Elastic Q1 Earnings Call Highlights

Key Points

• Strong first-quarter results: Elastic reported fiscal Q1 2027 revenue of $478 million, up 15% year over year, while sales-led subscription revenue increased 18% to $399 million. Non-GAAP operating margin reached 16.2%, exceeding the company’s guidance.
• AI adoption and enterprise commitments expanded: Elastic added more than 80 customers with annual contract value above $100,000, bringing the total to over 1,800. More than 37% of these large customers now use Elastic’s AI features, up from about 21% a year earlier, while current remaining performance obligations rose 21% to $1.2 billion.
• Outlook raised: Elastic forecast fiscal 2027 revenue of $1.998 billion to $2.010 billion, with an expected non-GAAP operating margin of approximately 19.4%. The company also repurchased about $40 million of shares during the quarter, bringing total buybacks under its $500 million program to $380 million.

Elastic NYSE: ESTC reported first-quarter fiscal 2027 revenue of $478 million, up 15% from a year earlier, as the company cited continued sales execution and demand across its search and AI, security and observability offerings.

Sales-led subscription revenue rose 18% to $399 million, while non-GAAP operating margin reached 16.2%. Chief Executive Officer Ash Kulkarni said the company exceeded all of its guided metrics and began the fiscal year with accelerating constant-currency growth in both total revenue and sales-led subscription revenue.

“Customer demand was strong across all solution areas, especially in search and AI and security,” Kulkarni said.

Large-Customer Growth and Contracted Commitments

Elastic ended the quarter with more than 1,800 customers with annual contract value of at least $100,000. The company added more than 80 net new customers to that cohort during the quarter, its largest increase to date. Customers in the group accounted for 90% of sales-led subscription revenue, compared with 87% a year earlier.

Chief Financial Officer Navam Welihinda said the growth reflected improvements in sales capacity, productivity and pipeline generation, as well as ongoing consumption of commitments secured in fiscal 2026.

Current remaining performance obligations, or CRPO, totaled $1.2 billion, growing 21% as reported and 20% on a constant-currency basis. Total RPO was $1.9 billion, up 27%. Kulkarni said the results indicated that customers were increasingly making multiyear commitments to Elastic’s platform as they pursue AI-related transformations.

Elastic’s net expansion rate was 111%, compared with 112% in the prior quarter. Welihinda said the metric is calculated on a trailing four-quarter basis and should improve within four quarters as the company’s constant-currency revenue growth accelerates through fiscal 2027.

AI, Security and Observability Initiatives

Kulkarni said Elastic is positioning Elasticsearch as a data store and retrieval layer for AI applications that require text, vector and hybrid search across structured and unstructured data. During the quarter, the company released VectorDB index mode and auto-calibration capabilities intended to provide vector-search performance without manual tuning.

The company also extended Jina’s multimodal and multilingual semantic-search capabilities, including embedding and re-ranker models, to on-premises and air-gapped deployments. Elastic said its Agent Builder product added agent observability, monitoring and human-in-the-loop approval workflows.

More than 37% of Elastic’s customers with ACV above $100,000 were using its AI features at the end of the quarter, up from about 21% a year earlier. The company said that represented more than 670 customers, including 70 net additions during the first quarter. Welihinda said customers using AI capabilities have a higher growth propensity than customers that do not use those features.

In observability, Elastic relaunched its metrics offering and introduced Columnar Mode in Elasticsearch 9.5 as a technical preview. Kulkarni said the index mode is designed for time-series data and can reduce storage costs by 20% to about three bytes per metric sample. The company also added native Prometheus ingestion and PromQL support.

Elastic acquired Deductive AI, which it described as a provider of AI site reliability engineering technology. Kulkarni said Deductive’s reinforcement-learning harness can automate complex investigations by using information from code repositories, Elastic alerts, Slack, PagerDuty and ServiceNow to build decision trees based on previous and ongoing investigations.

On the security side, Elastic said its Attack Discovery offering now autonomously investigates and validates threats. Kulkarni said the company is targeting an “AI-driven SOC,” or security operations center, in response to a faster-moving cyberthreat environment. Elastic was named a leader in IDC’s MarketScape for worldwide SIEM and a strong performer in Forrester’s Wave for extended detection and response, according to the company.

Profitability, Capital Returns and Outlook

On a non-GAAP basis, Elastic reported subscription gross margin of 81%, total gross margin of 77% and adjusted free-cash-flow margin of 30%. The free-cash-flow result included $13 million in cash paid for restructuring and other charges related to organizational changes announced in June.

The company repurchased approximately 800,000 shares for about $40 million during the quarter. Since launching its $500 million repurchase program in October 2025, Elastic has spent $380 million to repurchase 5.2 million shares as of the end of the first quarter.

Elastic raised its fiscal 2027 outlook following the quarter. For the second quarter, it expects:

• Total revenue of $486 million to $487 million, representing about 15% growth at the midpoint.
• Sales-led subscription revenue of $407.5 million to $408.5 million, representing about 16.9% growth at the midpoint.
• Non-GAAP operating margin of approximately 19%.
• Non-GAAP diluted earnings per share of $0.80 to $0.82.

For fiscal 2027, Elastic forecast total revenue of $1.998 billion to $2.010 billion and sales-led subscription revenue of $1.682 billion to $1.694 billion. The company expects non-GAAP operating margin of about 19.4%, adjusted free-cash-flow margin of 21.5% and non-GAAP diluted earnings per share of $3.29 to $3.37.

Welihinda said Elastic expects growth in total revenue and sales-led subscription revenue to accelerate during the second half of the fiscal year, with the fourth quarter producing the highest year-over-year growth rate. The company also expects positive GAAP operating margin in the second quarter and for the full fiscal year.

Kulkarni also announced that Caryn Marooney will leave Elastic’s board after a long tenure and that Julia Liuson, formerly president of Developer Tools at Microsoft, has been nominated to join the board.

About Elastic (NYSE:ESTC)

Elastic N.V. operates as a search and analytics company, offering a suite of open source and subscription-based solutions for search, observability and security use cases. Its flagship product, Elasticsearch, enables fast and scalable full-text search and analytics across large volumes of structured and unstructured data. Complementary tools such as Kibana provide visualization capabilities, while Beats and Logstash serve as lightweight data shippers and data processing pipelines, respectively.

The company was founded in 2012 by Shay Banon, who serves as chief technology officer, and Steven Schuurman.

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