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Elastic N.V. (ESTC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 revenue was $365.361M (+18% YoY; +5% QoQ) with Elastic Cloud revenue at $168.835M (+25% YoY; +7% QoQ); non-GAAP operating margin expanded to 17.6% and non-GAAP diluted EPS reached $0.59, exceeding company guidance across revenue and profitability metrics .
  • Management raised FY25 guidance: revenue to $1.451B–$1.457B (from $1.436B–$1.444B), non-GAAP operating margin to ~13.5% (from ~12.5%), and non-GAAP diluted EPS to $1.68–$1.72 (from $1.52–$1.56) .
  • GenAI momentum accelerated: new customer commitments in GenAI nearly doubled QoQ with three >$1M ACV wins, and 1,550 Elastic Cloud customers are using GenAI, including 240 customers with >$100k ACV in that cohort—management emphasized clear product differentiation (BBQ quantization, hybrid search) and consolidation wins in security/observability .
  • Stock-relevant developments: CFO transition (Janesh Moorjani departing; Eric Prengel appointed interim CFO) alongside raised guidance and strong GenAI traction present catalysts balanced by noted consumption variability and FX headwinds into H2 FY25 .

What Went Well and What Went Wrong

What Went Well

  • Exceeded guidance across all revenue and profitability metrics; non-GAAP operating margin rose to 17.6% and non-GAAP diluted EPS printed $0.59, reflecting disciplined OpEx and stronger-than-expected revenue outperformance .
  • GenAI commitments nearly doubled QoQ with three deals >$1M ACV; Elastic’s vector database and hybrid search drove wins across industries (e.g., automotive chatbots, retail semantic search) demonstrating platform pull and differentiation in RAG workloads .
  • Sales execution improved post-Q1 segmentation changes; pipeline creation/progression “back to normal,” win rates “incredibly strong,” and Americas led growth, followed by EMEA and APJ .

Management quotes:

  • “In Q2 we saw strong customer commitments…with continued momentum in GenAI and platform consolidation.”
  • “New customer commitments with GenAI almost doubled in dollar volume…with 3 of the deals…greater than $1 million in ACV.”
  • “The pace of pipeline creation and pipeline progression has come back to normal levels.”

What Went Wrong

  • CFO transition introduces leadership change risk amid execution ramp; Moorjani’s departure effective Dec 13, 2024; Prengel named interim CFO .
  • Consumption revenue variability and USD strength are modeled as H2 headwinds; management built prudent assumptions (month-to-month Elastic Cloud expected to remain flat) .
  • RPO growth dynamics prompted investor scrutiny; management noted sequential RPO was up slightly and historically tends to dip in Q2, but YoY is roughly flat given Q1 commitments shortfall .

Data points:

  • Month-to-month Elastic Cloud was 13% of total revenue and “flattish” in dollar terms; management expects it to remain somewhat flat for the rest of the year .
  • FX headwinds cited explicitly for the back half, informing guidance posture .
  • CFO change announced in conjunction with results .

Financial Results

Core Financials vs Prior Periods

MetricQ4 FY24Q1 FY25Q2 FY25
Revenue ($USD Millions)$334.999 $347.420 $365.361
Revenue YoY Growth %20% 18% 18%
Revenue QoQ Growth %2% 4% 5%
GAAP Diluted EPS ($)-$0.41 -$0.48 -$0.25
Non-GAAP Diluted EPS ($)$0.21 $0.35 $0.59
GAAP Gross Margin %73.8% 73.6% 74.5%
Non-GAAP Gross Margin %76.6% 76.3% 76.9%
GAAP Operating Margin %-13.6% -9.7% -1.2%
Non-GAAP Operating Margin %8.6% 10.7% 17.6%
Adjusted Free Cash Flow ($USD Millions)$60.103 $63.866 $37.662

Revenue Breakdown

MetricQ4 FY24Q1 FY25Q2 FY25
Elastic Cloud Revenue ($USD Millions)$147.980 $157.281 $168.835
Other Subscription Revenue ($USD Millions)$163.004 $166.493 $171.972
Services Revenue ($USD Millions)$24.015 $23.646 $24.554
Total Revenue ($USD Millions)$334.999 $347.420 $365.361
Elastic Cloud % of Total44% 45% 46%

KPIs and Balance of Growth

KPIQ4 FY24Q1 FY25Q2 FY25
Customers with ACV > $100k>1,330 >1,370 >1,420
Total Subscription Customers~21,000 ~21,200 ~21,300
Net Expansion Rate (%)~110% ~112% ~112%
Deferred Revenue ($USD Thousands)$694,139 $626,975 $645,705
Remaining Performance Obligations ($USD Thousands)$1,351,109 $1,258,813 $1,266,069

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Billions)FY 2025$1.436–$1.444 $1.451–$1.457 Raised
Non-GAAP Operating Margin %FY 2025~12.5% ~13.5% Raised
Non-GAAP Diluted EPS ($)FY 2025$1.52–$1.56 $1.68–$1.72 Raised
Total Revenue ($USD Millions)Q3 FY25N/A$367–$369 New
Non-GAAP Operating Margin %Q3 FY25N/A~15% New
Non-GAAP Diluted EPS ($)Q3 FY25N/A$0.46–$0.48 New

Notes:

  • Guidance incorporates FX rates (EUR/USD 1.060; GBP/USD 1.267) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY24, Q1 FY25)Current Period (Q2 FY25)Trend
GenAI initiatives (vector DB, RAG)Search AI Lake; Serverless TP; expanded LLM/model support BBQ quantization (32x memory reduction tech preview), AutoOps GA, Elastic AI Ecosystem; GenAI commitments doubled QoQ; 1,550 cloud GenAI customers, 240 >$100k cohort Accelerating GenAI adoption and product differentiation
Sales execution & pipelineQ1 slower start due to segmentation, impacting commitments Pipeline creation/progression normalizing; improved win rates; exceeded guidance Improving execution trajectory
Consumption patterns & mix—Healthy aggregate consumption; variability expected; month-to-month cloud ~13% of revenue and flattish; prudence in H2 assumptions Volatile but stable overall
Regional trends—Americas fastest, followed by EMEA and APJ Balanced growth, Americas-led
Security/SIEM consolidationAttack Discovery introduced in Q4 Multiple 7-figure SIEM displacement/consolidation wins; CDR integrated into SIEM Strengthening competitive displacement
Observability/OTelDistributions of OpenTelemetry announced Q1 100% OTel-native ingest; out-of-box Kubernetes dashboards Execution and product completeness improving
FX/macro—USD strength considered a revenue headwind in H2 Managed cautiously in guidance

Management Commentary

  • Strategic positioning: “Our clear product differentiation, and our relentless pace of innovation is helping us become a natural choice for customers building GenAI applications.”
  • GenAI traction: “New customer commitments with GenAI almost doubled in dollar volume…with 3 of the deals…greater than $1 million in annual contract value.”
  • Product innovation: “BBQ…offers a 32x lower memory footprint…delivering faster vector search at lower costs without compromising accuracy…a game changer…only available from Elastic.”
  • Execution & confidence: “We are well on our way to returning to historical levels in terms of our pace of execution…gives us great confidence…to build a multibillion-dollar business over time.”

Q&A Highlights

  • Consumption dynamics: Management emphasized healthy Q2 consumption across enterprise/commercial, but built prudent H2 assumptions given historical variability; month-to-month cloud expected to remain flat .
  • RPO scrutiny: Sequential RPO was slightly up and typically dips in Q2 historically; YoY roughly flat due to Q1 commitments shortfall, reinforcing the carryover effect into H2 .
  • Sales force normalization: Pipeline creation/progression back to normal; win rates strong; Q2 execution seen as validation of the segmentation strategy .
  • SIEM displacement & GTM: Continued consolidation wins in security; Elastic’s modern AI-driven SIEM and Express Migration program support greenfield and displacement opportunities .
  • BBQ differentiation: Better Binary Quantization materially improves efficiency with minimal accuracy trade-off, broad applicability across GenAI use cases, and strengthens Elastic’s vector DB leadership .

Estimates Context

  • S&P Global consensus estimates for Q2 FY25 (EPS and revenue) could not be retrieved at time of drafting due to access limits; therefore, formal comparison to Wall Street consensus is unavailable today [GetEstimates request failed—daily limit exceeded]. In lieu of consensus, the company reported exceeding its own guidance on revenue and profitability, and raised FY25 guidance, which generally implies upward estimate revisions risk for revenue and EPS if sustained .
  • Future monitoring: Watch for post-call Street revisions and color on consumption normalization in H2; FX headwinds and the timing of cloud ramp from Q1 commitments shortfall may temper near-term estimate momentum .

Key Takeaways for Investors

  • Execution rebound: Q2 marked a decisive improvement, with revenue/EPS outperformance and margin expansion; raised FY25 guidance signals confidence despite modeled consumption/FX headwinds .
  • GenAI monetization: Doubling of commitments QoQ and three >$1M ACV deals underscore Elastic’s vector DB/hybrid search leadership as RAG use cases move to production across industries .
  • Platform consolidation: Security (SIEM/CDR) and observability (100% OTel-native) wins demonstrate multi-product consolidation momentum and lower TCO value proposition, supporting durable growth in enterprise cohorts .
  • Mix shift: Elastic Cloud share rose to 46% of revenue in Q2 and continues to outgrow overall revenue, supportive of margin leverage as cloud scales .
  • KPIs strengthening: >1,420 customers with ACV >$100k, ~21,300 subscription customers, and NER ~112% point to healthy land-and-expand dynamics in target segments .
  • Watch risks: Consumption variability, FX headwinds, and Q1 commitments shortfall carrying into H2 may cap near-term growth prints; leadership transition should be monitored but appears orderly .
  • Trading implications: Near term, the narrative is positive (raised guide, GenAI traction); look for confirmation via Q3 prints on consumption stability and continued enterprise commitments—disappointments on these dimensions would be the primary stock overhangs .