Elastic beats earnings expectations but its stock crumbles in late trading on mounting losses – News

Shares of the enterprise search software company Elastic N.V. were hammered in late trading today even though the company posted a solid earnings beat and offered strong guidance for the current quarter and full year.

The company reported third-quarter earnings before certain costs such as stock compensation of 64 cents per share, exceeding Wall Street’s forecast of just 58 cents. Meanwhile, revenue for the period grew 16%, to $423 million, surpassing the analyst consensus estimate of $418.2 million. It was a decent performance by the company, driven by strong growth in cloud revenue, which rose 22% to $206 million.

Investors may be more worried about Elastic’s profitability than its revenue growth, however. Despite growing its income, the company posted an overall loss of $51.2 million in the quarter, double the $25.4 million loss it reported in the year-ago quarter.

Unfortunately for Elastic, Wall Street has become a tad nervous about technology stocks lately and its results were not nearly strong enough to overcome the growing fears of an AI bubble that’s about to burst. Elastic’s stock was battered in late trading, losing more than 12%, having already fallen 7% during the regular trading session. The after-hours beating means Elastic’s stock is now down 17% in the year to date, trailing the broader S&P 500 Index, which has gained 11% so far this year.

Elastic Chief Executive Ash Kulkarni (pictured) nevertheless hailed an “outstanding quarter” for the company, noting that it outperformed guidance across every metric. “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,” he said.

Constellation Research analyst Holger Mueller agreed with the CEO’s assessment, saying that the company is growing nicely in his opinion. “But the management didn’t pay too much attention to costs, and investors don’t seem to like it,” he said.

Elastic is the creator of the open-source Elasticsearch tool, which is used by enterprises to store, search and analyze large volumes of structured and unstructured data in real-time. Elastic sells an enterprise-grade version of the open-source offering, adding extra functionality and managed services on top. It’s a useful platform for businesses with applications that require sophisticated search capabilities.

Besides its main offering, the company also has a growing business selling tools relating to application observability and threat detection, which make it easier for companies to visualize and monitor their business-critical apps. Given that it’s all about data, Elastic has been looking to take advantage of the booming artificial intelligence industry, positioning Elasticsearch as a platform for feeding real-time data to large language models.

The company has been talking about AI as a growth driver for some time already, and it is making progress in that direction. During the quarter, it launched a new Agent Builder tool in preview and an AI agent capability in Elastic Observability called Streams. The company also swooped to acquire a startup called Jina AI Inc. to expand its search capabilities.

Despite these maneuverings, it’s not clear how much of an impact AI is having in terms of the ongoing adoption of the Elasticsearch platform. Nonetheless, Elastic does continue to grow, and once again it raised its full-year earnings forecast. It said it now expects fiscal 2026 earnings of between $2.40 and $2.46 per share, ahead of the Street’s $2.36 per share. Meanwhile, its revenue guidance was bumped up to a range of $1.715 billion to $1.721 billion, also surpassing the analysts’ consensus of $1.7 billion.

For the current quarter, Elastic sees earnings of 63 to 65 cents per share on revenue of $437 million to $439 million. The Street is looking for 60 cents per share in earnings and $429.9 million in sales.

Elastic also reported current remaining performance obligations of $971 million, up 17% from a year earlier, and maintained a net expansion rate of 112%.

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