Q3 2024 Earnings Summary
Reported on Feb 18, 2025 (After Market Close)
Pre-Earnings Price$133.81Last close (Feb 29, 2024)
Post-Earnings Price$115.96Open (Mar 1, 2024)
Price Change
$-17.85(-13.34%)
- Platform consolidation is driving revenue growth: Elastic is benefiting significantly from customers consolidating onto its search analytics platform, displacing incumbent solutions in observability and security. This consolidation is a strong contributor to revenue growth.
- Strong Elastic Cloud performance with stable consumption patterns: Elastic Cloud grew 29% year-over-year in Q3, driven by a successful sales-led motion and stable customer consumption against commitments. The annual cloud selling motion is working well, leading to strong annual cloud growth.
- Competitive advantages in Generative AI and vector search leading to customer wins: Elastic is effectively displacing competitors in the vector database space, with customers choosing Elastic for its strong capabilities in vector search and building Generative AI applications. Customers appreciate features like hybrid search, enterprise capabilities, scalability, and the incumbency advantage of having data already on Elastic's platform.
- Elastic is experiencing ongoing softness in the SMB segment, which is predominantly in the self-serve motion. This weakness has persisted and is causing a decline in monthly cloud revenue as a percentage of total revenue, potentially impacting overall growth prospects.
- The company anticipates lower operating margins in Q4 due to increased seasonal expenses and fewer days in the quarter. Additionally, Elastic plans to accelerate investments in fiscal 2025, particularly in Generative AI, which will result in only modest non-GAAP operating margin expansion next year. This heightened spending may pressure near-term profitability.
- While Elastic views Generative AI as a significant long-term opportunity, its current contribution to revenue is minimal. The planned substantial investments in this area may not yield immediate returns, potentially impacting margins without a corresponding increase in near-term revenue.