ESTC - Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Elastic’s First Quarter Fiscal 2023 Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Nikolay Beliov, Vice President of Investor Relations. ahead. go Please

Nikolay Beliov

afternoon, today’s Good fiscal you joining for financial Thank call and to on conference quarter discuss us results. you. thank Elastic’s XXXX first

Janesh Kulkarni, On Officer. Operating Executive have call, Financial Ash the Officer; and we and Moorjani, Chief Chief Officer Chief

remarks, Following the will we prepared questions. take

be of and in Slides, website at press this which Elastic downloaded close after webcast, release can conjunction posted the is can the today issued and Our viewed with ir.elastic.co. accompany remarks live on also was be of on conclusion the market our the website. webcast Relations Investor

materially. Our obligation our included today, statements in uncertainties with law. the release demand discussion this forward-looking for We could are to currently these this known based may other speak our which the the and in uncertainties estimates, Please subject and actual by those risks products accompanying and results we Exchange fully and issued and risks include and more on as that of solutions factors disclaim predictions, will date and include us, of the our future call webcast to regarding forward-looking our refer only required slides are or These to to revise expectations and the that revenue in forward-looking unless Commission. any included differ to statements these described earlier update Securities statements, press information. cause filings

of link. be the and days slides. our most under discuss the release found GAAP webcast company be regarding Relations XX measures replay measures in Investor also non-GAAP including reconciliations We non-GAAP comparable next this with available the financial the certain on Disclosures will measures. press website for call The can

its you join and will Goldman host person Communacopia participating us many XX. of in on San and Sachs Conference the X, Conference Citi September will Francisco. Elastic the on will Financial September Technology XX XXXX Analyst hope September We Technology Global on Day be in in

Friday, Our XXXX. to begins that, fiscal will period I business, XX, October XXXX of over close second With quarter it quiet Ash. at the turn

Ash Kulkarni

Elastic to I'm in to was Thank welcome, comprised year-over-year Cloud to results. and across and with constant see and demand strength or board, prior we our in you, the currency the XX% Nikolay. here very our I'm compared total year. in XXXX QX, ended subscription share and contract year annual to currency, with under disciplined rate with customers, to and as in revenue excellent environment grew values today more pleased over execution Cloud. our QX X,XXX just our once revenue our $XXX,XXX, in net momentum start XX% the XX% quarter we FY the quarter. grew expansion continued constant of drove again execution XX% robust and including XXX%. saw be XX% everyone. of year-over-year In revenue year-over-year you with than QX Hello, than XX% happy more in an We XX,XXX fiscal

execution consistent QX reflect on focus Our our the our and of results in our team. strategy

our duration currency the I constant the in guidance growth we Elastic's continued customers' continues the strength also the XX% to the we with data Even revenue dollar, We throughout growth powered adjusted confidence year-over-year. that saw All will in in and geographies, currency gives throughout across with this to for data of US As success. and patterns search, our quarter. this strengthening year. this for of excess delivering order geographies with in saw platform, quarter us essential our good to to customer strong each conversations heard importance, execution play raise by grow be form continue volume believe out of demand analytics the linearity.

of goals total long-term our by achieve to in achieving revenue positioned billion fourth XX% and of fiscal cloud well of XXXX $X total the in fiscal revenue exceeding feel XXXX. quarter also We

solutions. our share me Starting believe customers progress data and continue focus resilient Driving power customer because consumption platform believe of to and durable remain stay analytics and mission-critical, the growth. data need our with protect, spend we key our solutions moat; three and the our across recognize pace continue for growth. expand profitable steady Let We across widening and areas: to search fueling to across growth. the the level durable competitive our and see growth; observe usage maintain strong, We is of our customers

Elastic company on Cloud is security for leveraging For capabilities. our and bank example, SIEM monitoring US our solution security a regional

meet they closed ensuring we This requirements critical needs, deal they new leverage Observability them, and met. quarter, their expanded all to can application Elastic bank's monitoring the compliance business a of with log are with so us,

Last Additionally, now renewed QX, Elastic functionality QX, pipeline on is QX portion increase new logos. our data our continues fastest-growing from quarter, that our details search cloud, a field shared service we SaaS creation Elastic came all enterprise drove GitLab, in tier of customers. and by Elastic and amongst their the focus are in we substantial run their significant business seeing the results. Cloud a Inc. Cloud. cloud subscription logging tier over the Cloud deals infrastructure which Of closed with is field I leveraging which to on In drive to about the of Elastic managing note,

We are AWS, market. route Cloud fastest-growing continue with driver to build Elastic our Google growth Microsoft the of Azure an Cloud. important to and marketplaces momentum The hyperscalers: and major

our the marketplaces. we Commercial Marketplace that cloud growth resulted tight across the XXX% excited the for over investments fact, Microsoft integration the XXXX and of Award. from year-over-year I'm a once finalist to Year again, as recognized revenue share And our marketplaces partners were go-to- Partner of market In with in these

data to widening Now search cloud, of to a data enhancements what Cloud seamless environments. on as the providing quarter, I self-managed Those those to the constraints; Elastic new interoperability the deployments. moat. make of who for important cloud or transition updates With our support delivered are Elastic centers privacy one from is capabilities in particularly new across time. own am two in This maintain customers: we to These easy of customers platform. cross-cluster and and launched need to way their our customers to from to to capabilities, our to approach need in our due proud their who replication it search and an categories incredibly migrating process team search and data data regulatory for may cloud over this between customers cross-cluster that anywhere private benefit public migrating for competitive hybrid from

cloud, that cross-cluster moat. the to customers of public these replication search the migration clouds. private, our addition the already capabilities Elastic This wherever customer be data widening in footprint and customer now had, these across multi-cloud grows hybrid believe we With of have search further new we accelerates and capabilities, competitive the can seamlessly migrate data to to data public and or lives,

our continues success our the on fuel Moving solutions, in market. to our strength starting security with The capabilities Security. to of Elastic

meet snapshots major any environments with This SIEM expanded In business of with to search cross-cluster store the data to data. pace can using And choosing in easily across security hybrid I we search cost effectively retention which leveraging years' are search and who enhancements the also drivers data they internal security worth to they quarter, Elastic's leading we intelligence. of mentioned environment. continued identify to enables them What goals searchable enterprise-level relevant our easily security, innovation. They're to their earlier, data look as our deeper company, new streaming ensure subscription? the platform is

announcement capabilities response. opportunities Reception This cross-sell, Just expect this our full hunting year week, SIEM Agent, SOAR, modern single-click hundreds introduced we Elastic's approach orchestration, of delivering users through to security powered by capability Agent, SOAR automation strong, offering new cloud security. calendar sources third-party to and and It remediation been products. RSA speed vendor and user endpoint for Elastic allows workloads. we includes purpose-built our modern respond. to GA and capabilities their announced approach workflows, to product streamline data to integrating secure integrations. from up has to to threat Elastic's or our to operations native SOAR reduce time expanded which mean end cloud while and environments of And is within XXXX, Kubernetes Elastic and enhanced approach data security cloud a the June, to our and by orchestration in security featured the at the experience expanded we leading remediation

moving Now Observability. on to Elastic

look Our success to their analytics log continues Observability Elastic more cases customers to as monitor to entire holistic evolving in ecosystem. implementations larger, use

consumer appliance Elastic, us a able quarter, IoT manufacturer to applications to electronics errors connected world-class customers a appliance to ensure expanded With as and experience. that offering. their power they our large This are business connected across investigate user solution their global enhance they Observability monitor with have products leverage

Observability satisfaction closed and also Elastic Cloud Telefónica to for new Elastic upcoming Observability company a to in availability increased improve Telefónica targets with using Germany. This transformation the OX all support by deal relying They the our IT OX solution we as three hyperscalers radical on quarter, is years, performance. cloud a across are service further customer

visibility AIOps Rover Elastic On the problem driven product resolving business environments. front, rely detecting, investigating Customers business to and for insights Land crucial resolution. critical that providing alert Observability incident and updates, AIOps anomalies Jaguar alert new like on actionable ING accelerate complex infrastructure. unified deliver and in proactively management are smarter management triaging, announced for we just SAP, about and

than capability Elastic APM of beta. launch, capability. We more seen have also of synthetics recently Observability monitoring, Cloud customers XXX Since tried excellent requested on launched customers. by this out often Elastic the new We've the beta adoption the a

Our model and named and and these Magic for incremental the for Elastic for customers capabilities, XXXX Gartner consumption Visionary And adopt the drives in second makes was consecutive us. to year. revenue Quadrant APM for and consumption it try Observability based a new that pricing easy

their their is Search application purpose-built more. built customer with real-time power In provide leading QX, This Elasticsearch experience of American Elastic recommendations view customers. to health support Capabilities our and gained traction a top was in further continue the six their e-commerce, And Observability In Elastic enterprise Gartner's report, for experiences system named among in companion organizations database Enterprise five Search, using and XXXX experience who overall customer and Elastic the business more near use delivers that offloading, comprehensive, Critical Enterprise to an This Observability see evolution search, lastly, to clinical tremendous with health a of better across and their to Observability, provides supporting easy-to-read, search product. expanded website addition, support, fuel accurate enables solutions solution. out on showcasing fuel we search to as a cases workplace customer vendors company, momentum we overall we've members content, look Elastic and Gartner team the staff APM three seamless experience. faster with

business institutions This quarter, our who world's been the Elastic over steadily has past years. increasing we also leading expanded of financial one with several the adoption of its

designating to analytics, regulatory of payment for excellence enterprise to Elastic wide of addition use a and Elastic including multiple account operate a supporting center standard fraud they search, centralized Enterprise In lookup. as cases, of lines that customer variety Search their provides reporting, search business,

On enhanced by are machine the which in front, natural learning and with strong we preview our we encouraged in interest X.X early February. technical capabilities, innovation release the in first processing our introduced language

out feedback e-commerce Now patent graphic across dating, cases career design. and the over from trying online customers providing and features the we have to us out capabilities, and search search XXX testing use

areas all via capabilities our our customers that I'm to in are solution consumption officially integrated together series. a our three share our To Our moat Comes You across we component community of help Elastic and on our back getting platform. ML of competitive excited ElasticON with are and significant person drive

around These greater world, drive growth. transformation will are reinforce We and Cloud events where pipeline awareness, about together. Elastic Elastic the customers to together we the how with community and can adoption fuel six come latest our bottom-up hosting and learn product-led technology our and drive events

our growth. both on focus for to our the profitability fact exceeded QX. revenue our profitable Moving we and proud of and I'm targets on that the team

where he product Chief joins relationships building launched as to decades operating cloud millions ran Exner sales cloud non-GAAP our and experience This we invest where let of to XX past a portion in Officer, with leading served We've in technical us portfolio Ken margin and same outlook close he increased outperformance in and Most tools, teams. Elastic time, company the to of Ken's way, our continue by managing business a inherent our as of a model. our line, three bottom the first key We running slightly XX the partners. business and worldwide. the drop products the disciplined roles. spent in operating Board accelerate capacity significant And quarter, our services our at revenue demonstrating customers Product to from GM business also thrilled as experience our Chair. Sohaib of is our AWS, leverage solutions over in developer the primarily and for of dozens our in Based of joining added August of to time. XXth. report in and engineering Ken effective used products. Cloud, and that building XXXX, revenue the strengthen adoption will while confident customer goal on over Elastic strategy remain In also grow veteran, of our we He am and cloud-first momentum of our announce year. VP Vice has continuing our fiscal year important years all I we continuing to operating billion other the margin developments, recently, Abbasi achieving ESG Elastic $X industry he the AWS in hyperscale of

extensive has on become supporting you our Sohaib Day looking all Analyst to XX. sharing business September to We're they experience multibillion dollar our during organizations also about with as more forward companies. upcoming grow

future. turn call over our confident Janesh, I very as to the I remain Now in

committed you, and profitable are Janesh. durable We widening moat Thank to growth. to over our And you. driving now competitive growth, fueling

Janesh Moorjani

Thanks, Ash.

The quarter constant currency was to great the currency XX% revenue year-over-year subscription revenue total growth start and We delivered first XX% growth constant year-over-year. a year.

sustained remain from which QX in XX% was Cloud, in and through total solutions and momentum this The rate. discipline high long-term the beat resilience up strength did XX% the year a demonstrating and in line quarter, And while for and guidance the the quarter. bottom revenue new our customer the rest leverage. ago. in expense goals. the top a both again evident about our line net continued of We year confident of our XX% of We expansion high-end We operating our current Elastic in environment continued represented of additions we and once

strong. by results. first XX% year-over-year the growth currency, pleased XX% revenue $XXX constant or revenue up also the with which in grew on segments revenue. more first deal into To Total did usage not revenue $XX comparison during subscriptions, or color $XXX Cloud for verticals deal in We the year-over-year up both flow, get currency. quarter services XX% million, each strength in constant quarter once in first XX% in XX% expect quarter. to year-over-year we Professional comprising and Let's totaled Subscription in geographies, year. see Adjusted quarter million, XX% and XX% a growing of year-over-year again $XX remained was increase geo not unusual growth. and again duration, total constant balance bit in the a orders currency, from XX% the across customer We and We strong give Cloud growth against excess flow Within orders of services saw Elastic do XX% in was industry point in usage. revenue performance, currency or professional the patterns was at significantly mix. million, year-over-year. strong last were driven any growing very was quarter. million, our in you

responding quarter, As linearity we breadth with business by the our resilience changing as Throughout positive on external increasingly is cases them model we've The conversations said, businesses. closely to pleased as of the that All agile that and dynamic we the the expansions. in were said aware mission-critical are and of our new work use Search customer of in logo strength is continue circumstances. customers platform. to diversification and the and environment before, solutions also as and are supported tone net wins strength the remain reflects we well their with

discuss monitor I'll touch to I on this continue closely. more We when this guidance.

Looking Elastic once customers again the first majority the total quarter metrics, of subscription over in ended at the quarter XX,XXX customer in we with with additions the Cloud. vast

acquiring than quality has higher on customers Our been rather focusing nicely. strategy solely on focusing quantity and of are that working nurturing

X,XXX We the to our success drive end had of to larger values quarter compared with the the over solutions. at first ability of reflected over $XXX,XXX strength of annual expansion of customers count reflecting the quarter, end the of over in saw also customers. product the such the at customers prior We our across the portfolio strategy the XXX contract and

Our overall Elastic Cloud. net quarter expansion XXX%, at to momentum success and reflecting just rate continued in the our in be first strong under

Gross based margin by gross timing. mainly for gross margin the I'll Now discuss prior fluctuate quarter versus which with can was with driven services prior sequential quarter margin at XX.X% delivery XX.X%, measures. turning the on which non-GAAP to professional the for change Subscription in quarter. consistent the was service profitability

our with We pleased against progress plan. are our

Looking we margin as to gross ahead, in to to we it continue remain continue Cloud to drive modest invest headwind for a the Elastic increases year, growth. expect and mix, to

Looking quarter. at in expenses first operating the

We with had to invest the the we laid continue discipline plan out. according to in business

the business first which cash adjusted XX.X operating quarter. in shares in reflects million primarily the the than first in Loss using on in This leverage was million in was Our was model. average per due basis X.X%, significantly $X.XX, to better margin operating negative share inherent our the quarter revenue was outstanding. quarter an Free $X.X flow the the quarter. weighted performance strong expected,

first We million. equivalents continue maintain full position the cash We comfortable from of perspective. quarter cash We positive cash our operating cash an to with We to sheet. year. expect balance strong the slightly $XXX approximately adjusted fiscal have a and for with free remain flow ended

overall our long-term our XXXX, Before briefly framework. quarter remainder and second outlook for the the recap discussing I'll fiscal of

achieve the our deliver objectives $X record. in remain in Cloud, our continue to durable given customer growth XXXX. net billion growth, and strength of our confident in products, revenue Elastic healthy fiscal positioned We achieving We track significant to in momentum to our long-term ability trends our expansion new well be

environment executed and this well so have far monitor We closely continue to the year.

We continue by of XX% of exceed XXXX fiscal XXXX and continue XXXX. revenue each expand to fiscal Cloud in Elastic to points operating to margin and we fourth in several quarter fiscal expect to total the percentage expect year

to Turning guidance.

remainder the year. us quarter sets in of the nicely up performance for Our first the

customer said both are a us to believe build performs our we've consistently that and healthy helps which core through products before, As we downturns. our success, business upswings

delivered said we we as out well our played quarter first goals. it would, and The against

We broader customers and continue to environment. our to monitor close the stay

discretely guidance for slowdown that we've macroeconomic because not the are the a down we currency business. What adjusting in far seen of We simply is seen impact movements. yet not so have

With full the X% continued of our compared incremental we of year-over-year X% headwind year margin, approximately to headwind for for of US also other prior XXXX expenses fiscal guidance. portion a or movements the dollar, for present dollar, currency we total effectively growth hedge. million $XX our we in second a strengthening expect quarter revenue incurred full to respect the to US since significant a have and than the to approximately currencies With operating the natural

from the margin strengthening operating is less significant. the to dollar So impact

often and that me that strength. say our of heard model, You've strength another diversification business example is the is this of

at the Given our we plan to according so in year. to the of business laid invest out far, continue the strong execution the start we

continue to in growth, investing expect to to all while We improve profitability. fiscal continuing XXXX in targeted functions drive

unchanged. stays philosophy guidance overall our Finally,

revenue total the we the a year-over-year in that of to conservatism. of the at midpoint. We With representing quarter we the expect without basis, range at currency XX% total revenue XX% and million second background, year-over-year growth to On expect $XXX growth $XXX excessive constant continue fiscal of midpoint. thoughtfully for XXXX, million, guide

of XX XX non-GAAP in the of net $X.XX between to X.X%, range We using expect per to in range and negative negative $X.XX ordinary outstanding. non-GAAP million million X.X% the operating shares loss share and margin

XXXX, the fiscal $X,XXX neutral is in to is year expect the On constant guidance. million of XX%, earlier, currency full growth a expect the which we range headwind referenced compared and For representing the guidance, Compared guidance in of to versus resulting offset change prior for our prior year-over-year total our the year year-over-year for million, currency we in of to the the currency XX% midpoint the outlook I the the by total outlook reflecting neutral higher by incremental $XX net no growth $XX the at midpoint. million year. basis, of $X,XXX continue for total higher revenue of prior million, currency movements revenue revenue XX% at

loss believe $X.XX summary, operating cloud X.X% start In the of the long-term quarter momentum. seeing durable we to margin execute continuing And and Operator? go about per with for expect the $X.XX, range Day ahead had ordinary X.X% and that to well our XX We growth that, and to to of positioned using beyond. XXXX sharing September strong at and and full non-GAAP in our net looking we Analyst forward are more shares We We're million trajectory take a look for between fiscal and growth in we million outstanding. let's you XX second continued to then. profitability, year also share questions. non-GAAP the upcoming with and on and forward in to XX strategy range

Operator

Thank you.

begin Raimo now the And session. question Lenschow ahead. will [Operator Instructions] from Please our first go Barclays. will question-and-answer with come We

Raimo Lenschow

are behavior about moving That cloud in also customer in congratulations. business? to you Like my from, speak a cloud? customers? of seeing like and terms of you follow-on. towards of mostly the like then I the first terms customer what where in customers question terms -- just Thank are was faster new uncertain migrations coming times in on the story it's and Could the ask cloud, like the quick these What's

Ash Kulkarni

for the thank The unchanged. Raimo, Yes, remains pattern, quarter, last question. compared to as you the

also on new across much And the all geographies cloud. that's to pretty and to segments. and customers both We customers to are seeing continue expand come

that past us talking to about product, kind that any see kinds Enterprise use don't for. haven't expect When Observability the So or you're it, that. we of Security variability. as or of change seen seeing, Part we tend really we in of just usage Search, the the is about in solutions demand that and of we've customers we the the are talked

So Cloud. consumption in we've seen consistent Elastic patterns

Raimo Lenschow

like all like and in the there's the was Okay. followed a on-cycle Perfect. like from Then guys you quarter. what bit funny. you the debate of to said And like like were saw Salesforce you, the little about linearity I'm Janesh, is Like a June like some speak June? Can big kind of so of certain other far sure guys that kind yesterday, July probably you different.

sound little Thank in Can you a what bit and saw of little you of terms a talk you You bit well different. linearity quarter? in the again. done

Janesh Moorjani

we met this Raimo. And Yeah. July well saw nicely the was quotas was team actually velocity. and that for June it's quite us linearity is QX of took always like in the affected good of can delivered a good because expectations We the the quarter. know. specific a and And quarter across things you be as timing by But Happy to, month, Look, had. that. unique pretty July. also the actually as burden strong time, territories linearity of we and bit year. first a the and of deals, deal little that the assign

finish the quite so actually how quarter we're proud So strong. executed of team to the

Raimo Lenschow

Perfect. you. Okay. Thank

Operator

Radke question Please next will go Tyler with Citi. come ahead. Our from

Tyler Radke

of better Could taking of about with for you to order Thanks is north XX%. that how understand synonymous the RPO Thank recent contextualize, kind afternoon. the Just of is think the you. or into revenue? to that that, bookings, way then current And the to flows it kind question. ask of kind growth the trying wanted do you just how I Good is trajectory about that measure of you referenced exactly accelerating? that? that XX% and you

Janesh Moorjani

take I'll Tyler. that. Yeah,

each an driving really they're And And field field way right? it's subscriptions, focused about course, plus, that's based services. them the self-managed orders that and is that's of give what driving performance, think that. of pay and on as ACV that our look, of the services cloud So what quotas well. attached essentially to We did metric to on across geos essentially And and and represented.

of in ahead, the course, execution in chunk than growth for And cloud more cloud, the continue front. year. duration we to consumed sets the nicely momentum said, does As or that when which for now But Eventually, across means are those in great A XX% you that the and of all case to on to of it's up a big orders and us the are eventually adjust XX% as And translate greater services services. in from quite currency year of ratable. start self-managed through obviously quite looking what delivered get the terms geos. on revenue as even progress we those the of us that we pleased with actually of business, came it's represents case for it side, the that.

quite a the think good are the I job, with overall, So we and really team happy did outcome.

Tyler Radke

around use cloud? team one into respond the incentive the given talk incentives they're there particular second cases And more structure? And Great. field to the just are some of for Ash. Maybe new just about Thanks. how leaning seeing that you're

Ash Kulkarni

Tyler. Thanks,

provides, of talked my all towards that, cloud actually we've customers is are that been cloud remarks the across it's I that really is talked And just fact naturally the -- little by driven it. are not biasing it's and And bit that responded way all the pleased the to field a talked prepared the in We strong into about excellent. lean functions, I'm the but in seen So has our has pipeline choosing field, growth. we're being they that about it. field, the all seeing fundamentally, what advantages, Janesh as the growth advantages very can becoming about, that inherent imagine, order given clear by just you the

that all of cloud. wonderful across in that start with. a job we is three kind of terms uptake are positioning And tend field Our we doing to use seeing cases

Enterprise it's Observability all of board the we whether traction So Security, in or seeing them. are across Search or

So, no patterns change the there. in

Tyler Radke

color. the Thanks for

Operator

will Pinjalim ahead. JPMorgan. question Bora come go from Please next Our with

Pinjalim Bora

guess, taking on a the and for there gets it congrats quarter. the it why decelerating. that the I Janesh, pretty is the questions question, tough you we on point understand comp the point, Thank year. and contract, through the I cloud getting is easier some are

year, macro in of kind edge should the any expect see higher the patterns cloud investors evolving through as the expect So Cloud to consumption the you deteriorates? – rate to growth or do given Elastic of of kind landscape, environment the change if

Janesh Moorjani

Pinjalim. Yeah,

So currency nicely really last in of year-over-year against growth XX% actually. out With year-over-year us, point QX constant played the year. tough comparison for that of

where The about that to the other look at that's seen currency, over constant prior few and sequentially, average is way quarters. we've XX% in the grew it rate we

healthy really dollars new business. So added what's on adding. what consistent with is incremental in driving the that expansion we're we've Elastic and We've seeing been Cloud trends that

see We change of patterns haven't and recall, mission-critical use fundamentally observed help said that address a in like of lot snapshots as our cross-cluster mentioned and in searchable any And terms Cloud, customers just as Ash earlier, time features cross-cluster really in increase consumption operational and well generally. search we replication, efficiencies. Elastic down last drive which value the more and cases, solutions the cost adverse as

in the XX%. we're excited core reasons and cloud you've customer outlook use the we strong seen expansion. for I'd the the say by from QX they provide to So is out And the the might we Overall, as well in drivers that, and cloud. are QX, see of particular the happy those. in mix of general, really of on how quite criticality we've momentum on that XX% view seen actually a But that play increase adds all the terms going mission new not of I'm And cases terms momentum. numbers, specifically in as us what to to mentioned.

Pinjalim Bora

enterprise Ash, tier Thank well. for one Understood. it seems you, really the thoughts. doing you for like And is

we tiers? the adding opportunity you are upsell kind higher should added think about client base those and enabling search the replication. obviously You that? the And you're snapshot, How sales searchable how of help to them cross-cluster to achieve within now to

Ash Kulkarni

Yeah. Thanks for the question.

So have, with do they have pane hybrid single data over that across situations, of search move a to although a to can't data. And some to cross-cluster customers see instances be we mentioned, it's things that the that like is typically as can't delivered, stakeholders their seeing customers by to certain they leave that's that those and workloads own that the about design. And they turn do often And they of once. fastest-growing the workloads cloud, migrating are think if centers. rest And need the their whether in to never have Elastic they regulatory to want cloud, view plus they access wonderful the hybrid that that of of enterprise and just maybe Also, single off the replication. And our of want that's Janesh public uptake cloud, want the see capability, leave, all as enable of we to customers snapshots, now data the tier. search migrating them. for all are all kinds cutover just for the we might so we in data cluster the can they're capabilities upon touch And The important. me that able glass, searchable as to that you tier for you to have. reasons, we've their across let the tiers a have. ability kinds to now don't That that at why mentioned,

that So see search that them this migrating customers we of pattern hybrid a kind becomes cross-cluster And important. accelerate and typically where time. process, through help this workloads instances functionality a to incredibly at are little

benefits to of continues plays the we driving sales they're more these our seen be something is this drive to with going we you And from need any are moving are And this lot to as expect customers, be field are a lose that specific is workloads don't in going they all one something even reasons Now these to interest why that -- over. basically of within of we've the is our as nicely be field customer base. team. can imagine, tier enterprise our to very our that and able

I'm excited with it. the So prospects very about

Pinjalim Bora

you Thank color. Understood. the for

Operator

question Our Kidron come Please from with ahead. next Oppenheimer. will Ittai go

Ittai Kidron

relative if the like quarter to of declining XXXX, of Thanks. my I right. is, is on and FX. quarters FX, for seems the guess is the comments to this guide next dig upside it guidance it of Hey, versus fiscal kind quarter. to million about and you guiding four -- want And look account guys. $X basically I you're to quarter Janesh, sounds the consensus into guess you're again. even the and I the fiscal All declining at But magnitude like understand where in I I question your about your guiding when declining.

it hands of of just kind be if I'm even ago. So upside your get just a the for this. wondering my FX, it Again, me -- lower is to implied around help quarters I guide couple used the than account seems like what upside in

we're is has So it what changed? What that missing?

Janesh Moorjani

quarters the previous of guide a start that has are we set Ittai, Look, in told fundamentally should delivered level not numbers so the to changed. And philosophy. you we've to like outperformance staying true conservatism of overall nothing fundamentally, years. and we ago, would less we that with in a folks expect that couple expectation

changed what nothing We then to approach in has taken. terms quite here based know, really we on in And saw and work we've So fundamentally played quarter hard nicely. we that of The the that's what we guide QX. out outperform.

in the pleased We tough do did revenue what said We here on we strong execute just QX. particularly do, despite will that's really numbers and are with well. the to metrics, continue we we what customer quite comp. and we We cloud. And would delivered

are the for And the rest that You'll work if QX good year the outperformance of really for longer-term. see deliver we a obviously, year. for the revisit feel how for the year hard we see then we operationally, currency. we here positioned about It's But in can adjusting we will go. again in effectively raise and as and to

Ittai Kidron

business. a activity who's that a the How deployment to completely as a Very SaaS? of versus on-premise is incremental cloud on switchover cloud follow-up going from much someone good. from Maybe

Janesh Moorjani

Yeah.

doesn't overall the Customers the from we the for cloud. solely new about just from opportunity drive nature when in to strength fundamentally, Cloud are So -- cloud growth significant right? the us and think more customer the come business, a expansion. is spending base, of transitions customer in

see And well. reflected as our we business in what so that's

customer more of compared spend additions, strong the to it's reflected model business new And to because was, in of So a trying prior quarter. see drive customer and sort the again, consistently transition. that which opportunity the some than you net rather

are so activities those go-to-market. in in many product many cloud orienting and ways We towards of We talked more the earlier. about

some naturally even ready. be So to customer search will drive we as they to until march them cloud the features of in just with and replication, opposed see base. quite we sort allow us successful that hybrid cloud shift Customers And for happening are are happen, like trying to ready in to forced that will a they cross-cluster move world. to when

there So are. we'll wherever be they for them

Ittai Kidron

Interpret bulk and the versus comments who someone new was cloud? the of move your to me right on-premise to the activity incremental cloud business that now is

Janesh Moorjani

Yeah, that's right.

Ittai Kidron

Okay. so Thank much. you

Operator

will come of ahead. from with Koji Bank go Our Please next America. question Ikeda

Koji Ikeda

Hey, guys. quarter. questions. the Thanks taking on the Congratulations for

off. housekeeping couple me. for a Just One just question, to start

Did You revenue cloud miss monthly total could guys that can? percentage that, just give to provide a or as you please you used a of revenue. if I

Janesh Moorjani

Koji, revenue. again Yeah, happy XX% was to. It of total

Koji Ikeda

it. Got Ash. question, picture -- so Janesh big a for then And okay, Thanks, or Janesh. either for

Product brought on awesome of Ken it's a I kind a the pretty the to hire, way. Chief ask bringing Officer, With announcement of I this the question wanted but thought

guy, prior CEO. product He's a too a named as brought there. company technologist I being CTO, and a Shay Product into guy CPO you're a Officer. to as Ken the Ash, bringing mean, now Chief as on and still the a is product you're the

on is now? the now, bring why picture Chief guess big a Product I Officer question So why

Ash Kulkarni

the individual the Fundamentally, it for an as a And cloud, building was that continue of CTO play our to continue momentum spending we've that somebody stateless future be we are evolving of is is as talent who double cetera, he's platform, was capability the to we forward-looking like but cloud as the revenue well. towards the on in as we hyperscale the we've that about grow, said, really could imagine world his the really in is and our as Shay been are kind help et to we CPO contributor Yeah. talked can architecture effectively and as taken on all question, kinds used I our of of -- us CEO, as Thanks the -- has of make want future. the to when role, engineering, Ken. time vast really cloud. building core Elastic the on that Cloud, fact that I've on a some sure interim imagine, And going you of the kind We for searching we just majority on around to that that areas products, job, driving I not towards. doing design, the responsibility role the the for CPO, future,

table. continue for the built all our of us to to in excited And with of momentum So given skill brings what we excited Ken, that set technologies driving have are that very makes very he's the takes that the somebody when bring time somebody of that AWS, he about. the to availability, need just we you clear everything ease just to hyperscale he's use that about all very built going when given he's table, the to his is that skill background, developer out what services, this that The it of knowledge tools done, the the exactly kind is building constant is that forward.

him. what about So he's with knows having also, fact just work means – that to it And very hyperscalers. we are the he excited the

fact with. so So that that, continue strengthen hyperscalers I'm the our to also we very going he's with us to work all help excited the about relationship three closely

Koji Ikeda

Excellent. on hire. you. Thanks, Thank much. Ash. Congrats the Thanks so great

Operator

Our Hedberg Markets. will come next question go with Matt Please from Capital RBC ahead.

Matt Hedberg

or quarter But more. we're wanted to you, than at my is here. for bit Thanks history you drill in here this I you're have more for Obviously, two there? and with of just either came uptake AWS curious Azure question. different Janesh, the much I a you of some – is initial can point. but AWS the sort maybe smaller GCP one there anything and sort base into Great. board, taking bigger AWS, seeing lot of on that on But contrast level a of guess other maybe a when observations versus of compare obviously

Ash Kulkarni

right, that, in So that been a direction AWS on way integrations time. when is very with them, able you Elastic, now, to about that brings partnering think resolve clarity the many fact now evolving that about of that last to our only market, AWS years together from the work the of to a that where talked in lot the Elastic, all is really that and because working sellers friction, of positive the the infrastructure to base the their runs sellers customers talked significant the What's trademark make in we've sense ability for you that right? marketplace with some the with share that, for brought sort the had overall with AWS marketplace market a Elasticsearch see matter been the of A Elastic at that has AWS allow AWS and of we've cloud the the long been fact, that the Matt, Yeah. in level, And discussions their day-to-day lot to want moving less we've of ways, we've overall which availability it the deploy that relationship has they market. tend with every we on just customer cloud is a and in mirrors on has market, about to sure clarify I've Elastic I better. quarter. made

movement. that's and not we on the an in to we've AWS We flipped marketplace, their a a thing, more relationship that's as But be are while. our see just been sentiment to of overnight. something continuing to clear new for kind sense with And opposed just this been as that that see that that I want there evolution

Matt Hedberg

– guess of I I – was my But get answered was I relationship trying trying to guess, it you was changed more helpful. super great. I That's the recently question. to, yeah,

a Thanks guys. lot, So, yeah.

Ash Kulkarni

Thanks, Matt.

Operator

Please with question next Jefferies. go ahead. Brent Our come Thill will from

Brent Thill

you're at – in your seeing this slip that. you like where things your conservative resiliency the versus others. are and know, not a in expecting of very year take seeing? of others guidance. account of what think been as on level things the that align being I'm more you rates other you to what about not you you're you it thoughts and And follow-up going kind now, is slightly curious seeing you're Ash, just close you just and are the results giving think is are on seeing different, And I'm as you same that Janesh, maybe are that for ball your just when think playing guide, could you've you get to that for are right maybe the what given or playing curious kind where you're just one

Ash Kulkarni

and off sort use is Maybe to I'd What our back of the question. for just you the have -- and it say the question cases then let thanks him. what that asked for. Yes, to core we kick Janesh of me and that sort again, speak platform is this comes target optimized

So with there then with end Observability, whether or if these we really analytics cases to or data use that's or off And it's for a security comprehensive you across where of from expand about, off think the SIEM, around like talked where being then the X up lot Enterprise to business, you Observability searching about to think And aspects the somebody be about of lead we've security, the always when and it's commerce for sort relevant Tier mission-critical. tend core pretty very hard turn in we the in use Security of applications. turn just Observability to Search, log lead around and security, absorbability. cases

seeing platform, that that to -- make even our that in like have the and means we that when different them that continuing which the tremendous I seems our continued we that you're customer spending to I so we of one of I've from to Telefónica OX about the about resilience And others, choose the is kinds are lot vice logs. And cases, be in examples or Observability customers gave versa. Elastic to Elastic. our have talked leveraging from decisions fact where around want differentiation more increasing, to and even is going seeing as a stress of and to be demand that effectively analytics are enough log thing crossing the the more are technology, to And of we continuing and for or strength what customers can't data security choosing starting it where from situations grow whether in have Observability they think to use environments, all the in base. aspects see customers

don't natural from to mission-critical part you you. who we heard a some from a these use us might you that core that's of kinds are cases, why from So believe have Janesh, of to others on and what have affinity there's that advantage. see the results different

Janesh Moorjani

the in guidance any of the changed our again changing terms not Brent, approach. fundamentally philosophy in We're Yes, on question, nothing way.

in anything macroeconomic the because any prepared have earlier that just business slowdown in like simply not mentioned the remarks, in I not we we've the As business particular seen factored yet. into the in guidance

we fundamentally, had was. guidance the there's no I environment monitor was sure the in like a But it a did business $X the of way million But we which the we $XX always which to terms offset essentially million other brought So beat. FX, way we'll to change of it We obviously think a approach. to make disciplined back by continue in raise, where have. terms operate in about simple our guidance, that the is

Brent Thill

You guys you. a crew tonight. built have Thank

Operator

Please with ahead. Our Kash go Sachs. next Rangan come will Goldman question from

Kash Rangan

consumption business quarters cloud Thank trends Hello. talked you few results, a on very Janesh. and you Janesh, Congrats much. about in the Ash I know the ago.

to consumption implied as to the also could business. recognized the workloads to subscription expressed be shift a about could that sort you see from the end, confidence of non-linear customers be started ramp cloud how business at up talked growth the SaaS non-linear, the but front You revenue you their in within minimizing

progress now, maybe even the that first so if see much. when should it to are to we're we that have contracts cloud where post follow-up begin nearing the or as respect accelerate. trends motion, you through anniversary how customers of that? question. Thank when a likely not to these the anniversary we So I we first selling consumption with are are And seeing And

Janesh Moorjani

which sign the of they it's then that will consumption -- that time. consuming over they customers very for the gradually customers There customers, increase customers that of we are range are customers, what mix are earlier when that day, their Kash, at are rate to in And kind large to I start and going great adding we've the first up given some seen us, of again. high a be the some net of up journey, kinds new in portfolio. catch in Hey, north Yeah. always as customers with that the there's us, Look, is -- at well mean, well. on business X-digit the end

So of rate It We mentioned mix expansion been continuing on actually and journey excess quarter we've got that on in the in customers XXX% to to was cloud. XXX% But a And be case. rate be last of our expanding. continues had wide net what on say net general, there. cloud I'd that above are the the increasing. continues in that expansion is

them we and to And see another. as definitely additional that them in been volumes solutions the data. about, stored and into to architecturally, with across in see greater I the extend that, continued for makes from easier we as Elastic features the to of it solution it drive a So more the we're think easier increases one of starting adoption for in effects that ingest make being particularly lot brought we've Search. talking We've data significant people

are those us all consumption indicators and future great for growth. So on future

good So about really that. we feel

Kash Rangan

you, for one Great. Ash. And

the than in larger are business? versus maybe becomes the managing the of had you inflection part business worse through XXXX, equally you $X Thank At point, towards in an other, or your as better do how subscription much. balance point, some inflection the end cloud navigate revenue cloud of that you by I a would both? and fiscal in on-prem business? the one cloud billion As so you How do you that suppose and you and the larger good point

Ash Kulkarni

is to a is completely effectively code where together base. a this Kash, ours it's some from is self-managed of of cloud understand Yeah, trying different sort offering, you vendors things are like one strength that their other the the that's offering to one of important of that hear really bring unlike

that is, into sort product, so those the choices. that this, things will It's from in from see They And not of data means move I'll that are anything operational or aren't touched that environment, -- We're we've the doing are certain be might of not instances even aren't self-managed it. just everything are an about, kind continue reiterate very, we even resource that's those are to cloud utilization, innovation making of but as pretty standpoint, that stuff, terms customers we of building, we their just grow. margin, get that that the driving customers very that customers away already self-managed And customers of what except -- consumption self-managed, kind talked grows, it, forcing as benefit the on forced to for environment. in benefits the upon any we keep mind grows, that means the specific the from and Janesh natural. and to and And in right? we

what I the make sure clarify said guidance. have we we thing -- multiyear other said the that, you about The want to guidance, just

XXXX, and is billion expectation account to is to cross by the revenue the about XX% Our of guidance our of that QX cloud going XXXX. in going FY we're for $X mark we've that talked and FY overall that,

just expect is going our they that, want to But that expect it, deployments. we're newer apply self-managed that are is that's great those also I important. areas. it where just nice focus moving the I And clear. deployments, are in those cloud. both described with would because make And to that's other between will well strike able do a the behind continuing than continue as So of is innovation And that, and really that, to workloads sure balance as I I But newer to background be thing the to naturally, customers to the well, mode. to that's

Kash Rangan

I $X Thank billion. love the you. of you, Thank Ash. sound

Operator

Stifel. go Our ahead. Please Reback will from Brad question next come with

Brad Reback

can very cloud year Real the strength the a what quick, caused ago? Thanks us Great. remind in much. you business

Janesh Moorjani

Yeah.

expected. we consuming deals. It I fact any for there it those wasn't think, planned increases wasn't large a to related year had happen were we to what think had than customers I just that, already the and we quite increases started heavily, – lot that sooner and was, some specific had just that

it So lot portfolio that but that wasn't there that, a smaller. our had single was part a caused factor was of just

have And in customers the portfolio rate, consume so a that that individual you time. a higher would at more when show at it bit little easily up

Brad Reback

in that by up consumption following did the outsized this handful And see on of any quarter for customers just July, Okay. then that a drive you helped quarter?

Janesh Moorjani

not. the did consumption that rates we No, saw were across general balanced board. The we quite in

Brad Reback

Great. very much. Thanks

Operator

will Sandler. from Rob Our next go come question Please with Piper ahead. Owens

Rob Owens

Thanks my Great. question. taking for

in a the to cloud, I of job hybrid good leading with biggest differentiators think logo why talked is. what host versus what of there you lending acquisition whole did the highlighting competitors you when fashion, the are win a for value But you're out your you proposition you about, a opinion? in

Ash Kulkarni

Yeah.

and at very, has with to of of is that has type data which very The this it biggest of And strength amounts on is of been core very deal everything any scale top do that the that. built Elasticsearch, Elastic we massive large to take differentiation of. ability the me our fast. foundation have Let

in is to then the designed so not done And value onboard data. product to the data, everything make cloud easier that start getting only we've in that to you but it for your immediate from

and in the of in of with and Security, terms have at And around seeing productive And So that you available need outcomes solutions everything. you you and the prepackaged we built need. Elastic and market, that the anybody to we around we of than start to do in in get getting the over we're indexed, Observability or for they kinds Observability, environments. competitive Elastic stream alerts and over this as Security are all automatically that that better success you – that's having data cloud the again its want to made that it's and starts scale, rules come in that dashboards

tend have and and a either we that's Security, which type proving tend significant logs, it data be advantage that exist of over when out to over just or to to the beefiest for Observability comes So again.

Rob Owens

you. Thank Great.

Operator

Our Blair. next Mielczarek question William will with go come from Kamil Please ahead.

Kamil Mielczarek

What to in. investments the be or will catalyst for to guidance. on question me squeezing primary Thanks to follow-up around the Is long-term get just primarily growth get Kash's in I just revenue? inflection to scaling they make want cloud? it catalysts needed to the for are when that need $X What uptick growth? billion in And other to there? that you expecting

Janesh Moorjani

this Janesh. Kamil, Hey, is

that just business excess is the of our has in number additions, a out said is that resilience be of that we high continuing got for quite and Security expansion where growing you what we second of and lots side, new And and which its is, continues the customer billion when growing the with net got seen we've customer with been hit the cases, particularly that velocity. seeing $X course, momentum behind that you mission-critical It's core, to true on strong business today, even piece a And is as at Observability what's just seeing So we remarkably in used XXX%. solutions, rate the which, of XX% the our now right, and is quarters. are great portion get cloud, laid of strength of when penetration. you've over we to are last that strength use escape really fast, expansion several

we that those to in core the really had out. billion that we've $X laid so that And of got were both things factor number

Kamil Mielczarek

few helpful. That's several your just competitors a over have And as follow-up, the past models of years. changed pricing

As can they've update more as recent competitive months? been you've in you focus more seen rolled given us a concerns deals in the on of become what out macro especially broadly, pricing,

Ash Kulkarni

of if resource-based that around we pricing, continued it our up, never pricing, But the know it is way any it. comes to in model. does shelf seen terms fair this sort have is, others fact there's The emulate works come the like important up, which what's when to our started advantage, advantage understand that we've that that have of to always me, operated. I to that have discussion We've pricing means we

to what know from us. Our customers expect

we to trying is that that conversation. consistency us of now are no this system. understand it we with advantage. in a continue history give we've lead others Our so many fact tends the this, model. That's when and work licensing years. -- shift to is a they and successful to anything, that pretty model. And right it's clunky the as what with with. it, It's got after They validation us very the we've becomes they what the they're it, And that we a models, it. to And to been friction get see are fact sales if And are validation there's doing trying that teams others emulate and tend their believe

Janesh Moorjani

And out and we of ASPs executed and full how shout remarkable organization, will did in of give They discounting right? well and field in I sales did a terms holding really Michael the driving QX. just a quick to job

Kamil Mielczarek

That's very helpful color. Thanks again.

Operator

Our Please Koenig ahead. question next will with from come SMBC Nikko. go Steve

Steve Koenig

there two, question. and Hey, both just just at thanks mind. throw gentlemen I've them out got once, my don't I'll taking for you of if

they bit did and release back but earlier to little relationship with in put -- lot and a is more development search. fact and a trying May, cetera, et the resources on the they now, brought I'm well. big that square AWS how with data you're it's open one to want that our weeds, a First just And the in that up you partnering settled open shows search I more

going saying not So things? to are market really that they're the so square aggressively end those in product, you don't we do not kind two And that how with then weeds. or just of we

that picture use how your very any my complexion So color cases? us Thanks more you're the on to question much. give your use customers on-prem -- of new cases versus selling -- your of bigger cloud your you can is,

Ash Kulkarni

Yeah.

to tend pull between to Let material comes very there cases. made, it factors, that thing in the open or is we of there. in source the that's are second one see cloud into understand you significant the me significantly, the being We number see maybe all features delivered of of done that irrespective that the are being use cases one. no that It's touch metrics patterns the ahead contributors, search. anything code, to at, self-managed. of kinds we When upon by is are difference the new look use -- of There's Search, that Open three no requests on important are the being number

the is other of the at all went code There's Elastic the clients. sort the would the AWS us. bills involved Open that's of created directly And to bills, that's effectively, with doing would and work all right? important that, the thing pick and before directly Search, much with do work from They fork us. the maintaining pick in from building compatibility core the so They from code looking understand AWS is past, all used just in to to The base. benefit the

the capacity, huge work that applied a and was didn't work, all have work fully more of imagine, being very Open keeping I'm the developers, were even active they amount might bare that most we Now of behind that people lot And having is non-trivial they and to maintaining do to themselves. is appreciate what it. you of of sort bones of a scenes. Fork which have amount amount as source doing of that's effort they confident, just of code they have are massive a maintenance Search, that a added can though now And

Search So that we are long-term, very have Open in we the are innovation the confident is that market of that confident in about driving. this and the speak to continued going all we the increase moat very for with

Steve Koenig

it. thank congratulations and very on results. consistent the Got you Well,

Operator

question-and-answer This concludes our session.

Ash Kulkarni

on Have our to Day September great you. Well, I thank joining our of you, during XX. today. evening. speaking call the you everybody, with Thank for And all a Analyst look rest forward of

Operator

The today's for conference you has attending now Thank concluded. presentation.

You disconnect. may now

Elastic (ESTC) 25 Aug 222023 Q1 Earnings call transcript