Elastic’s second quarter was marked by positive momentum, with revenue growth and profitability surpassing Wall Street expectations. Management cited robust demand for its search AI platform as a major driver, highlighting increased adoption from both enterprise and public sector customers. CEO Ashutosh Kulkarni pointed to successful platform consolidation and a surge in generative AI workloads as key contributors to the quarter’s strength, stating, “Our growth was supported by the ongoing demand for our highly differentiated search AI platform and our sales team's solid execution.”
Is now the time to buy ESTC? Find out in our full research report (it’s free).
Elastic (ESTC) Q2 CY2025 Highlights:
- Revenue: $415.3 million vs analyst estimates of $397.2 million (19.5% year-on-year growth, 4.5% beat)
- Adjusted EPS: $0.60 vs analyst estimates of $0.42 (43.4% beat)
- Adjusted Operating Income: $65.13 million vs analyst estimates of $45.77 million (15.7% margin, 42.3% beat)
- The company lifted its revenue guidance for the full year to $1.68 billion at the midpoint from $1.66 billion, a 1.3% increase
- Management raised its full-year Adjusted EPS guidance to $2.32 at the midpoint, a 1.8% increase
- Operating Margin: -2.3%, up from -9.7% in the same quarter last year
- Customers: 1,550 customers paying more than $100,000 annually
- Net Revenue Retention Rate: 112%, in line with the previous quarter
- Annual Recurring Revenue: $1.55 billion vs analyst estimates of $1.57 billion (13.5% year-on-year growth, 0.8% miss)
- Billings: $317.4 million at quarter end, up 14.1% year on year
- Market Capitalization: $9.17 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Elastic’s Q2 Earnings Call
- Matthew George Hedberg (RBC Capital Markets) asked about the impact of AI workloads on customer spending and usage. CEO Ashutosh Kulkarni explained that generative AI applications are more compute-intensive, increasing consumption, but emphasized that Elastic is still early in its AI journey and sees this as a long-term growth driver.
- Robbie David Owens (Piper Sandler) pressed on the security segment’s competitive displacements and durability. Kulkarni detailed that customers are seeking to consolidate on AI-powered platforms, and Elastic’s approach of treating security as a data problem is enabling multi-year migrations from legacy vendors.
- Raimo Lenschow (Barclays) questioned factors behind self-managed segment growth. CFO Navam Welihinda noted broad-based execution across geographies and solutions, reinforcing that the company’s focus on sales-led subscription revenue is working.
- Sanjit Kumar Singh (Morgan Stanley) compared the maturity and timing of growth in AI search versus SIEM security opportunities. Kulkarni described security migrations as gradual but durable, with Elastic benefiting from a wave of customers seeking next-generation platforms.
- Tyler Maverick Radke (Citi) focused on large AI customer wins and the effect of recent price increases. Kulkarni confirmed that price changes apply across offerings and are part of Elastic’s model of adding functionality and periodically adjusting pricing.
Catalysts in Upcoming Quarters
In the upcoming quarters, the StockStory team will be monitoring (1) the pace of generative AI adoption among existing and new enterprise customers, (2) continued momentum in displacing legacy security vendors and expanding within the U.S. public sector, and (3) the impact of recent price increases on consumption trends and customer retention. Additionally, progress in serverless adoption and the scaling of new product features will be important indicators of Elastic’s ability to sustain differentiated growth.
Elastic currently trades at $86.29, down from $87.77 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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