ESTC - Earnings call 3 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, and welcome to the Elastic Third Quarter Fiscal 2024 Earnings Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Anthony Luscri, Vice President of Investor Relations. Please go ahead.

Anthony Luscri

Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic's Third Quarter Fiscal 2024 financial results.

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

their will we prepared Following take questions. remarks,

and after press are which ir.elastic.co. Elastic the be close Our Investor issued also to on today can on was of website. release supplemental market found is call Slides, Relations posted our at the the website

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

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

business XX, on quiet XXXX period April fiscal at XXXX. begins close quarter fourth of the Our Tuesday,

March and over XX. With I'll Media Software Wells participating and the be in it Stanley Symposium will the on Telecom Conference Ash. turn Technology, on X We April to that, Fargo Morgan

Ashutosh Kulkarni

joining you, Good thank quarter. another delivered everyone, strong Anthony. for on you day, call. us today's Elastic and Thank

year business execution, and to with in product attention to our reflect deliver our the customers in innovations, managing first Our momentum trends our over half to we our focus saw maniacal ability the on drive continued the business differentiated continued discipline. fiscal results The our our QX. of

as applications, appreciate First, AI what AI relative increasingly customer interest become they able strong. Generative it Generative database more advantages about are to to takes of build our vendors. to customers remains educated vector the pure-play platform in And

platform to Second, for platform displace we momentum multiple log customers saw cases, in search continued particularly as the in incumbent chose solutions Elastic and use SIEM. analytics consolidation

and core consumption more and continued in as trends our analytics and driving infrastructure their saw growth their stack platform confidence Lastly, share stability increase talk their SIEM reinforce previous GenAI as our patterns the analytics, customers in we I'll business minutes. consumption in future against search our growth These trends few a cloud as in for choose success more commitments. a applications. our some log IT about customer part of examples these companies

by under me a XX% review Cloud driven continued financial let in platform. results. and revenue quarter customer execution with that and our pleased QX, the year-over-year, In third start with performance. XX% growing our cloud First, momentum I'm grew the Elasticsearch Elastic strong with drove traction of consolidation year-over-year our

also XX%. with of operating our guidance non-GAAP We exceeded a margin profitability

saw quarter. broad this we the to Turning trends

shines. to focused it's sense, At the leverage met on experiences. time, strong I around costs. where I a with In customer all business elevate remain efficiencies gaining sacrificing about innovation, reduce a globe, processes this to Elastic customers finding As saw to ways the desire and is AI same without improve companies

patterns is fully reranking area inform GenAI leading reciprocal hybrid applications, customers This building for in personalization can explore all of needed innovation, language Generation build strategic businesses total and or Retrieval security set Elasticsearch the GenAI like potential using Generative much them leveraging capabilities search, applications the features with to functionalities data the full decisions. In enterprise-class emerging fusion, AI, to advanced rank advance models. existing starting more. RAG Augmented experiences to With their their platform, of the and permissions, and document-level to customer optimize gain drive insights are unlock and of that

million database top more semantic for tech and search human-like we Elastic's AI-powered developers, via its search. the Consensus largest features, more model. In All summarization and of customers and to replaced functionality, experience developers build vector why with Overflow Symantec most expensive a quarter, This aggregates example Generative question-and-answer artificial vector use company reason integration Consensus, AI. have the big Stack we hundred and thousands Scholar customers is means using we One training. from is we Generative addition X.X the that to added the Overflow and The online new quickly, for studies from increased AI once expanded becoming AI-powered AI and advanced platform scalability, of product. QX, ESRE which customer, again the Engine Cloud pronounced. In are community with on the allows of Their benefited and our such to accuracy Generative the capabilities these integration for They fact the are GenAI across third in Elastic Relevance ESRE. peer-reviewed to and leading the by understood, relevance for becoming search and without applications edge is XX better our able than our AI Elasticsearch Overflow intelligence, of from XXX businesses several already advantage. as or a insights based semantic is the own customers, chose users functionality capabilities, more powered leveraging our ecosystem. GPT-X previous that of Generative long-time to trusted deliver that our results database. to papers Stack data of for to vector also turn Cloud incumbent for customers ELSER. This significantly Elastic and search this tens applications. us an our is its distill Generative barrier AI engine business model build their RAG And is with Elastic. for differentiated lower OpenAI's asymmetric are search complicated as

also continue choose in future. expect choice us to because future. other their right functionality today the they as use they as We In the needs platform customers as see the for our ESRE our words, see for well to

align Elastic an X management As search multiyear expectations vector company by this our search company because a moved experience. platform. quarter. to search documents, document entire with the cloud-based enhance competitor's leveraging billion power performance With legal across a example, their Elastic to of and the to Elastic experience leadership professionals market signed ability with capability chose using customers' for Elastic's to Previously they and to innovations, over offering, deal our modernize for searchable a user the their

trend AI, which that observability noted second is platform, for our Generative the built the earlier. platform observability and top continuing as with talked Beyond are The are to customers Elasticsearch on foundation. displace we Elastic solutions analytics Elastic and search security, the about and incumbents onto I of consolidate security

gives it our Our at AI-powered platform for extreme advanced ingest quickly kinds speed allow has to it and the unparalleled correlations, scale data ability and log use a incumbent single big and and this of around all of centralize analytics. analytics. ad-hoc reason This customers is and for make in security require SIEM the solutions, then searchable index all that searches success and a all platform advanced analytics. petabyte to This to kind at kinds especially or for ability displacing onto search analytics cases of

more it our for platform. and even including compelling for making security are observability innovations recent move to our assistance AI customers to Our

displaced incumbent This quarter, we we closed solutions where deals security. for several and observability multimillion dollar

Our greater innovations. on value overall value continue from them our is industries our customers IT helping even across their while and spend as gain helping innovation resonating we save

speed, rich an They the as storage also periods features. legacy of capability, performance, The chose a top longer retention for Elastic U.S.-based replace security searchable bank a As logs snapshots our security reduced which for SIEM bank retain included dramatically regulatory innovative to platform at storage the tiering, important selection scale and cost. to allows Elastic's Elastic desired behind example, set vendor. drivers chose their platform

for We ingest security set. platform The SIEM, support search their legacy visibility Elastic's them and gain their and also to enabling their functionality, agency scope the the across for allows Elastic for agency to operations The tool chose multiple with alerts started of speed, business maintain QX, initially expanded and Elastic and increase in with state vendor security environment capabilities, replace search broad capabilities for correlate Security. to Elastic stability center. security U.S. branches agency then and across reporting agency a

Now products turning and to innovation.

Query Elasticsearch in powerful or launch call, to it invest that migrate to new I Elastic. capabilities to from solutions the We customers easily possible our for ESQL. of make query On piped our language, last incumbent mentioned continue Language,

we seen our continue X,XXX trying new in Even capability, with customers this out as we from we to have since November. interest launched approximately enhance customers tremendous it

Our Elastic store vectors search included latest improves latency query as dramatically reducing indexing a technique which scalability in speed up is optimization scaler performance vector also quantization, of release by metrics. and Xx improvements improving It key customers delivers several several enhancements in Xx. that overall enterprise-level January X.XX also critical across allowing to to including RAM, many while

elastic security, reduction speed full we AWS for cloud the adept Additional APM AI introducing to way observability, Elastic vector support very results security query in support as enhance well mobile enhance Elastic search tech for effective for approach we posture of across and Google natural to our in in security, general brought capabilities continue our complex language based existing security operation enhanced enhancements for ups assistant is analysts search concurrency AI and queries. In Elastic environment. In a Security, with set cloud management. observability, SLO that a open This to navigating XX% that triage. alert added including for addition support cybersecurity at more similarity a security efficient, including types, and the availability, on our analytical Microsoft telemetry. real-time alerts to Cloud, in Azure resulted In we broad market-leading latency as for monitoring several assistant interactions the

in we of with and in on the worldwide. our On front, our events conference momentum through participation allowed to drove and go-to-market thousands that connect users Reinvent Elastic continued prospects AWS us QX customers,

was analytics customer capture to important We Elastic the to our across now full The including seeing Elastic's focus in Dodds success, community that Generative on everything team Generative the on future Mark pleased as that traction I Officer. of I gaining customers solutions events we closing, entire holding We we data. how stack search of for brings functions, our will with we excited of the X opportunity as and sales coming team this confidence every AI pleased Mark joined we for Elastic gaining to fiscal thank to in will Generative resolute to Revenue we about analytics all we another momentum context are their their the architecture, search are to QX. And Mark as around X concluded and a executive our Especially for unwavering Chief our sales, us services, platform experience segments these Elastic but announce I'm customer-facing leads becomes our core be for want driving the AI platform the new innovations company. In global and and future. ahead of increase in the quarter, a commitment. and our growth a final highlight professional our continue infrastructure Elastic IT all as extensive a insights years in see performed us the as partnerships do platform, into in very is push quarter. our are and from go-to-market of ecosystem all consolidating operations. drive momentum I'm to part in business. of Mark where AI. have our continuing for

to let me that, over with call Now Janesh. turn the

Janesh Moorjani

Ash. Thanks,

top the above We that focus both our our line. a driven the quarter the delivered are high guidance strong once we on again and line on pleased quarter, came execution. for We consistent bottom the by in of end

growth year-over-year year-over-year. out the The with growing expected. XX% XX% largely third played quarter in Elastic Cloud We total revenue third in as delivered quarter,

focus non-GAAP operating our on continued We profitability, margin of delivering XX%.

well performance both and reflects Our growth our executed in both market deliver self-managed and to We in Cloud strong quarter revenue. in success Elastic the continued the discipline. investment

without consolidate Elastic spend we onto of to in their number platform customers saw total quarters, prior As lower the sacrificing innovation. a

healthy against We saw continue as to customers consumption consume contractual cloud commitments. also growth their

private strong business large GenAI to see to ground enterprise-ready a use their to continue with we mentioned, AI Customers Ash Generative comprehensive As ESRE interest desire context. use models language express applications it around strong platform provides to customer since a cases. and build

in While continue longer will our significant expect a that GenAI a for us it term. spend will take revenue some to time we opportunity to present meaningful of GenAI for become revenue, driver the

currency third the Let's revenue XX% reported constant $XXX the on on from get XX% Professional an for constant X% into Subscription Elastic the an our third Total year-over-year the quarter, year revenue. in growing and in represented arrangements contributed and of quarter year-over-year quarter a basis a was basis. $XX third X% year-over-year was constant quarter month-to-month QX mentioned year-over-year outlook. ago. of XX% in XX% as-reported total year-over-year year-over-year constant services currency and or currency the from revenue subscriptions, on XX% was total Cloud in the revenue revenue Elastic basis, up as revenue. results derived XX% a million, basis. up totaled of previously. Elastic trends $XXX Within XX% year-over-year total on revenue million $XXX currency million, reflecting or Cloud up and XX% Cloud in I comprised from XX% revenue up million,

As professional add we've our and during vary mix fluctuate said To around significantly time. Americas deal services context quarters fastest grew we followed it more before, of overall based service and expect flow, the EMEA in delivery, on not by to across do timing APJ. may over the quarter, the the revenue

across see popularity We reflects verticals healthy a our the balance solutions of platform. the breadth based on to geography and continue diversification this business and and

with over to more annual the metrics. $XXX,XXX. on X,XXX ended than customer quarter Moving values contract We customers with

we with over and quarter in ended ACV XX,XXX customers, customers. broadly, Looking subscription the X,XXX total additions $XX,XXX more customer above at approximately

who are pleased on the driver quarter's the the focus in than We are greater of additions this with reflects customers primary category, business. highest which customer our XXXK value the

QX Our XX-month net consistent our quarter. which, you approximately rate, with line expectation is the and lagging a indicator, with in expansion as was trailing for XXX% know,

non-GAAP profitability I'll to which for turning Now discuss measures.

a our or quarter items, of any quarter, of Our in for per a Gross margin the allowance discrete This operating and non-GAAP release tax quarter in the income was share, results prior a valuation XX% third impact from versus reflecting of benefit among results, million slightly purposes. non-GAAP the free GAAP not exclude, earnings other flow for $XXX the cash higher XX.X% mix. cash equivalents. cash adjusted subscription did

on margin as discipline our and better was Our than quarter operating driven expected. was to drive margin in growth. revenue managing which XX%, $X.XX. The per expenses the we with Diluted strong future operating by quarter was was outperformance performance share invest continued third focus earnings in the

basis quarter Our was cash adjusted free on adjusted XX% the flow cash margin. $XX million or an free in flow

non-GAAP margin fiscal an no there cash our for we for in continue be free change basis above fiscal to fiscal expect the For 'XX full outlook, prior to is slightly flow margin on year, the operating and adjusted 'XX.

guidance. to Turning

While guidance our 'XX, are far we our pleased unchanged. and our very in FY execution philosophy with outperformance thus remains

broader parts business that continue will unchanged. largely climate, the We remain near moving macro Despite the the conditions in be to in term. many prudent anticipate we

in expect in appropriate the it of that fourth near may consumption basis. to million, addition, and representing year-over-year the we $XXX quarter revenue as constant $XXX background fluctuate million that an patterns term. on total currency With XX% to for the midpoint anticipate growth believe range the 'XX, at fiscal In reported we of is

outstanding. range the X.X% range of the between the shares using non-GAAP We to XXX.X diluted average 'XX per fourth $X.XX and and share earnings in fiscal weighted XXX.X X.X% for of expect in million million margin non-GAAP $X.XX, quarter operating to ordinary of

on raising constant growth representing are midpoint $X.XXX expect For year-over-year XX% billion of revenue basis. at now billion $X.XXX total the a full fiscal range currency or we to outlook our the XX% and 'XX, in

We approximately fiscal XXX earnings weighted per using margin to and full share for between in outstanding. $X.XX non-GAAP and to 'XX expect operating non-GAAP range XX% $X.XX million be the ordinary shares average of diluted million XXX

ahead we're to looking Finally, of the middle 'XX, process. planning fiscal our in

revenue demonstrated this provide And next leverage. on our to non-GAAP initially we inherent already investment is While has approaching had model we even expected. business outlook, expanded especially that an faster year, around specifics, our perspective. operating year are from too operating early than will share margin I we've how it thoughts We've

for expect go against investing As through we balance we near-term to our long-term planning process, profitability. growth

in this planning Given in we see AI, the capture accelerate we to large and fiscal opportunity are Generative market. investments significant help to 'XX expanding

We to margin operating in expect expand these are the we Therefore, fiscal be operating business to expect relative to drive modestly investments only 'XX. guidance broad-based meaningful 'XX fiscal intended revenue over and term. across the longer margin current for to non-GAAP non-GAAP our growth

loaded We front-end expect in 'XX. investments more to likely fiscal be these are

around guidance ahead 'XX formal questions. that, pleased performance our more we and with far 'XX our and in for fourth summary, earnings go so QX the provide with let's our quarter. And take are In fiscal in are confident will We outlook call. on strong fiscal Operator?

Operator

our of Bora And Instructions] first [Operator from Pinjalim question will JPMorgan. come

Pinjalim Bora

Congrats for if which variability monthly, in last lower slightly kind versus seems I seems did that And XX% total on any there did much caught growth Was have not it the a rate repeat so then would maybe the in was Or the Or which was QX, of of the like This you cloud? again, opposite consumption and So QX? want typically little anything be of the seems Cloud about dig is a like quarter? correctly, seems downtick QX, versus a see uptick of a I sustainability there a little different a year like bit think do onetime is, typically on higher we a at XX% little Elastic Janesh. seasonality. kind was drag? little seen bit helpful. side, you bit of bit far, a of quarter. color a which QX, how in sequential that versus opposite. QX XX%, like it QX the to maybe

Janesh Moorjani

Pinjalim, me for yes, let you. unpack that

If I first our pleased performance the we that off, as back, our quarter, did secured in at time say in look sales-led that, in XX% side, which it in commercial drive I just off, just then first the enterprise, QX, But we then performance unusual So our on we QX remains the I about out played overall expected the step the motion, including is as if were year-over-year self-serve QX that was very think know would. you during on well which onetime I'd that off as soft, Broadly pieces motion predominantly actually about to consumption take recur think if after commitments. And for and and the coming speaking, performance in it of in there piece growth. we the segments, with didn't nothing table. or now. the we've a at bit little we both across SMB in the been and soft that's is really cloud

played it that out would. with even But consistent was where it So we basically been. as expected it's

just so XX% to that's revenue monthly revenue, rest period. given the cloud or our of XX% cloud prior versus the growth versus quarter in And what year ago the of in cloud relative in monthly drove the XX%

you our time So quite just across reflective consumption. If those as working the of QX mentioned working of motions stable consumption, of can with actually are generally I'd I though, think the in If about fluctuate different securing consumption think earlier. as way both which we to I'd a initial ramp fact, said, terms called nature and board, about all to was patterns and in from commitments broadly their I across of the time. that's say quarter, the seasonality in customers elements out, the then, the say speaking, sales well, course, we've

at And forward strong with we cloud quite so moving look pleased performance, look QX. the we were and parts, all a to delivering when overall, our back I actually

Pinjalim Bora

Understood.

these question one some to LLMs? Ash. solutions? context of a going follow-up, the for people is of How kind into thinking, of primary about of think architect cost of Just the the tokens I'm windows in for little RAG? basically eat for expanding kind driver of does RAG the the we use should that latter bit be technical cases for Or how future context

Ashutosh Kulkarni

for you thank Pinjalim, the question.

pattern our applications, and works, but think responses something RAG second. that we at believe -- price. And factors. going Augmented and stop And enterprise to data, your we the more that these point, our pattern or about cost by is is, primary to itself definitely speaking changing this reason people grow that to very a about Generation, working to and and there Retrieval the seeing are that you And So the have are strongly predominant it's that put with being internal changing. second, or that is establish is like your that them is even with, mini a I'm pattern you you're real-world build X when on that trying tokens are to is more by looking going you the control will confirmed refinement production, forward. it worry that's not that training to team constantly for a customers, training then context that some continue, into said, that as data as is windows. of model only they continues you how send your as customers but building proprietary helps RAG, that One It's

you contextual what. no for need accurate, responses to be and So are actually able you RAG, to that matter provide

about those so And position the good to the way are feel for reasons in why is there. really our people we becoming applications. very enterprise primary RAG And these build

Operator

The Thill next of from question Brent comes Jefferies.

Ashutosh Kulkarni

there? Let's to there? caller. Brent, are you move Are you next the

Operator

question of comes from Tyler next Citi. Radke The

Tyler Radke

is color I growth that you're just be right exit QX starting any realize 'XX about the on point, Janesh, but moving apologize other Cloud. can for I be we should about about subscription we to then should helpful. it, secondly, Elastic the other think growth thinking the frame just should pieces relative between and FY us growth. pinning saw how the QX you line missed growth And would not in if top QX. How subscription think stronger for we guidance,

Janesh Moorjani

those. I'll Tyler, cover of all Yes,

and really strength whether to So off, business, folks Maybe the with, of start remind a about the quarter. or there saw self-managed in chooses think other the that customer just we I that the self-manage we ultimately We've subscription better just and seen think cloud first better posture cloud, I'll on deployment their we it's both. us, And for customer's and prefer good for is the choice. momentum customer it own while on depends and format. the

So of partly the mix a in business is we function the And trying did from from any of not deal kind customers shift to importantly, move flow of generally see quarter. self-managed. cloud to

just the so it's We function an the more we increase think and we that segments revenue this saw renewals quarter. I a of and of call in the geos deals had on expected across actually that shared to timing see self-managed forth. prior and already also

it was a to not surprise us. So

ago business the pattern was strong. a QX a period, fact, where we in In saw that in little self-managed bit similar year

if in prior in think to compared so I I self-managed And look quarters. XX% of XX% at terms the grew it couple year-over-year even year-over-year growth, of

really a it So wasn't big deviation.

sequentially factored how higher our to then so for guidance for the for it only think is we as about $X And QX think QX. reported I guidance way that's what One million than about is here into QX.

versus to roughly so days keep that self-managed, we think cloud it. guide I because in we've individual lot have that mind QX there's XX have XX QX. typically in to days just got QX, days don't And don't X I and not moving about in pieces that's but parts we fewer of movement. We much just around in expect So a obviously how there, the

growth just of right. little we've at 'XX. a about And early that's of been presents bit execution. very of of call mind in you middle into process finally, We've planning that in seen to growth revenue terms the million something then roughly about for the really that's just I think it, headwind already too factored We're think keep guide. so 'XX a sequential the Look, thinking from this as of, to And million in in for strong business 'XX. far. rates. And so with $X also And QX. stage, what fiscal the in our still performance pleased We've it's $X

outlook. too concrete on it's view to So have early the a revenue

more delivering For focused QX, 'XX just talk on call. on now, will we about we're a the and next strong

Tyler Radke

pretty which follow the displacing why choose I Ash, talk company. decision common industry. vectors that Can it's name And example -- terms are that them the -- in of vector the are maybe a for the on for How I customer displacements? to coding of the evaluate the database, what you the drove early just reference mean, am and -- main the alternative customer these [indiscernible] about And up in Elastic? nascent repository factors an were

Ashutosh Kulkarni

Yes. Thanks, Tyler.

are So roughly that about differentiators, quarter, Cisco applications, as is, DocuSign, customers And examples out past obvious last Consensus. think in the about seeing these customers. are I whether customers X building become Stack are you it core time, to that customer so and was on, to past, beginning I Overflow, as or Generative gave AI in very the not talk into the about say, getting things. What's we've standing customers, we more this I'd but educated everything goes that really our talked to things to only shine

our good on quantization making incredibly perform implementation. that's terms database It's about scale customers memory that's that requirements. is of we've that of kinds even scaler Like built us talked intensive of in better, top be First area innovations the even the vector less implementation system around driven new better, in just I've in the perform an really scalability. SIEM. terms And well, of see especially

first performance thing, So just the one is the vector thing.

second applications. the that permissions, when building product, you're security things on, facets the very and of The all level which search that the really important powerful, is have geolocation delivered the capabilities like other ability thing, capabilities into to personalization and is use -- to the do ability enterprise become the we've like so enterprise capabilities which these document we

is now which thing, search. hybrid is becoming third very The popular

it is the their X And quickly to becomes Generative on us data are much means using then data, continues this like expect as platform, them of data easier embeddings for already search most the whole these customers incredibly to take more vector AI spread create just So important the answer with like We things thousands for that our is those familiar us becoming all reranking search be all that relevance space. their many hybrid a use of you and differentiate. come search and to is in ecosystem, customers of stronger Elasticsearch of kinds fact of to that is use a become to continue it I this like get broadly use that customers, and our mechanism where the is as thing more and are then to that right out search recognizing and to They're last area. we if how relevant -- is a vector that that going are with that mature, area to use that about semantic all of are up for lexical fully just strengths techniques. And those then the in and are and for tens stronger on in in very sophisticated to they this winner Elasticsearch and applications. Those ways think incumbency. hybrid bigger combination platform, you becoming factors it

Operator

from Matt comes question Capital of next Markets. RBC Hedberg The

Matthew Hedberg

on the guys. results, Congrats

about And industry SIEM? pressures or Ash, the obviously, that things bundle you eventually shows offerings, and large wondering vendor like talked trials. think firewall pricing free up to as a plan logs if including I'm

Ashutosh Kulkarni

Yes. Thanks, Matt.

competitive dynamics. the consolidation. I platform in say whole But what is idea change of any seen haven't will we the So

meeting, budgets. what that I'm to every is CIO about As overall seeing still I talk is very I'm that their conscious customers,

to excitement AI. are budget more and wanting in Generative tremendous So pressures there of around continuing, do is terms

to as deliver see but they that's them to want innovative, of being having only So incentivizing that that. The we to of also platforms and double ability a are of the that bit that's their not beneficiaries the customers we help one And tremendous on today, few do that fact see that trust, they they as innovation. becoming a future direction. proofs can whammy, more a

win do that Generative at investment something customers innovations our observability assistance pricing that's consolidate been displace much both us have for We delivering it value to possible with for it doing our security to enabling a and overall incumbents. and and better is to and that model AI like makes AI,

that So are motion, leaning consolidation it. into we

been now, of are and benefits several the quarters into have leaning we We it it. for seeing

Matthew Hedberg

good usage. talk its vector like of what do SIEM? really sort of or observability way hear. it obviously of extent or with lot into and to are think those just you within And there's a lot -- broad GenAI search feels technology then makes I'm security search search. curious, to vector And a about [indiscernible] enterprise Really, maybe like

Ashutosh Kulkarni

AI search market and and we That's for a believe increase materially is very overall term. on And in great going question. addressable the so strongly vector Generative the size to that although search long

the of seeing and are in and observability ability security. differentiate also compete better We areas our to

alerts a guide assistant. is and can help is So security, to because able bar several possess. in typically level need what just interrogate they to audience plays of AI that alerts to to our questions know, ask gets needs is the everybody that Elastic the terms give that, incredibly with we've assistant them The and and the now and on you of really to super it customers, that events real-time about experience expertise AI out of powerful those the the some gone security see the that reduces in security sense through security analyst we talking now. all system And through are they deal fact to how of excited on thing when consistently how

to for making deals that these it easier in and win compete us and So is that incumbents. displace much

to feel AI. future. the And we us reason that everything Generative the we're it's edge only that expect giving growing doing are around about in why we edge that's so continue excited that I So already.

Operator

question from Barclays. Raimo next of comes Lenschow The

Raimo Lenschow

the as Two changes with go of now new on kind the any on from you're And me kind to of go-to-market quick change Ash, for questions. anticipate Congrats we year? One, the well. side, getting I to then one kind of in are journey there Janesh. market, we're any ready for should had changes as follow-up evolve but leadership the seeing

Ashutosh Kulkarni

Absolutely.

I it's the in he's into short that wonderful partner, -- mean even see He and Mark's are just he's is he's he's really excited dived he's the impressive how on, he's -- strategy, been commercial been that about job. we to So very working addition. time been a enterprise leadership that remain is on the Look, that focus are go-to-market overall our expect demonstrating closely very I'd we the members natural is and the team what with segments, the and to the wonderful. direction our here, say I same.

only and us expertise like in We change. set, expecting we opposed this have and do Mark Mark platform changes. touched to add Janesh we to are to I'm have we skills do are help the AI, about know that of the at to the as that areas, going business that feel that point, consolidation, that that seeing and to as earlier, continues in is a those well with lot made Generative better. And any progress It's even that. going terms very brings are in I direction we really make Mark's not of it like success the areas upon any excited

Raimo Lenschow

know you yet. need the in building And think guiding break areas capacity, take need changes kind there's a productive. the between Janesh, guys for investment with we to about about should mixture of you, look you with of sales 'XX, recovery, And industry about on time you of how of think more thanks R&D, sales stuff further, going I sales you're a on lot it? initial they But bit to that the if if think into not little a lot a for down then and and kind AI. like and Is obviously get I so

are think focus like board? there we just So of about? areas could the Or across kind is it

Janesh Moorjani

Raimo. Thanks,

on revenue through profitably margin process will year. we relatively profitability. called why do now, against And near-term the expect we balance investing than So 'XX, But long-term the as think that that's to going modest obviously I growing faster that our as we'll continue next and expansion our going about for are expect specifically, we're fiscal we growth focus grow I expenses. to op out we planning for

of year, capture. opportunity massive us go of past So this and over that increasing terms the the ahead pretty a the of we've can we of opportunity seen importance GenAI significant course in

some will when guidance But clearly these support I longer go-to-market investments, our investments business. we now, investments will will We'll a to loaded an that op of opportunity. I and in market to indicated And go unlock And a more that little capture also investments opportunity. There really margin to in front-end be year. will non-GAAP the 'XX. plan be we be area this our think and the have formal why color more the accelerate little capabilities term. well actually so do will longer-term in want we'll do engineering. fund And And in trajectory. to making we on investments that order be broad-based for growth this across get support that And that's bit Raimo, little will the earnings really execute that bit call. impact And next the to bit investments the a provide on fiscal and we next expect

Operator

Wells Fargo. The of next question Nowinski comes from Andrew

Andrew Nowinski

questions. I X have

to ask I ESQL. was on want one First

tool of think that the platform reduces data could of advantages leaving be a you one about the more bringing Splunk? search onto already talked you data friction customer Do So you have it ESQL your if the your lot on platform. a for vector is Elastic's of from

Ashutosh Kulkarni

great hasn't question, it it since us prepared a I'm already X,XXX we been around Andrew. more I What excited have even out about like And customers in is introduced it. and friendly. trying mentioned makes the That's We remarks, developer it super long that Yes. does ESQL.

make to entire Customers and because iterative of other assistance, very it makes developers is which It's designed, to it languages is and these had quickly take SIEM customers our it. have semantics gone. the And to ESQL, on to to that. it the of why it very got those that that one grow. able excited the barrier a are use onto and you to love for pipe easy. feel development process for continued allows incumbent just the piping thing for is kinds and from Elastic, of onto are easy In other how language solutions very customers AI consolidate take And share reasons map easy take makes it's platform on. And add onto platform ability terms to when capabilities language. with so similar it our to legacy possible semantics, of it ESQL does our so some that that's switch move from able solutions and incumbent about I now our And solutions

much data going more term, to in more infrastructure. this is overall So bring to the platform, our onto long our us and to believe that allow critical become I definitely customers'

Andrew Nowinski

one quick -- my Just question. follow-up

and for Given your added ELSER have you that with now you've changed account these ESRE platform and all cetera, the ESQL, new pricing functionality all to et the capabilities? to

Ashutosh Kulkarni

Yes.

tiers. Andrew, you're as know, different in in, is price unlock functionality. of And the one tier So depending things, the the that terms multiple upon basically you kinds of of you

so forth. are the most some on example, the tier, assistance tier, and our our of the as ESRE functionalities so tier, top an So in platinum enterprise in AI

have customers capabilities. these get So shift of to up a tier additional to all

increases, that we times times at when -- price we do But it that And will to done we've that self-managed. time sense, it's functionality prices we done increased at the cloud. for given for makes from of terms In time. We've that add. really

to to Let Janesh me anything see that. has add if

Janesh Moorjani

nothing, No, Ash.

I nicely. covered it think quite you

Operator

The next Patrick question comes of from Colville Scotiabank.

Patrick Edwin Colville

on call ask really the Thank about XX% to be I Elastic you constant pretty in part to great the I and guess XQ of is currency for me revenue, terrific. having story. want

most You just XQ drivers; you called out, in my order can question levels. for you committed was which those, and rank some those consolidation drivers security then guess to Ash, you, is coming called one, was out GenAI observability important. the consumption three back and I

Ashutosh Kulkarni

the I'd Generative our AI, Yes. given in but overall Thanks question. revenue, say early has terms I'd in is contribution it's in of still for contributing the is say it of definitely that the What size, -- terms had days.

we've since observability few can been terms been consumption come platform, our our takes and are several by business, stable imagine, up, That's displaced that to growth that you ramp strong workloads seeing once for helps. the it a that platform on as doing to has running for it customers is customers being quarters quarters, the on the also we very they that some and typically onto time fact security. consolidating for contributor the we've a a now. And as been play of these and of incumbent consolidation for solutions In

it. I So if think about that's would will, how you

to probably So consumption cloud anything? add the that the probably is you I and thing biggest the is Janesh, stable don't consolidation being you the know equalizes if things, want will. But if just

Janesh Moorjani

Yes, I'd ash. that agree with ranking,

Patrick Edwin Colville

Ash. Janesh, you, my please. follow-up for is And Thanks, I guess,

XX%, nothing double-click margins XQ a op leg non-GAAP to So and snip look, just in this in what's that's same nitpicking, out down levels Why but Based some guidance there call only indicates in on XQ. XQ down going you Can on XQ? one-offs all. leg profitability? XQ? as investors on in Are of terms imbalance, out my the at of to

Janesh Moorjani

Yes.

delivered X in quarter, million higher in I cover QX. mentioned to the events. we in I pleased happy have the had the So the to got If third with on had And we approximately this call, seasonal earlier relates $X prior and the that $XX we've fourth that $X is of the quarter, benefits our mentioned last the fourth little out the natural call, bit from time of But headwind this about on obviously think that. fewer quarter have to then engineering days revenue. million are change a to employee quarter, we all-hands a the million as this I also, since approximately we that, of in timing expenses things outperformance we called one on in QX.

QX affect So together, come The those is that's why items only QX. X and lower. factors seasonal

against as even really expect and and full saw it perspective, our from we've our we raised the outlook commitments, full that for prior focus to we pleased outperform the our so year, number. we're you raised strong. managing earlier had And finish the even we year. in here, on year the We year And can very

Operator

Thill The comes of Brent next Jefferies. from question

Brent Thill

know we I should the anything did that Janesh, surface aware of? it but be decel RPO bounces around, underneath

Janesh Moorjani

strong are say QX. annual consolidation and selling motion, business We've and all the actually forth, we a very talked of very sales so the trends platform how Brent, contract the delivered saw, so with we including overall, including in pleased I'd successfully that about in those If the seen shorter call contract think but reflect one roughly business I'd that is X.X RPO, than thing period. years, maybe we've of at lengths success. were the slightly the out previously to what they ago that about were year similar I some

bit based RPO that a on the business. deals the in terms And little vary so signed of can a consumption we

and renewals customers You've variations their match the with of expansions to try timing consuming. also got how they of quickly are

the rest I bit business, primary So of And line with all there. on little basis tracking else line very revenue of with in are of the Nothing outcome we a shared growth revenue with RPO the the pleased the would actually business. we've success our can indicator as it a as call we before, and was other and generally in noisy. be really measures. quarter-to-quarter out. Fundamentally, And look was the at growth

Brent Thill

terms Anything wave? starting as or in can you for this you've you're to AI, the see? any anything resonating do early step guess But common forward of verticals wins, still are do be others it's terms of there you're these to are awareness the to mentioned kind What pushing some you and start on that pull go AI and learning seems gas and And and through on there boot smaller common commonalities in deployments, threads camps early. seen obviously the others geos. taking of and of with then it industry. I you in die -- really scope is you Ash

Ashutosh Kulkarni

for Thanks the Yes. question.

the seeing one, that in broad-based I patterns it's have tried remarks. we of definitely some examples pretty my industries. are prepared across some to is, give So

model. -- the which some which you some mentioned, you If past, the about in tech the are internal customers really to that of Consensus, of that think I RAG about of scientific them to is that is lot Overflow, of risk management in chance build, reducing research are companies talked more manage use one cases hallucinations, and they space, Cisco A gives research, the become to pattern, use the more about their the I've best Elastic it's the obviously, at like of others the document and customers which still are we how in -- but the this making are hallucinations, last all as completely vector Stack these several pattern. There about continuing the are vectors, broad-based. look facing the ability and still confident about our sure search that's that something the eventually quarter, ELSER internal adoption facing we quarters is in driving us this incrementally use using we've customers of the Encoding hundred to cases, Sparse terms taking every are X they the now change, customers. that still Look, of so searches. I've I've our that's adding right? into that talked grow using staff. for vector will second storing Now mentioned similarity of how that doing are And been that lot dense a now

are year, and through center, we've XX this So X is effectively our we sales here front the got traction in organization and we're doing, and of this the very the excited And of are gone are in is and quarter. way customer about that seeing we are this Events we've adoption. And fiscal doing we events that we through terms driving for X on boot Elastic GenAI marketing more our camps. fourth out

have been customers. successful. Workshops with These GenAI are Box widely doing We our in a

up. momentum. So take Like said, I'm for early going very time this to it's about excited you the to build some

in for TAM is we're a increase believe the over the But material early innings. us. in to haul, long very this be going still I So

Operator

Sherman of Cowen. The next TD question comes from Andrew

Andrew Sherman

cloud seemed -- growth. Janesh, annual mid-XXs pretty number strong the stable at

And that's the just that really pressure down number? there's what that you overall are forward? SMB So dragging of assuming in segment going kind

Janesh Moorjani

been the talking think straightforward Ash I very against that a and portion, And SMB as both commitments -- has that we've that the and cloud mean, those also if in short while is consistent here, with view fundamentally, I And the if thinking the opportunity driven math the before. think about was we've secured you're will our cloud ago, it's and the It about soft. against been than continue a there continue the where rest sales-led the cloud about as set we've commitments. consumption I remains annual terms on think expect unpack about fundamentally, motion, there. the that excited is but And pleased motion, future, which mean mentioned right. we be faster you're business. I of I that overall, of won't that been selling I about doing it to we the business pretty to grow Yes. the segment-based with really

Andrew Sherman

customers And anything are reaching out logs pipeline the competitor? your of to then, yet more disruption, potential you seeing Ash, largest you in because potentially

Ashutosh Kulkarni

question, there's disruption call We've and out. specific Thanks opportunity. consolidate our the as motion Look, now. that is, see incumbents. Andrew. for onto driving to a displacing no will What customers the or by to platform I a change while been prospects that whole this say I'd for get tremendous We

use with being past market, and the on our our around you tremendously security the in and capabilities and to beyond ability many our those talked ESQL. then even Frozen it which is like everything We've always land customers for in when assistance. expand innovation, AI also going capabilities further to log but so to strengths search and for AI observability have in to -- now and beneficial We the SIEM there, once are that Tier, us And customers, opportunity comes about the analytics gives that. we that's

now that's about why confident over big very are comfortable All to our really of customers exciting. and and those moving factors are platform,

Operator

comes America. from of question next The Koji Ikeda Bank of

Koji Ikeda

and when mean about we X think the in about terms the past, rates between ways search, business to about talked enterprise I the categories. observability, security In the think those past, you've growth in of

about you're here get to us granular growth a term categories over aspirations? little So of if medium-term between your the you kind X and wondering could these about let how know thinking maybe growth rates think medium

Janesh Moorjani

what maybe terms the think take seen the year the we've I invite add consistent solution Koji, overall, generally last across at and more. of a areas, this Ash about ACV. to then in with QX in If was mix stab I'll

and about if medium for bounces and a If little nicely based I time. forth. the renewal solution flow occurs, will there around growing shift, any term, bit I so deal think mix it all If timing areas think is contracts, on it us. take X are

So looking not mix. we're actively to the change

search of should that as GenAI over that, out we the the an think future, we've shared expansion I as benefit TAM. view As before, from

a And we've we as as see to drive consolidation security pretty so that the with the GenAI of in They the we in strength security the as the well that that observability observability into also a actually presents and significant us. But have an significant with opportunity stack. motion been opportunity for well. effect growth and build capabilities helping seeing both

For the example, talked that with AI about before. have the assistance launched we've that -- assistance and

that's So the the I medium way for term. about it think

Ash, add there? anything you'd

Ashutosh Kulkarni

No, Nothing to more Janesh. add. I it, think you nailed

Operator

of Brad The next Reback question Stifel. from comes

Brad Reback

and you're support part as for investments to do this need talking make functionality? Janesh, COGS investments that of beyond, next AI all about you to these year

Janesh Moorjani

natural Brad, will we as for future, the investment in COGS. about increase I profile a think our see

said, some guidance but There that related that expecting investments model we the more months. we call significantly 'XX. we for not that That may But a of more see. that, at there's to major I would coming function cloud our stage. growth I into out be think offering the to anything We're that's structurally over as formally factor launch serverless we see different. provide initial the nothing this have when we fiscal will

Ashutosh Kulkarni

that. Janesh, if I quickly might to add just

I instance have CPUs, we our for RAG types. are and cloud deliver be of types, regular we in on that are that capabilities able is, that functionality. need things just We like GPUs very time the sure don't One memory optimized make instance for run to types want us everybody understands the to the instance efficiently that very, to that, things

And of offering really is the a why love because in efficiency. one the area of the perspective, so from COGS GenAI of overall reasons customers our

add clarity it. that so I some So to and if around I there are make I is that on, questions any that usage want around just there make because sure sure GPU

Operator

The Mike next from Co. comes question Cikos Needham & of

Michael Cikos

now the ask, And adoption new demonstrating Or now? X data we make A entire the right of of that changes multiple when those some actually new how like drive using up were pricing Ash, were just to incumbents. talking really, here. I earlier, of seems that locked I'm the issues second the the tiering? cases? better but parter functionality. contribution the first sure grand from drive And and calling Janesh, up I'm And are wanted sense just And a bringing generated that think for possible, revenue use some offerings. can guys about get Or growth my it tier were ask or we over the start could helping out there's customers but reason in me you, scheme workloads over while me worth you help a highlighting incumbent we estates I to that it for migration I I from guess this know up more are I at for Is Elastic is know tiers thinking I newly porting I'll I if a wanted through, really to question think coming look is is ESQL things? And legacy still there using significant ESQL, relatively have is that data to as previously about today, for to SIEM maybe is that but a with small legacy way you properly. that streamline if just

Janesh Moorjani

of and in I'll interest the the time. first brief question with Maybe start it keep

we've Elastic looking quarters will continue and that seen the We've the time, here. adoption the of particularly higher of terms of ahead. the drive increase several for our tiers and steady pretty this in generally In upsell expect to higher Cloud over a that seen we there, now, growth enterprise tier

that there's It's higher expecting quite particular modeling. routinely already. add subscription additional or for what So no inflection to We consistent I'm our tiers. seeing we've some time with just been features

motion. of sales the upsell regular just Our team It's part demonstrate our of value customers. to that

Ashutosh Kulkarni

me let quickly touch And ESQL. upon

incumbents. do for that. that allowed had do not about semantics. to interactive But It's data query development bringing So incumbents have languages using ESQL always to query easy in people is us from been piped

give were just hurdle things translate built we their So in they a them very used ESQL over into very that the that to bit for meant that to familiar query rules of and development that's is was to already of ESQL something switching now just that much able familiar because and language doing are what's is users switch that And something are those a people which Elastic that platform they with, they're a enabling style that to with, way. certain faster.

Operator

Kulkarni closing This any for concludes would like our I over the session. back to turn remarks. Ash conference to question-and-answer

Ashutosh Kulkarni

our much. joining Thank you very call for Thanks today.

dividends. We focused and commercial are performance strong the our and is execution, motion pleased in our segments paying enterprise sales with QX as

and the 'XX. and FY business confident you day. heading We the QX into are again, and Thank a excited of great strength have about

Operator

conference you now Thank for presentation, concluded. The today's now has disconnect. attending and may you

Elastic (ESTC) 29 Feb 242024 Q3 Earnings call transcript