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On Friday, Wedbush Securities adjusted its outlook on Elastic NV (NYSE: NYSE:ESTC), reducing the price target to $110 from the previous $135, while sustaining an Outperform rating on the company’s stock. According to InvestingPro data, analyst targets for ESTC range from $75 to $160, with 22 analysts recently revising their earnings expectations upward. The revision followed Elastic’s announcement of its fourth-quarter fiscal year 2025 results, which showed strong performance but was accompanied by a forecast for fiscal year 2026 revenue that fell short of market expectations.
Elastic reported total revenues of $388.4 million for the quarter, surpassing both the Street’s estimate of $380.4 million and the company’s own guidance range of $379.0 million to $381.0 million. The company has maintained strong momentum, with InvestingPro data showing a robust revenue growth of 17% over the last twelve months to $1.48 billion. This success was attributed to the effective execution of the company’s sales strategy and its ability to capitalize on the market demand for platform consolidation and GenAI. The number of customers spending over $100k in annual contract value (ACV) increased to 1,510, up from 1,460 in the prior period.
Despite the overall revenue beat, Elastic’s cloud revenue, which accounted for 47% of total revenue, was slightly below expectations at $181.5 million, a 23% year-over-year increase. This was attributed to challenges within the US public sector and a slower sequential cloud growth rate. However, the company’s GenAI application development continued to show strength, with 2,000 customers using Elastic Cloud for GenAI use cases, up from 1,750 in the previous period, and 310 customers paying over $100k for GenAI, an increase from 270. For deeper insights into Elastic’s growth trajectory and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro.
Elastic’s gross margins exceeded expectations, coming in at 77.0% against the Street’s forecast of 76.7%, aligning with the company’s strong gross profit margin of 74.4% over the last twelve months. Non-GAAP operating margins also outperformed, reaching 15.0%, which was well above both the Street’s projections and the company’s own guidance of 13.5%. This was a result of Elastic’s prudent capital spending and strategic investments in its partner ecosystem, supported by its solid balance sheet with more cash than debt.
In an effort to expand its market share within the security space, Elastic has announced plans to add security sales specialists incrementally throughout the year. This move is part of a broader strategy to double down on the company’s go-to-market approach and capitalize on opportunities in security platform consolidation.
In other recent news, Elastic N.V. reported better-than-expected fourth-quarter results, with adjusted earnings per share reaching $0.47, surpassing the consensus forecast of $0.37. Revenue for the quarter increased by 16% year-over-year to $388 million, beating the expected $380.53 million. Despite these positive results, the company’s revenue guidance for fiscal 2026, projected between $1.655 billion and $1.670 billion, fell short of Wall Street’s $1.69 billion estimate, leading to a 12% drop in after-hours trading. Cantor Fitzgerald responded by lowering its price target for Elastic from $109 to $92, maintaining a Neutral rating, as the firm noted mixed financial results and longer sales cycles in the U.S. Federal segment. Stifel also adjusted its outlook, cutting the price target from $140 to $112 while keeping a Buy rating, citing the cautious revenue guidance and potential headwinds. Needham maintained a Hold rating, highlighting the anticipated pressures from the U.S. Civilian business segment. Analysts are closely watching Elastic’s integration of GenAI capabilities, which have seen growing adoption but have yet to significantly impact financial performance. As Elastic navigates these challenges, its management remains focused on sales execution and innovation in AI, as stated by CEO Ash Kulkarni.
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