European stocks retreat on tech valuation concerns; U.K. economic woes
SAN FRANCISCO - Elastic N.V. (NYSE:ESTC) shares fell 9.1% despite reporting second-quarter fiscal 2026 results that beat analyst expectations, as investors appeared concerned about future growth prospects despite raised guidance.
The Search AI Company posted adjusted earnings of $0.64 per share for the quarter ended October 31, exceeding the analyst consensus of $0.58. Revenue reached $423 million, up 16% YoY (15% in constant currency) and above the $418.23 million analyst estimate. Elastic Cloud revenue, a key growth driver, increased 22% YoY to $206 million.
Despite what management called "an outstanding quarter" with raised full-year guidance, investors sent shares lower following the report. The company boosted its fiscal 2026 revenue outlook by $18 million, now expecting $1.715-1.721 billion compared to the previous analyst consensus of $1.706 billion.
"Q2 was an outstanding quarter for Elastic. We beat the high end of our guidance across all metrics," said Ash Kulkarni, chief executive officer. "Our deep expertise in managing unstructured data, combined with our clear product differentiation and context engineering leadership, positions Elastic as the natural leader for search, AI, observability, and security."
For the third quarter, Elastic projects revenue between $437-439 million, above the $429.9 million consensus, and adjusted earnings of $0.63-$0.65 per share, higher than the $0.60 analyst estimate.
The company highlighted its AI-related initiatives, including launching Agent Builder in technical preview and introducing Streams, an agentic AI capability within Elastic Observability. Elastic also acquired Jina AI to enhance its search capabilities and launched a $500 million share repurchase program, buying back approximately 1.4 million shares at an average price of $84.45 during the quarter.
Elastic’s current remaining performance obligations were $971 million, increasing 17% YoY, while the company maintained a net expansion rate of approximately 112%.
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