining traction with GA across all hyperscalers and contributions ahead of internal targets, potentially improving adoption and cost efficiency in observability and search workloads .
Pricing increases from May provide a durable YoY baseline lift but management emphasizes performance as the primary growth lever; monitor discount dynamics and net expansion trends .
Sequential RPO/deferral declines warrant monitoring of bookings linearity and consumption patterns; YoY strength remains solid, but QoQ volatility can affect near-term optics .
Near-term catalysts: Financial Analyst Day (Oct 9), EASE adoption case studies, serverless region expansion, and public sector momentum via GSA and FedRAMP progress .

Elastic N.V. (ESTC)·Q1 2026 Earnings Summary