Elastic delights investors with earnings and revenue beats – News

The enterprise search technology company Elastic N.V. is getting a lot of attention today after delivering an explosive earnings and revenue beat and forecasting more of the same in the current quarter.

The company reported third-quarter earnings before certain costs such as stock compensation of 63 cents per share, crushing the analyst consensus target of 47 cents. Revenue for the period grew 17%, to $382.1 million, far ahead of the Street’s $368.3 million forecast.

Elastic’s growth was even stronger when looking at its cloud revenue, which rose 26% from a year ago, to $180 million.

As a result, its stock shot up more than 14% after-hours, completely erasing a 2% drop in the hours before its report came out. Investors were even willing to overlook the company’s slide into the red, as it reported a net loss of $17 million in the quarter, compared with a profit of $176.1 million one year ago.

Elastic Chief Executive Ash Kulkarni (pictured) said the company exceeded guidance across all of its key revenue and profitability metrics. “Our results reflect ongoing momentum across all aspects of our business, led by strong sales execution, continued market demand for our products, and our relentless pace of innovation,” he said.

The company is the creator of an enterprise-grade search platform that’s based on the open-source Elasticsearch tool, which is used by companies to store, search and analyze large volumes of both structured and unstructured data. It does this in real time, and it has become a key platform for enterprises whose applications demand complex search features.

In addition, Elastic also sells tools relating to application observability and threat detection, making it easier for organizations to visualize and monitor their applications and networks.

In recent months, Elastic has been looking to position itself as a mainstay of the enterprise artificial intelligence revolution. It says its platform is ideal for large language models, enabling them to search through enormous amounts of information to deliver more accurate, reliable and up-to-date responses based on the latest data available.

It has even built a more specialized tool for LLMs known as Elastic Search AI Lake, which decouples storage from compute. It’s an approach that allows it to scale search across exponentially larger data volumes with rapid query performance for both traditional structured data and unstructured information represented as vectors. It’s a product that has been getting a lot of attention lately, Kulkarni revealed.

“Continued interest from customers building generative AI applications and consolidating onto a single platform helped drive our outperformance during the quarter,” he pointed out.

Holger Mueller of Constellation Research Inc. told News that the AI era has been extremely beneficial for Elastic so far, as its enterprise search platform is a key ingredient for many generative AI applications.

“Ash Kulkarni’s decision to consolidate the company’s offerings into a single platform helped push the company to a record quarter in terms of revenue, and Elastic Cloud has grown to represent almost 50% of its total sales,” the analyst said. “Elastic Cloud should achieve the 50% milestone in the next quarter.”

Regarding Elastic’s drop in profits, Mueller said this won’t be a concern for investors, as last year’s profit was the result of tax income benefits. “Elastic is showing good cost control,” he added.

The company expects more of the same in the weeks to come. Looking to the current quarter, it says it’s expecting to generate revenue of between $379 million and $381 million. That would mean growth of about 13% at the midpoint, and is well ahead of the Street’s forecast of $374.2 million.

In a second announcement today, Elastic said it has hired former Grammarly Inc. and HashiCorp Inc. executive Navam Welihinda as its new chief financial officer. The company cited his experience in helping HashiCorp scale its initial public offering and his knowledge of making money from open-source products.

Photo: News