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Investing.com -- S&P Global Ratings revised its outlook for Elastic N.V. to positive from stable while affirming the company’s current ratings.
The rating agency expects Elastic ’s leverage to approach its upside trigger by the end of fiscal year 2026 as the company continues to mature into its new operating model. S&P anticipates leverage will drop to about 2.0x from 2.3x by the quarter ending July 30, 2026.
On October 9, Elastic raised its full-year 2026 revenue guidance due to improved demand visibility, supporting the company’s deleveraging trajectory. On a last 12 months basis, Elastic reported revenue growth of 17%, EBITDA margins of 16%, and free operating cash flow margins of about 19%.
The company also announced its first-ever share repurchase program, authorizing $500 million in buybacks with more than 50% expected to be deployed by the end of fiscal 2026. Going forward, Elastic plans to use about 50% of free cash flow for share repurchases unless better capital allocation opportunities arise.
Despite this new shareholder return initiative, S&P believes Elastic has sufficient capacity to fund these returns given its strong balance sheet and cash flow dynamics. The rating agency views Elastic’s disciplined financial policy as supportive of a potentially higher rating.
S&P could raise its rating if Elastic strengthens its competitive position by sustaining above-average growth, or if the company expands EBITDA margins, grows free operating cash flow, and maintains adjusted leverage below 2.0x.
Conversely, the outlook could return to stable if leverage remains above 2x, which might occur if the company adopts a more aggressive financial policy or if topline growth weakens significantly.
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