DoD tests AI models that make it easy to switch from vendors like Palantir
On Friday, Needham maintained a Hold rating on Elastic NV (NYSE:ESTC), as the market anticipated a weaker performance. With a market capitalization of $9.6 billion and analyst targets ranging from $75 to $160, the stock currently trades at $92. The firm’s analysis comes after the company provided its first full-year financial guidance under the new Chief Financial Officer, Navam Welihinda, who began his role in late February. According to InvestingPro, 22 analysts have recently revised their earnings estimates upward for the upcoming period. The guidance reflects expected pressures from the U.S. Civilian business in the April quarter, which is a small part of Elastic’s Public Sector business, a top five vertical for the company.
The management’s forecast for the fiscal year 2026 indicates an 11% year-over-year growth in constant currency terms. This projection was made by applying the weaker trends from the U.S. Civilian segment across the company’s other business areas. This forecast comes despite Elastic’s Net Expansion Rate over the past four quarters being reported at 112%. The company has demonstrated strong historical performance with revenue reaching $1.48 billion and maintaining a robust gross margin of 74.39%. InvestingPro analysis reveals additional insights about Elastic’s financial health and growth potential, with over 30 key metrics available to subscribers.
The company’s recent introduction of GenAI capabilities has been met with growing adoption. However, this technological advancement has not yet translated into a noticeable impact on Elastic’s financial performance. The analysts suggest that the market’s reaction to the new financial guidance might lead to a decline in Elastic shares during Friday’s trading session.
Elastic’s performance in the public sector, particularly within the U.S. Civilian business, is a key focus for analysts and investors, as it has been highlighted as a significant factor affecting the company’s growth trajectory. The management’s decision to use these trends to inform their broader revenue guidance suggests a cautious approach to forecasting amidst a dynamic business environment.
Investors and market watchers will be closely monitoring Elastic’s financial progress as the company continues to integrate GenAI capabilities and as it operates under the strategic direction of the new CFO. The full impact of these changes on Elastic’s market position and financial health will be revealed as the company progresses through the fiscal year. With an overall Financial Health score of "FAIR" according to InvestingPro, which offers comprehensive analysis through its Pro Research Report, investors can access detailed insights into Elastic’s valuation, growth prospects, and financial stability among 1,400+ top US stocks.
In other recent news, Elastic N.V. announced its fourth-quarter results, reporting adjusted earnings per share of $0.47, surpassing the consensus forecast of $0.37. The company’s revenue rose 16% year-over-year to $388 million, beating expectations of $380.53 million. Despite these positive results, Elastic’s revenue guidance for fiscal 2026 disappointed investors, with projections ranging from $1.655 billion to $1.670 billion, below Wall Street’s estimate of $1.69 billion. This guidance implies a 12% growth from fiscal 2025, which is less than anticipated. Stifel analysts responded by lowering their price target for Elastic from $140 to $112, although they maintained a Buy rating on the stock. The analysts cited macroeconomic pressures and longer sales cycles as challenges, particularly with U.S. Civilian Federal customers. They noted that Elastic’s SaaS revenue did not meet expectations and that the company issued conservative guidance due to potential public sector weakness. Elastic’s CEO, Ash Kulkarni, highlighted strong growth driven by sales execution and demand for the company’s solutions, with a significant increase in Elastic Cloud revenue by 23% year-over-year.
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