Enterprise software company Elastic (NYSE:ESTC) reported financial results for its fiscal second quarter of 2025 last week and the report was received with enthusiasm by investors. The stock gained more than 20% last week, mainly thanks to the Q2 report.
Elastic stocks are on the move again today thanks to commentary from Wedbush analyst Dan Ives. According to The Fly, Ives believes in principle that the time has come for artificial intelligence (AI) to catalyze the growth of software companies, including Elastic. He (like other prominent analysts) therefore recommends that investors buy Elastic shares, causing the stock to rise.
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As of 11:30 a.m. ET, Elastic shares were up about 4%, but earlier in the day they were up almost 8%.
In a nutshell, Elastic allows its customers to search their data. When it comes to search, generative AI can be useful and that appears to be the case with Elastic. In the Q2 call, CEO Ash Kulkarni said: “In the second quarter, we saw strong customer engagement with key wins across all our solution areas, especially in search powered by generative AI.”
The proof is in the pudding for Elastic. The company won a number of key customers in the second quarter, expenses increased and remaining performance obligations rose 13% year over year to nearly $1.3 billion. It seems Ives and others are right to note that AI is currently giving Elastic the tailwind.
For the 2025 budget year (which is already half over), Elastic expects revenue growth of 15%. It’s worth noting that this is slower than the 19% growth in fiscal year 2024. And expectations are lower than expectations when the fiscal year began.
It may seem counterintuitive for investors to celebrate Elastic’s financial results while growth is slowing and guidance was revised downwards earlier this year. But the context here is that enterprise software companies were struggling early this year as customers were reluctant to spend money. But in recent months the cold has begun to thaw, leaving investors excited about Elastic and others heading into next year.
Before you buy shares in Elastic, consider the following:
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