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Elastic N.V. (ESTC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered strong top-line and profitability: revenue $382.1M (+17% YoY), Elastic Cloud $180.0M (+26% YoY), non-GAAP operating margin 16.8%, non-GAAP diluted EPS $0.63; management said it “exceeded guidance across all revenue and profitability metrics,” citing strong sales execution, GenAI demand, and platform consolidation .
  • Guidance raised for FY25: revenue to $1.474–$1.476B (from $1.451–$1.457B), non-GAAP operating margin to ~14.7% (from ~13.5%), and non-GAAP diluted EPS to $1.91–$1.96 (from $1.68–$1.72). Q4 guidance: revenue $379–$381M, non-GAAP operating margin 13.5%, EPS $0.36–$0.37; prudently framed due to three fewer days ($10M revenue headwind), FX ($1–$2M), and flattish SMB month-to-month cloud .
  • KPIs: customers >$100K ACV rose to >1,460; total subscription customers ~21,350; net expansion rate ~112%; Elastic Cloud reached 47% of revenue and surpassed 50% of subscription revenue; adjusted FCF $99.2M (26% margin) .
  • Strategic/product: Serverless GA on AWS (Azure tech preview), Logsdb index mode, and Elastic Rerank Model launched; new CFO Navam Welihinda appointed, effective Feb 28, 2025 .
  • Estimates context: S&P Global consensus data was unavailable at time of analysis due to an API limit; we cannot assess Street beat/miss. Management emphasized internal guidance outperformance .

What Went Well and What Went Wrong

What Went Well

  • Strong cloud and broad-based consumption: “healthy consumption from both enterprise and commercial accounts,” with larger-customer strength; Elastic Cloud reached 47% of revenue and surpassed 50% of subscription revenue for the first time .
  • GenAI tailwind and search acceleration: search was “the fastest growing” solution, with 5 GenAI deals >$1M ACV in Q3 and >1,750 Elastic Cloud customers using GenAI; “Consolidation and Generative AI are powerful tailwinds” .
  • Go-to-market execution rebound: segmentation changes implemented at FY start are now yielding results; “back to the levels of sales execution…we are now seeing the expected positive impact” .

What Went Wrong

  • SMB/self-service flattish: month-to-month cloud (self-service SMB) remained “flattish in dollar terms,” reducing an otherwise incremental growth lever .
  • Q4 drivers of deceleration: three fewer days (~$10M), FX headwind ($1–$2M), residual impact from Q1 shortfall in commitments, and prudence around large-customer consumption normalization .
  • GAAP earnings pressure from taxes: despite GAAP operating improvement, GAAP net loss ($17.1M; -$0.16) in Q3 driven by $21.1M tax provision; contrasts with prior-year Q3 tax benefit .

Financial Results

Consolidated P&L vs prior quarters

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue ($M)$347.4 $365.4 $382.1
GAAP Operating Margin-9.7% -1.2% -1.2%
Non-GAAP Operating Margin10.7% 17.6% 16.8%
GAAP EPS (diluted)-$0.48 -$0.25 -$0.16
Non-GAAP EPS (diluted)$0.35 $0.59 $0.63
GAAP Gross Margin73.6% 74.5% 74.6%
Non-GAAP Gross Margin76.3% 76.9% 76.7%

Growth context

Growth MetricQ1 FY25Q2 FY25Q3 FY25
Total Revenue YoY+18% +18% +17%
Total Revenue QoQ+4% +5% +5%
Elastic Cloud Revenue YoY+30% +25% +26%
Elastic Cloud Revenue QoQ+6% +7% +7%

Segment / Revenue-type breakdown

Revenue Type ($M, % of total)Q1 FY25Q2 FY25Q3 FY25
Elastic Cloud$157.3 (45%) $168.8 (46%) $180.0 (47%)
Other Subscription$166.5 (48%) $172.0 (47%) $178.2 (47%)
Services$23.6 (7%) $24.6 (7%) $23.9 (6%)
Total Revenue$347.4 (100%) $365.4 (100%) $382.1 (100%)

Cash flow and balance sheet highlights

MetricQ1 FY25Q2 FY25Q3 FY25
Adjusted Free Cash Flow ($M)$63.9 $37.7 $99.2
Adjusted FCF Margin18% 10% 26%
Cash + Marketable Securities ($B)$1.147 $1.198 $1.284

KPIs

KPIQ1 FY25Q2 FY25Q3 FY25
Customers >$100K ACV>1,370 >1,420 >1,460
Total Subscription Customers~21,200 ~21,300 ~21,350
Net Expansion Rate~112% ~112% ~112%
Deferred Revenue ($M)$627.0 $645.7 $706.9
Remaining Performance Obligations ($M)$1,258.8 $1,266.1 $1,354.3
Elastic Cloud % of Revenue45% 46% 47%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 FY25N/A$379–$381M New
Non-GAAP Op MarginQ4 FY25N/A~13.5% New
Non-GAAP Diluted EPSQ4 FY25N/A$0.36–$0.37 (107.5–108.5M diluted shares) New
RevenueFY25$1.451–$1.457B $1.474–$1.476B Raised
Non-GAAP Op MarginFY25~13.5% ~14.7% Raised
Non-GAAP Diluted EPSFY25$1.68–$1.72 $1.91–$1.96 (106.0–108.0M diluted shares) Raised
FX AssumptionsFY251 EUR = 1.060 USD; 1 GBP = 1.267 USD 1 EUR = 1.040 USD; 1 GBP = 1.260 USD Updated

Why: Q4 prudence reflects three fewer days (~$10M), FX ($1–$2M), flat SMB month-to-month cloud; FY25 raises driven by stronger execution, commitments, and GenAI/consolidation momentum .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1, Q2)Current Period (Q3)Trend
GenAI & SearchQ1/Q2: strong GenAI adoption; clear product differentiation; AI ecosystem and BBQ quantization launched Search fastest-growing; 5 GenAI deals >$1M ACV; >1,750 cloud GenAI customers; platform as runtime for RAG/agentic Improving
ServerlessQ2: Serverless GA announced Dec; momentum building (press release)Serverless GA on AWS, Azure tech preview; plan for all hyperscalers; expected gross margin uplift longer term Improving
Go-to-market executionQ1: segmentation changes caused slower start; addressing “Back to” historical execution; stronger pipeline progression; more $1M+ customers YTD than all FY24 Improving
SMB/self-serviceQ1/Q2: not emphasizedMonth-to-month cloud (SMB) flattish; consistent with prior quarters Stable/Muted
Consolidation (Obs/Sec)Q2: platform consolidation tailwind Logsdb index mode driving upgrades and consolidations; competitive wins on TCO Improving
Geography/Public sectorQ2: ICMP marketplace listing (US Fed) Americas fastest, then EMEA and APJ; US military SIEM win Stable/Positive

Management Commentary

  • “Our results reflect ongoing momentum across all aspects of our business…reinforcing Elastic as the leader in Search AI.” — CEO Ash Kulkarni .
  • “We saw healthy consumption from both enterprise and commercial accounts in Q3…strength from some larger customers.” — Interim CFO Eric Prengel .
  • “Our long-term vision is…serverless is going to be the primary way in which our customers experience Elastic Cloud…we do think there’s going to be an uplift to our gross margin as it’s a more efficient way for us to utilize cloud resources.” — CEO and Interim CFO .
  • “Search saw ongoing momentum from GenAI and continued to be the fastest growing of our three solutions.” — Interim CFO .
  • “We have already added significantly more customers spending over $1 million with us through the first three quarters of this fiscal year versus all of last year.” — CEO .

Q&A Highlights

  • Cloud strength durability: Q3 outperformance driven by enterprise/commercial consumption and select large customers; Q4 guide prudently excludes repeat of same sequential strength .
  • Serverless strategy: Targeting primary delivery model over time with migration tools; early days but expected to be growth driver and benefit gross margins as efficiency improves .
  • SMB/self-service: Month-to-month cloud remained flattish; sales-led enterprise/mid-market motion is the focus for lands/expands .
  • Mix and cross-sell: Historically ~40% observability, ~25% security, balance search; search growing fastest recently on GenAI; AI as “tip of the spear” that also pulls observability/security .
  • Q4 guardrails: Three fewer days (~$10M), FX ($1–$2M), residual Q1 commitments shortfall; prudent assumptions on cloud consumption .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) consensus for Q3, Q4, FY25, and FY26, but the data was unavailable at the time of analysis due to an API request limit. As a result, we cannot quantify beats/misses versus Street consensus for revenue or EPS. Company stated it exceeded internal guidance across revenue and profitability .

Key Takeaways for Investors

  • Elastic delivered a clean quarter with accelerating scale metrics (revenue, cloud mix, RPO, adjusted FCF) and raised FY25 guidance—setup remains constructive into year-end despite a prudently framed Q4 .
  • GenAI is now a material demand engine: search is the fastest-growing solution, with multiple $1M+ GenAI deals and >1,750 cloud GenAI customers supporting sustained consumption growth potential .
  • Serverless is a medium-term catalyst for growth and margins as it becomes the primary Elastic Cloud experience and expands across hyperscalers; expect gradual mix shift and improved resource efficiency .
  • Consolidation tailwind persists across observability and security, with Logsdb index mode and AI-driven features (e.g., attack discovery) enabling tier upgrades and vendor displacement on TCO .
  • Q4 watch items for near-term trading: fewer days (~$10M), FX ($1–$2M), and caution on sequential consumption after large-customer strength in Q3; SMB self-service remains flattish .
  • Non-GAAP profitability quality is high (16.8% op margin in Q3) versus GAAP headwinds (tax provision), highlighting the importance of non-GAAP adjustments and cash generation (26% adj. FCF margin) .
  • Leadership update (new CFO) adds experienced financial operator with open-source and consumption business expertise, aligning with Elastic’s multi-product, cloud-first trajectory .

Appendix: Source Documents

  • Q3 FY25 8‑K/Press Release: revenue/mix/margins/FCF/guidance, KPIs, reconciliations .
  • Q3 FY25 Press Release (Business Wire): same figures and details .
  • Q3 FY25 Earnings Call Transcript: strategy, execution, GTM, cloud trends, serverless, GenAI, Q&A specifics .
  • Prior quarters for trend: Q2 FY25 Press Release ; Q1 FY25 Press Release .