ESTC - Earnings call transcript Q1 2025

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Operator

Good day, and welcome to the Elastic First Quarter Fiscal 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Anthony Luscri, VP of Investor Relations. Please go ahead.

Anthony Luscri

Thank you. you Elastic's us Financial First thank call today's Results. and discuss to Quarter afternoon, for on joining conference Good Fiscal XXXX

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

we their take Following will questions. remarks, prepared

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

statements, forward-looking regarding include will may our include and expectations discussion Our our information. or estimates which and the products predictions, other for demand future solutions in revenue

that are statements cause differ to earlier in We filings of forward-looking slides uncertainties release speak and unless call statements actual Securities that only the risks disclaim currently Relations our of Investor fully materially. to required and those Exchange Commission. update any based forward-looking issued and included These the uncertainties known Please these to this website to to us more by described the press refer or could on on the factors subject revise today and results in date the are included with in law. obligation we as and posted the risks

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

XX, period XXXX. business fiscal close Wednesday, quarter October of quiet XXXX the at second Our begins on

Goldman Frontiers Technology and in that, to Over turn Conference. be it the the Piper the Sachs coming TMT participating will Growth Conference, Conference we With Ash. over I'll Sandler Citi and Communacopia weeks, Global

Ashutosh Kulkarni

and Total of high again XX.X%. you, and grew in our operating delivered profitability QX year-over-year. guidance and against grew you today. quarter. us the revenue for end thank outperformed of We all XX% Anthony, once Cloud XX% we the joining revenue non-GAAP year-over-year, for Thank margin revenue

strategy, focus over us growing to continue consolidate spending number expand to total and X,XXX. with the We more than of on customers our land, $XXX,XXX

momentum platform We opportunities. continues search our volume message commitments we helped around with to generative also strength, because our us drive a Despite us in fell QX business. of resonate to overall growth this accelerate this customer consolidation the Furthermore, in view our quarter mixed this continued And strong expectations. of we closed as for short AI customers.

made expanded strategic of reducing by issues accounts of of created both at commitments segmentation changes per total rep segment, To and number our fiscal specific, that we beginning and mid-market our In customers. our of landing the customers, start sales in QX increase the the year, strategic in to sales the and focus terms new at customer into enterprise high-potential were by to segments. enterprise created largest be greenfield closed selling distinct commercial more territories we affected on the the impacted on the we QX, on focus more accounts focus

relationships customer grow our in will and, share platform All these customers our increase motion. our with changes help us wallet through time, consolidation

EMEA. over largest fast underestimated enough true just degree, to Separately, delays we especially where bring and in was the tighter the in a in account impact changes. these we line. transitions constraints had This to we deals progress deals However, that lesser didn't finish occurred of closing budget with the the Americas changes, customer the to led territory them and

have deal heightened team, biggest had the monitoring the I were have the lost, expect None we had to funnel. to largest our segmentation sales of these we sales progress course. deals deeper as cover due reps the in new close the are through already rigor, their accounts encouraging of deals Dodds quite increased more progressing and seeing changes. and a we on these Working signs time focus areas this simply, Mark significantly in of with With accounts, and where leadership

largest for quarters with and drive us budgets. particularly significant accounts, engagements, next strategic the customers several deals the large our over can beyond. have also enterprise Our largest These

our Looking remain we the market opportunity extremely in both ahead, confident that to opportunity. successfully capture and ability

Our innovations differentiation. are expanding our competitive

choice the continue We position AI as strengthen applications. real-time our to of platform for building

cases. us and Our strength a customers for for continue multiple value advantage onto as to be use price Elastic consolidate will

QX to enormous Turning reinforces and intensifying technology potential customer long-term beneficiary companies to acceleration AI-powered for and I overall cases. demand with for am ended saw mentioned in this greater cohort search adoption. position shift. we our enthusiasm their business Elastic our generative of business using of XXX GenAI's earlier, AI as Also, Elastic in out as over testing chose customers level very customers continue AI and pleased with that an as generative use AI generative conviction progress cases. transformation our I us ideation to in using And of AI. more is build strategy Cloud as drive to immense generative GenAI. for customers X,XXX amongst customers use The from approximately our our XXX,XXX we to than a

company for platform well applications. as All leading building future our this GenAI the the for AI of with bodes real-time incredibly search

faster company precise each to signed example, Elastic in proprietary machine use software Elastic's enablement augmented across deal GenAI tailored an The search sales personalized generation retrieval for incorporate to learning their expanded to customers model semantic an now a copilot company's As capabilities. enable ELSER, to of through and leverages its QX, create leading and more platform. content

twofold the of our company in Platform over last X than has its improved cybersecurity led and operations. the more and their with GenAI Cloud or training satisfaction integration in leader architecture chose months. expansion and has Other through Google their across industry model to customers was seamless increase an that QX Search a a all Elastic Elastic capabilities global upgrade transportation The in extensive consumption win hybrid signed incorporate doesn't with require retraining. AI Elastic to the Marketplace search the that the This deal for security

the AI-driven and their deploy analytics capabilities automate capabilities operational enhance Assistant, security processing our ESQL, organization will Discovery The and efficiently manual Elastic to enable detection, Attack innovative prioritize actionable event These security manage such intelligence the as to XX%. effort company capacity significantly to increase by aiming AI threats, reducing efficiency.

to firm a search enhance American large and signed Elastic vector firm paralegals A case use generation. has solution to preparation will law for for displacing an retrieval Elastic deal incumbent new The and augmented their lawyers with per win case cases, cases will with their rates a clients. application. and boost similar find for and which case applicable ultimately for new revenue improve aims internal application laws The benchmarking, correct search misclassified

the chosen platform organization in has based incumbent customer and displace to conversation was nearly scale comes adding is win to Elastic also every consolidation. I solution continue Elastic is ability why brings million approximately and documents value million have, we through performance currently which the X every The on XX in month. as to

add make incumbent and to for AI to migrate adopt customers to continue the easier solutions from it We capabilities Search Platform. Elastic

piped we have the at legacy mitigate language incentive launching In analytics adopt with by led the and last move the Search up costs services and Assistance several went In and away security and AI quarters, dual Security a Black our QX, to from with and query quickly Conference, ESQL, Elastic Express our Hat step observability. Migration, AI program, the for vendors to a SIEM we further packages which all migration vendor the Platform efficiently. a new log helps Elastic company needs powerful

incumbent focus our with efforts continued pleased solutions. displace and are to We

via closed we a and a compliance example, For in competitive in X-figure leader quarter displacing the with AWS solution. the a Marketplace, data security deal

the previous their data world's demanding detect, the based was cloud enabling detecting to companies. operations mask has The company and XXXx. search the security volumes the ensure and our to Elastic of customers influential to and risk. meeting Elastic up of organization's Platform the speed on environments Search and to complex massive search, chosen and manage uses sensitive visualize data of already needs solution compliance their largest security in mitigate AI efficiency by in across improved, most The capabilities rapid environments, analyze data breaches, outperforming

productivity intelligence Elastic from first incumbent Also an and sources source and deal law The lives replace government and open save enrich to developer company's protect in analysis and most. platform empowering search data search reduce a around the matters increase improve By the with Platform. deliver disparate ingest, a can and sources analyze data outcomes. they and business help businesses AI signed data choosing solutions, to Elastic quarter, Search what relevant intelligence disparate results, solution to new enforcement, leading agencies and costs, globe, consolidate more streamline

in innovations Now QX. turning to

in dramatic experience continue binary we significantly first of a quarter, text further resulting and which the areas our Our to GenAI resulting advantage observability type, position to developers. retrievable and speeds we the and faster introduced of or support leadership memory security. embeddings We capabilities further our use the quantization, the requirements. for team each chunking large query RAG, search, continued vector for And scaler text expand augmented a field In In in optimized added case. Symantec competitive reduction documents the automates deliver for search, have underscore GenAI, generation, in simpler extend and also database in chunk, we process creating as to in

model users improves capabilities reranking providers. our all wider we search AI which Finally, expanded with our capabilities, Symantec of a natural variety language for

conversational introduced to developers RAG their Search, experiment workflow. select accelerate model Playground through of of any Search Elastic an UI-based With and to all choice. refine also We low-code a Playground, in Elastic with intuitive generative development application with with queries data

with to license is can Elastic today be And AGPL source under source approved AGPL again. On Playground embraced available is OSI be RAG export an simplify the open note, Search license. a the experimentation, grounded part this production-ready and proprietary source option this, power free will After Elastic Elastic officially always SSPL will announcement an adding open the demonstrating of code considered related Search of is by to code that data. license with has our implementations the as that source our open today.

in for will engagement our Search our This will search further platform incredible the community, and be drive RAG Elastic business for building runtime users long for our applications. for exciting greater vector the increasing even within This our as including and change over GenAI areas, term. popularity and adoption

the is landscape. security, In transforming AI SIEM

QX generate the and accurately. this the had onboarding to our evolving Discovery rules fast new schemas call, AI-driven to in infer AI by prior platform our discussed investigations SIEM Import. and Attack to Automatic Building automate leadership triage, using area traditional launch AI-powered powerful which a Automatic the on to automate data for automatically security SoC. capability threat an we ingest with analytics continued modern With our Import is in of SIEM to search data on we

continue can continue their effort the existing of to area And use customers this that Assistant observability, of In and all we AI the risk platform. reduces to Elastic to to together our to complements consolidate Elastic. It enhancements the and taken connector leverage the onto Google custom and support deliver SIEM greatly AI AI rules convert that customers improve experience Pro Assistant. in they giving Gemini knowledge our increase choice customers. X.X for Assistant more overall Vertex how base, with AI support for Model index for Adding Assistant flexibility the

customers to Finally, our Partners pleased strength be sacrificing strategy. we shared Partner are reflects proprietary Quadrant U.S. but delighted privacy as go-to-market the are Magic underscores leader an their our be security their only ranked focus in part not AI for to accelerate the partnership, the XXXX essential journey as which of without And and the Year, Platforms. of data. of Microsoft XXXX also we a help the to recognized were our of Observability Gartner

committed coming to results community, improving the time it strong dollar foundation In financial opportunity With team give focus our detail. building that, sales on of execution over over closing, business our in our profitability. to a very an and in I'll large remain base in and multibillion incredibly to go to through on build our a upon. more months. with turn platform, We us growth we Janesh our us, customer front are technology focused our The

Janesh Moorjani

in first both revenue profitability our our we discuss first high outperformed the Thanks, reported Total year-over-year second in as for before of the first year. first up for guidance the million, as currency. describing quarter, full and up the revenue constant constant I'll for $XXX in results $XXX million, end XX% in outlook totaled Ash. quarter once the and XX% In the against quarter revenue quarter was Subscription currency. again the year-over-year reported and and quarter quarter. the

annual revenue currency. in Elastic as QX the Within as in from Elastic of trends subscriptions, growing in played was and million, Cloud constant XX% revenue XX% out total Cloud represented consumption quarter. $XXX year-over-year reported Aggregate self-service continuing commercial arrangements, quarter. commitments. motion, the enterprise against versus is Revenue somewhat we mainly driven remained our their SMB expected prior which to customers month-to-month by from and flat on consume with customers

based revenue came XX% revenue. on in Cloud of Elastic at total arrangements month-to-month

We will trends continue quarter million, reported consumption growing Professional first closely. constant in $XX and currency. services was X% to revenue monitor in year-over-year the as

anticipate lesser in was sales due Although the vary changes by delivery, organization, budget revenue across in particularly do in caused we transitions fluctuate add tighter professional mainly we around significantly To to quarters we to we mix did This Americas services account expected. on in we extent, may it timing our close not the to expect that services of the over deal flow during extent based deals to quarter, made EMEA. not segmentation constraints more and, the context not time. a the did intentionally

Since the became quarter, visible in loaded more be issues our these contract to signings July. in back-end us tend to

As we close time. of lost, them Ash over these mentioned, deals expect were none and to

already the in Ash described taking we specific to response steps that. are

are our towards way in a actions we return and with We QX, feel execution. confident better are these we that on to progressing

remains highly is Search Our differentiated. Platform the AI large, market opportunity Elastic

for GenAI environment. customers to current is traction are opportunities the look in strong, Our and to continuing consolidation

We regions, and significant In change quarter. see did during terms grew competitive than any Americas. in the APJ EMEA across environment of growth faster the the not

X,XXX first land with focusing annual provide growth in motion These a Our with metrics. over with values strategy a we over the customers on ended higher time. working customer company for of our expand as $XXX,XXX. strong more customers quarter contract a than evidenced propensity We is multibillion-dollar for foundation larger our as customers and build

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

quarter. was rate line approximately was our expectation expansion with the net which Our in XXX%, for

during the also remained quarter retention Our strong. rates

Gross XX.X%, profitability to turning in with margin which quarter expectations. I'll flow, the Now cash and was non-GAAP line discuss our measures. in

outperformance was in was quarter million adjusted operating expected, $X.XX. Our XX% earnings first share driven free margin quarter. continued in flow in which an than first quarter discipline basis and on Free in $XX revenue or the of margin was the our the cash better was XX.X%, spending. cash Diluted flow per by approximately

margin margin to above the fiscal expect though we adjusted 'XX Finally, don't formally be we guide free cash flow, flow 'XX. to to cash fiscal slightly continue operating for for non-GAAP

timing to cash flow is you an we flow on and As quarterly adjusted at seasonality, on basis. basis know, continue full Cash basis. free a unlevered our this on issues will look a primarily fluctuate so given year

Turning to guidance.

current continue are positioned opportunity and across capture guidance our this we first all believe performance our our to opportunity, are reflect solutions we see well to significant quarter to we and outlook. While updating

are where as expecting the not assumptions includes for In quarter. what same environment. will the our guidance terms macro the of we we in the we That in remain EMEA, broader the first changes the are of rest assuming year, saw environment significant

both directly this revenue and QX Elastic fiscal The year. on will customer commitments self-managed impact shortfall in Cloud

actions of issues we ahead, seeing good are are taking progress, this confidence on the gives we our experienced us to in sales execution Looking front. which address and indications

we maintaining for this assumptions stance prudent are year. of on However, rest a closures on our deal the

rest self-service commitments for year. continue Cloud of the seen securing revenue. we've Elastic on the commitments We continue consume expand terms on will And year start although a will bit Cloud in that we slower we Cloud dollar for stay assume to as customers expect against will now, quarters flattish the to Elastic impact on their motion revenue, Elastic further our several the to

balance investments steps that. and we revenue and As growth the before that do in to we've said we taking investments, are we will business, consider

issues don't the the similarly Since we taking on the potential, investments are reduce term or market near we face believe our opportunity are are and our we affect growth measured. actions core view long-term to

particularly are long-term best in We growth, positioned GenAI. areas prioritizing towards to and drive near-term investments

in invest to continue will platform we map. road R&D, within Specifically our

product to long-term differentiation Our success. core is our

continue with the a regions and opportunity. see capacity marketing, sales greatest will build on we we sales to those but Within focus where

sales growth. marketing sacrificing we that And not drive functions greater will the the certain in We other and in investments will we term as delay G&A in finally, near are efficiencies reduce customer-facing, where drive without investments or long-term can efficiencies well. our

spend revenue help steps the operating these than year will reduce reduction, and All growth us long-term more in Cisco by opportunity. higher our do without non-GAAP $XX so the for resulting margin compromising

positioned expect fiscal years. of our in second to operating business the in background, that we drive continue also the 'XX, for to be model, higher in $XXX million margins business million. operating leverage total to range of quarter $XXX future With the well as scale inherent With we we revenue the

XX% basis This year-over-year as an growth and at on represents in constant midpoint, both reported currency.

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

the For reported revenue This on expect the billion range of both $X.XXX year-over-year first midpoint, 'XX, an and represents we at basis in $X.XXX fiscal total billion. to growth constant in as XX% currency.

our range average non-GAAP expect journey. early outstanding. 'XX the to for between $X.XX still margin we while weighted XX.X% ordinary confident QX that summary, growth million performance, earnings shares potential we using and be diluted our per of non-GAAP XXX in In are not we full in XXX million We in approximately $X.XX and with operating stages and remain are satisfied our diluted of to growth share the fiscal

take and questions. coming our on going focused are go that, months execution in to and continue drive Operator? And growth forward. profitable will ahead sales the improving let's We with

Operator

from Markets. with [Operator today Instructions] Hedberg Matt RBC comes Capital And our first question

Matthew Hedberg

start I'll you. Ash, with

term. what like how we terms click to of there just which in it are execution improvements think in maybe but remarks, seems how some see to of I you're most segmentation, important think doing the long it long prepared about the You makes sort a wanted And way growth? to the on you're longer to improve any a touched it's lot items accelerating you as of is to result on going to -- of till take sense going double

Ashutosh Kulkarni

been something imagine, a and question. you are we lot, differently. is could what done differently have Yes. reflecting I've we what the doing for as can that Thanks This on

we And so the three already. are that things doing

of the CRO, monitoring doing increased is, and this. working deal leadership through I'm significantly with sales First Dodds, his team Mark the funnel. that personally our we are I've sales on progression

The deeper been second been accounts. the of that what is be our we've largest driving largest budgets, that ones that's thing just a part big ramped doing tend enterprise and These on we've focus have our accounts to the up.

-- is an so building their more those is of signs thing third this in less The se, territories. progress accounts. deals pipeline our the time seeing And are sales moving we progressing, are already, is per and these through are that relationships. fact just adapting the but reps as to They as new action are

X irrespective. are doing that things from that of we these were apart a about, other talked Now couple things I there

that quarter, help all migrate the some that's effort. we you've -- that worked minimum customer onto in first, accelerating of our motion Elastic customers services the the with minimum us Black do technology sort for platform Hat of well and quickly In we for we've and together launched of Migration been really time incentives the brought Elastic continue been the that risk and all consolidation Black motion that in needed Express incentives, Hat. a this about everything to the program At to the terms past platform at It's conference, time. very talking

stood success their helping that for been helping has small ramp for team there, also the with having we've their specialist is thing up our that's demand them -- team a The GenAI, we've up faster, given building other been exceptional. been specialist applications, that technical doing customers we've all GenAI the skills

commitment. my of confidence state of the our This number absolute we are going strong So that is the we've that and my quarters, next in couple things past. me priority one had back sales to all of get these give execution to in

Matthew Hedberg

feel leverage that what migration And squeeze guess on all for one maybe number the the I'm way really doing? focused you've guess these migration comprehensive. it are just and maybe noted to like accelerate wins -- tools curious channel things other Very there Are I any we've a And some if on I replacements? technology. pipeline? could curious, these And I know you new at of maybe also does then to I is in a I'm specifically lot the been quantify quarter these competitive in one. growth of can opportunity.

Ashutosh Kulkarni

Yes.

the things. these So with and then about let me we start how scaling technology talk are

really the had some built customers rules, that ESQL, their logic, in it have technologies of which made incumbent easy move the it query our we've switch to in So to language, they terms technology, for and Elastic. the -- alerts really of

allows Assistant we help a with We that onboard bring quickly which sources also had streams Automatic then and platform. into the data so can moving data AI move you the is and and that alerts that very data Import, Elastic on. And Elastic rules all capability dashboards like recently to and those of launched

onboard very uses quickly. create to And it AI very, you sources infer schema need and to the large mappings data all the models. those effectively It uses that language

helps. all that So technology really of

period we've itself, transition to the thing doing, second that because so to customer customers of big The to part easier. for a the and of cost the sort that incentives of pay the double challenge tends program in be with mentioned, program incentives they helps the been like is have make I that

that kicked we the then, a of that? Since it. in. Hat. is -- at interest excitement been we've our scale Black very Migration the that off has sales the been seeing it leaning Program has pipeline strong. how in The It's around Now focus and Express team obviously lot We

same momentum always drive and we we partners, of hyperscaler into natural partners partners, that thing. to our is help leverage other with those use a goal then kind the of as with opportunities. that motion is as we terms make In And that to work work partners, sure

Operator

next Thill Jefferies. from with Brent question Our comes

Brent Thill

to guess team, think of this it reps, an love percent more to understand would reps everyone think describe easy changed way simplify XX% easy Is to you I hear different of out? Is what of XX% about the on way segmentation what our changes. like to changed focus an when about you Ash, there I is this accounts? your we go-to-market means?

Ashutosh Kulkarni

area And the public nature the of that all right impact anything was is, the in is Americas the Brent, touch all where still given And in except there Americas, team. verticals, in greatest answer public for U.S. did territory. teams was the But I of the are the much a not these look the changes, U.S. were sector way believe the separate affected. sector pretty that, in us those the territories, outside simple changes. I at the changes, we

at of that terms drives what I looked we greater the wrong ways every lot the practices account those that's in And in brings best of a right got that if And focusing little a do we've As were redo this, them we now possible, industry and transitions. focus. us we've What a those changes more gradually. are execution of carries these it on. of would way changes more it, rep stagger just number I little to analyzed are accounts as in this to each because was the

we they we working those building are as What on sales really be sure sure been they couple pipeline. with to their progression that that we're make me, we've accounts, with is on of that accustomed sure we make I to that are it's are to. reps way. gain interruption, ramping of but expect temporary we'll of that -- inspect familiarity to quarters, making focusing the well that those And that up back and in quickly it's our just of the all level just execution a accounts, And

Brent Thill

to Okay. heard right. make want sure I I this just

You changed Fed. vertical every except

Ashutosh Kulkarni

In Americas.

Brent Thill

that magnitude gave to given level that guide guess [indiscernible] yourself disruption, I you natural there the a in embedded wasn't the why your And follow-up of gave guys of the -- guess, Janesh, I ensure cushion is you higher

Janesh Moorjani

Yes, a it's great Brent, question.

guidance the of happen As we change approach assumptions, changes we look, did, guidance, And about of And in did was segmentation Ash as enterprise the a what as associated company. some a The built almost anticipated degree we that. the But some obviously, this. thought almost software with factor saw in every magnitude and said, much standard larger. that degree the practice month bit from as the saw in we in was was of a that it there try late recover a of impact QX. guidance, quarter. the and the of we really and that only we built lot to July, we little anticipated to too late it in We

And put we couple the in of Ash quarters. the described, and encouraging in place, initial so to return started corrective already, actions we as see to expect then execution track to signs we've stronger and our historical record next of

Operator

Pinjalim Bora with from Our question comes JPMorgan. next

Pinjalim Bora

the into I terms It and I'm adjustments on an impacting double macro, of changes scrutiny plurality sales increasing of believe, everything, on on in effect, see impact that or a have any commitments other? you deals the in seems went lower-than-expected self-manage that both cloud and of to did clicking it's again, element trying understand it's And if execution? managed. in the specifically there worsened in there's Just Was would any July or May? largely like from commitment. self one price of you the to say later? kind Or

Janesh Moorjani

Pinjalim, this Maybe take that. is Janesh. I'll

broader execution. one right, format to the and reflected isolated it It sales cloud impact was not was across You're because self-managed. the both

the was we whether single-digit because mainly based believe we the of it it a price increase did and had that technology start don't terms increase on did I at price that of the In QX enhancements and that was impact, delivered. had any

see to impact meaningful a issue. to that solely So we commitments related customer didn't

both increase. of the be renewal percentage sales that was contracts terms in as us it about think part a the year, anything, time, signed start was revenue to as for as multiyear execution into because well QX well. commitments And If small come year, relatively in you change revenue intended renewal in a this it think of I was for outlook customer to revenue, issue. at meaningful Even not shortfall only single-digit price broader the we I a and a know contracts driver will also change, as the

So on that in QX. in the here us impact wasn't for a of much driver --

Pinjalim Bora

One Understood. and annual that the the months run you. the last your relative about of Can about to cloud to talk Yes. tracking actual talk follow-up, among customers? in X essentially you consumption rate? the how the been into rate And more run committed linearity has And trends consumption maybe cloud August. Janesh, consumption

Janesh Moorjani

Happy that as touch to well. on Yes.

I played expected commitments both us to think consume customers In as in us. enterprise quite already trends that made for annual cloud continue segments, nicely and consumption to they've against nicely out commercial the the the QX. we

I platform. that think adopt value see a indication lot from to customers just our continue a of that that's cloud great

fine. we the I that is the will that And the ahead think have execution looking think consumption, a was new I because of think revenue sales QX, to impacts issue in cloud on lower related issues, for that I again outlook. terms our in that secured of we degree broader commitments us of that was that But -- rate

natural traditionally view not as some monthly because of customers. a the consumption across business there of the just within terms know, linearity the in be quarter, broken we've In can you out fluctuations patterns

So we month tend on data. much a not single of to rely too

consistent details it with going just I'll here so we've and what or quarter. expected won't out But as the into seen August. played about And that we share I before say disaggregate

Operator

from Cikos Needham & comes next with Our Co. question Mike

Michael Cikos

on the topic. I'm I'm also make just going up want segmentation to sure right. hearing to this But circle

you how Was did get in go out. quarter when that trying into to identified a quarter, implemented, So like guys played relatively just I'm this Or you late August in this it those the again, changes And sense actually X? late the like in have sounds the issue it effect? July? was

change there The has reason we're given is, see X if I'm possible, X end the side, you to can from guys some any But weeks on of these like I quarter. been segmentation your hear July out on changes the the notable to front? of that asking know I'd

Ashutosh Kulkarni

question. the for you thank Yes,

made were the very fiscal of at the year. beginning So just clear, that to changes be the segmentation

be changes that rolled this software most changes In So pretty the will all territory ours, May most It's was I like mentioned, of companies case, that is this changes level every as year, out. -- typical a there And the to our like were for be like were on regular happen. some practice. enterprise X clear, companies time, just greater. of

as having July. And about, talked in -- we we later it as we the Janesh in now impact when that was -- realized --

since rigor pipeline that most really so started to the I And to soon put into corrective to the As those we've really see and engaging on. of and of about. some of we already the then, reps the we we with accounts, changes, accounts focus account that, inspecting started progression of the in signs. monitoring the action we the The movement put number started progressing, as pipeline, are that the on enterprise it that talked as seeing the been had positive

time, better that progress slipped QX, in quarter, the of them. deals deals out did of close of the through out just seeing many lost. they weren't pipeline because, the They We not are again,

have due them of close since some and closed, we in remaining to And the expect process.

that's place actions getting make in we these that already So all that sure seeing are quickly, progress. to focus we're and our

the be of execution seeing back gives strong state and that couple our the prior positive in sales We to that's of signs, a are we what me confidence quarters. will

Michael Cikos

sure, Awesome. make And just I'm to clear again, here.

we as when combination your lower that the well new of to out now fact couple of commitments these it the you of year play the does that -- like of is should secured take quarters it's guys as the implemented really the So and think a QX, feel it's a the this degree around here. over view which about in rest informing guidance have changes segmentation

Janesh Moorjani

Mike, finish in the fact same it's enough The We deals just had over the Yes, didn't reflected sales the execution that we get lower issues commitments. issue. were line.

the we're actions quarters. issue. the absolutely state couple over expectation return execution will that taking, is we it's So of prior next stronger same the belief of that you're our all And of and that to right with our

Operator

comes next from with Tyler Radke The Citi. question

Tyler Radke

little I to guess shortfall specifics and a the I So back just of want bit understand the go better.

it large renewal like which enterprise presumably mostly are deals. these within was segment, the sounds it So

just challenges consumption existing of have least. And at on implied because customers aren't any less so -- that you backlog cut is And sort I seeing you conservatism guess or if is cloud, visibility? the to

of and sounded kind to on the you consumption ramps yet okay, consumption for the sort believe cases was commits us you're for help those sort expectations it's these use up? Or because do like deals coming cutting Just new that cloud and full but in in cases pushout delays understand of year. order these new to ramp it timing use the of a could that

Janesh Moorjani

that. take I'll stab maybe Tyler, a at

So terms the made only we impact, entire sector. public of all was saw of changes, the the because except it team, across we Ash part segmentation Americas the in as large off, first where changes as enterprise said, not accounts in

So accounts the that impacted too. number and there, commercial a changes of relationships and

was more it So broad-based.

obviously larger to bit because the commercial those you have felt more and accounts on side. be The on the transactions, segment with is velocity impact and more larger tend larger little enterprise deals a

mix the and felt versus retention about Those the of gross business. We strong. and new our rates terms In workloads that incredibly close we pretty stayed of expansions good how healthy. were renewals renewals,

that And strong. so piece was

new impact. rep was little additional of think that more new workloads were the in a trying or land, I saw a either trying where was workloads, that's really net that drive net existing accounts accounts the to to we bit it we

over how the annual a customer contract out, to you And burn those commitments time that the we and the against plays as terms commitments customer our consume they as and revenue down then consumption makes they cloud with and of that made. then motion, in they've know, in commitment us

model and that to so the that that against that that got going their into existing healthy are was forward. the And of guidance into commitments, be customers assumptions rate our the and consumption that, continue will have we've expect going we healthy,

in is work to fact a securing on QX, we going quarters through. execution commitments sales us couple to missed take of the here new our are But issues that

won't you so you revenue. the historically have cloud that And form the see at that rate can limits of that seen. expanded commitments the of therefore, and addition and limits to same which down burn in amount the And the new we've at then pool

this in model, way of and we've the assumptions there actually built that that's the out guidance that's for year. we've the the and rest So got embedded the

Tyler Radke

out, follow-up I know so wanted couple obviously, saw, moving source, the before open there that thinking you earnings of I source for just the Can open to the about was the AGPL important. of minutes is in announced The importance market? think, sort the basically around there's -- release the a I here, open about just question license adding lot you ecosystem, source strategies pieces. ask a GenAI the with source I GenAI super came in you, the just particularly announcement of and talk code. significance how of you're Ash,

Ashutosh Kulkarni

open. for you this hopefully and and use ethos changed. Since Yes. and it's And Thanks a terminology so We've that about source. that very could done has the we for that know. changes been we But always made free not acted ago, -- license is then, reasons, years we think as question. the we kind I source clear that open had ourselves that operated to Look, X mindset. our specific has lot with call always everybody open of with

and there not growing. of OpenSearch only but the created sort that's in our out everything AWS has And competitive against OpenSearch. market is There differentiation just own been

we the see is very of used the choice built, vector been and it for every what that And is so we ahead us. big opportunity. see embedded And GenAI that and GenAI to database of positive modern application means in that's us tremendous very, being a that's be opportunity

I already lot seeing saw success, accelerating You we're that we shared that. to keep data a the from of that and want

open in get open developers Search source capitalize ability forums, now more Elastic have the means And all market these the the search source for addition access greater to where years Search we the use So of cases, Elastic the typically to can go in we GenAI to AGPL adoption now to come. available the option as all for of them. as vector our an vector proudly see places the in software, that license database, a on

it. about and is key strategic, to excited it I'm very So It is us. very

Operator

Lenschow Our with next from question Raimo comes Barclays.

Raimo Lenschow

You Then workloads starting for the reacquiring help a of had like that follow-up how a the part helping? is you commented second I guys. of And that and already, Ash, of that with how kind that on initial to is new see those Could of earlier like about with you over? there? half kind are in already working terms call you factor What help convert do that. people the trials could

Ashutosh Kulkarni

Yes.

a the because in Look, accelerate that about even business the fact think search generative Raimo. And saw the is question, the is I remarks that are that, mentioned the our of the factors when for quarter. thanks we is No, things interest search of behind one that all I prepared seeing that of resurgence reality this AI.

design lot workloads and cases And important in of past is incorporated then about use in are a use it grow. semantic early RAG seeing implement of that we've be We cases. the the these and talked the to search customers these these steps applications and

are our competitive strategy. feel is me in this good feel makes That very good and saw as cases, search acceleration succeeding. very seeing about that our fact makes we you that about That mentioned, that heartening. our very we quarter, the And and are I use differentiation me

feel long company. we so I And a And us this leaning term, is are to I'm be that in. for the going valuable -- in incredibly as

Raimo Lenschow

Janesh. Perfect. Okay. for one And then

different if out how a that. investments your year are will about you cost If thinking you what -- will Like look, probably kind well? guys like, and think flow that restart about lot to of sales about the need as it, in year and the quarters the for you to of like think

Janesh Moorjani

we've the in we issues the we're to facing investments. taking expenses. measured steps do view as are are that that Raimo, taking are And today, mentioned I the we be with approach to near-term earlier, we want since issues, revenue But will maintained Yes, always balance on that. we growth

longer to making in term. as near the as So on make in to term we're investments continue the areas growth, think the well invested that business, as to about we where I and stay investments focused can drive both we're going stay

we're growth. And where will to And particularly associated make target into investments and going little growth. marketing with part of impacting the directly go slower And that sales -- think areas not everything big in in a were that goes we R&D, in we a then areas investment on side, I specific GenAI. make can bit

in So G&A the other or for do. some investments example, non-selling we the for kinds as side efficiencies example, on so we then will of investments, program drive forth. continue and And roles to brand always

that's think continuing just journey. I a

to we're year the leads in reduce non-GAAP basis full the revenue a that, and And And than our which margin. to year the actually expecting slight by the that's increase we've rest income operating view more And then all so see of a of through reduction, spending that. ourselves couple for we on we as returning philosophy will develop approach over investment the through navigate this course stronger the a quarters, of taken. we next on to of beyond year, as the execution then

years because for us expand leverage to is But operating looking ahead, inherent to in do room business see I in operating continue the future margins there model.

Operator

with next question Our from comes Bank of Ikeda America. Koji

Koji Ikeda

focus I the side, you big pretty part been the international there's on but Americas To a have go sales lot equation, too. do a know execution business, to of of the back

was learned that seen anticipate the international And learnings similar Americas, on put what taking is are strategy. question months a specifically, and were to strategy maybe similar happen go-to-market that an to you've And you within Or strategy, the there learnings over trying on that go-to-market to those -- few change a that the going international? you've the was so pause? from implementing in international Just past the internationally? was understand

Ashutosh Kulkarni

thanks Koji, question. Yes, the for

regions. of into teams way different and the you some So international our in bucket right? have we largely teams sort countries countries, them organized of then is so large we have by And

lot Given In changes have -- the pretty Americas that we the were way in term organized, because felt the way relevant more were. the the in size you about the for the Americas, needed much regions, things a we were the were business of scale. international a felt countries larger a they good very in long

no were and so were changes changes no made. planned And

we better federal. civilian, segment, sector in tends et are public strategic you in terms of that Even in sector, things Americas, in the public state the were Americas DoD, expanded And customers distinct the segment largely in created as drive commercial opportunities brought or new greenfield it the given we the number in larger segment. logo Americas, the to sector was those enterprise all It enterprise of rep. the reducing of those, We public changes, was we the and the not have in organized APJ. between cetera, by segment. more different then versus strategic acquisition. focus per the where to opposed to And and EMEA federal, And to touched. and segment in local Those accounts how have be outside were very in

Janesh Moorjani

EMEA to deals extent, budget because of say of or the quarter And we see Koji too to in end And to but did in of customer push [indiscernible] constraints, as lesser that, we the the early if macro some related the the it's lesser remarks extent. a out anything that's to a that mentioned earlier was sort. towards

Koji Ikeda

a quarter. the I I look first fourth Janesh. follow-up first subscription in follow sequential self-managed And And off Got it. a pattern. just does when quarter at of growth the from for then somewhat RPO, predictable the of When historically, the the when portion quarter down starts look down,

to about RPO thinking just So to curious color be we add revenue? how some if self-managed you relation could should in

Janesh Moorjani

Koji, the as the that nothing reflects the about approach or mean we I that look talked Yes. think just said, terms our in our opportunity question. issues performance. our we've to fundamentally RPO that's a overall there's at it's longer-term of market. changed And overall, QX about if I good I

So that we to look stronger execution. forward to returning

about that means what there draw. isn't that self-managed, thinking connection particular I would around Specifically a

and would As to self-managed. we both see here both return related time, QX those. as And I that I we issues saw recovery mentioned, in of stronger cloud the expect in a to execution, to over

small self-managed piece time. subscription the overall point about relatively upfront in of revenue at patterns, think of our the this you a revenue a If is component recognition

lumpiness revenue recognition. for big doesn't shift us drive it any So in terms and of

Operator

comes with Patrick Colville question next Scotiabank. Our from

Unknown Analyst

is Colville. This on for Joe Patrick

search that mentioned in quarter. accelerated Ash, you the

that and slightly wondering, than I'm expected? mean performed observability does worse So security

Ashutosh Kulkarni

think all Well, was all I the lower effectively, customer areas total of businesses way were business, the and by -- number the the observability about that it search, I think fact in is, our would commitments of quarter. security affected

segmentation not everything So changes for It everything. the was impacted. certain use was sales others, just affected cases versus

seeing we've In use because the business success spite our of in that, GenAI saw cases. that's of been an search and largely in we that acceleration

Unknown Analyst

just customer enterprise I it about penetrate competitive of little win? makes search sense. can to for then And guess, why AI And to what search the bit AI follow-up, Elastic the That these take cases? for kind tends in a environment you more base use your my will also, significantly talk

Ashutosh Kulkarni

absolutely. No, Yes.

area that So company. right? reputation we an first We we known and strong of is have are known brand are extremely such as an AI all, like this experts, as the in, search

that exciting from recognition perspective, brand because we resurgence of is interest where seeing a a very area that the of interest greatest so is the And the this tremendous like is us. really natural for GenAI. growth area of have What's or is area

that kinds in used easy very kinds into then the A in for database or RAG data that to Search, it's cases. and is that lot customers getting means RAG-style embeddings of ends of search it sitting to which up applications these vector use leverage vector already in GenAI Elastic turn our semantic of functionality data use

one I one, customers our strong vector the the real and consider scalability from also incumbency. comes of But we database performance, have strength a best tell a terms product. have what really databases to just there's the us in would there So of that we be out is, what vector

lot we developers hybrid the developer-focused it adopt our product around reciprocal and of this and to that the a have overall capabilities Second, search, just added for of capabilities use everything easier fusion, make space. set rank that we've features, in enterprise

sustained a the competitive is believe that over differentiation give this tends of All going kind to very of differentiation we time. us to be

Operator

Our with next Piper question comes from Rob Sandler. Owens

Robbie Owens

think to and seeing especially is that drill seeing just to side base little chunk a competitively I the Elastic bit want more I of up And grabs, what on Splunk for since switch? competitively, you're you're potentially down security and Express customers' what a decent willingness Migration. the

Ashutosh Kulkarni

Yes. Rob. Thanks for the question,

talked So sort showing of of bring ability customers have incumbents. those about not data are the the that about competitive Attack to just been hasn't I've the technologies. in to sources a of to in is it changes those but talked what do to I've any environment to Discovery, the flows, that make is Express capabilities that about talked in win. on is past, Elastic. data -- designed we interest the Automatic is I easier announced -- terms designed our from for seen have customers together And ESQL, there bring really move And recently away lot around Import Migration to

program includes And also customer incentives. the then

go to and talk and So our it to the reduce customers thing risk, in. what It's then sales gives to to about. And want make effort for to been this And we the that's natural for also very easier with. lead do them over. leaning lot reduce switch we've is teams a just customers what a

very confident momentum is going continue. so this And I'm that to

changes, I the the like our from segmentation we said, control. saw And near-term the of that fixes are some within impacts the impacts --

doing And it. these We very I of acting consolidation particularly platform, we onto with already confident are on our migrations that driving are kinds things am for excited. and and

Robbie Owens

on me, the well? observability as on mirroring excuse Any side this, thoughts

Ashutosh Kulkarni

doing it observability. and for both are We security

patterns, this is both but just obviously, restricted SIEM, them on focus log Now And on the And the drops. is seeing is to security, observability, in analytics. we the across are not security. focus same in apply

it's it. exactly how So that's approaching and great question, a are we

Operator

comes Wells with from Andrew next Our question Nowinski Fargo.

Andrew Nowinski

magnitude understanding quantify keep quarter the get slipped out of the kind quarter? it Can and how of that guys have deals maybe an into going you Just the what the could just I'll trying many to quick. next what quarter. like of deals you cushion or looked have of

Janesh Moorjani

take Yes, Andy, that. I'll

a just So tend amounts customer and orders just say so But we of general it forth. significant. not as I'll disaggregate to was commitments the matter, and

here us Many And caused are I revenue to nicely close in of deals these sales the a move As expect progressing not out. would all close quite of it take while through meaningfully. QX. amount them these to you to see the while obviously that will can funnel,

also actions we're encouraging a the while we've to through corrective continuing of seen signs lot And work initially.

in back us it stronger we will take to to a level couple get of we've execution said, seen As past. for a the of quarters that

time think that about period of And revenue the year, guide the so I well. as for it as considers

the are I miss of So the went about into some those had that in impact of how here the that QX. thought things we

Andrew Nowinski

to close be the somewhat the it may as next simple these more I control, follow-up. over self-inflicted out if I a of that any your deals not And necessarily are sounds guess it's going than with to to a than mean you're -- deals take about like the these X at account. salesperson you couple accounts concerned the just with close, is there -- change slipped? competition worried it -- aren't more quarter

Ashutosh Kulkarni

No.

we this The this So describe relationships those we the focusing way. on that's that's to are is stumble. incoming had Every now. me there and an pick has account what -- about where up. handoff now clean, of rep needs is it to and sort the not establish transition, And be let been -- time It's competition. we've

-- drive. now. haven't these of about when strength to just takes we're line of losses. pick about bringing that to time say because on the and full that vanish the been are we up what over competition our deals QX, It's for that -- about in really back is not we is turn to in talking be terms we to and it's them seen sales a just execution, working any we that continue rep back So into it or actively to expect It establish

Operator

Our Joel next comes Truist with from Securities. Fishbein question

Joel Fishbein

Andy's How XQ and that to question. are go that you the And about the give did what follow-up a numbers as confidence just year? the Janesh, can guess, for you achievable I the full us guidance? formulating

Janesh Moorjani

that of the aware the the and the Yes, not the that started in in to to we off, impact expect this of that approach view put that's in all all guide. conservative deals And considered more in revenue Joel, did transactions obviously so now that to July, guidance, that how we place expecting actions corrective close. were in first obviously terms issue close, in took terms a reflected we we've of we QX of of in are internally we reflected

rest and referenced for I that deal factor some year, about comments assumptions earlier that guidance. I accordingly into in talked we in this prudent the of as of on well, where closures the my

about think are I Not the to the that fundamentally But where continued through So has actions philosophy. changed. a changed that nicely signs seeing overall approach approach across the are to encouraging progressing taken, funnel. sales building we've it. we guidance, not prudent to We've deals maintain the

in their We're territories on an people as performance. enterprise said, accounts. Ash And focus seeing as we terms reps are and are that, deep of those not of building nicely normal engagements settling lots customer our relationships. overall now But into assuming despite return immediate to

the how we've in of a that's couple to quarters this will guide. We taken approach assuming of And the we've terms that are fix. take worked

Ashutosh Kulkarni

very call you Thank our much right. All for joining today.

focused on opportunity. coming market execution our number priority are We our and good remain Thank the growth and in We you and this evening. confident sales have months. very my potential extremely in one will much, improving remain a

Operator

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

now disconnect. You may

Elastic (ESTC) 29 Aug 242025 Q1 Earnings call transcript