- Total Revenue Growth: 18% to $450 million, exceeding guidance with 18.6% non-GAAP operating margin.
- Sales-Led Subscription Revenue: 21% growth to $376 million, driven by AI adoption and large customer commitments.
- CRPO Milestone: Crossed $1 billion for the first time, up 19% to $1.06 billion, with RPO growing 22% (best in two years).
- AI-Driven Expansion: 3,000+ AI customers, including 2,700 using Elastic Cloud as a vector database, and 30% growth in $1M+ annual commitments.
- Shareholder Returns: Returned $186 million via buybacks (60% of $500M program), with $54 million adjusted free cash flow (12% margin).
Key Drivers of Growth
The number of customers with an annual contract value (ACV) of $100,000 or greater exceeded 1,660, growing 14%. Current remaining performance obligations (CRPO) crossed the $1 billion mark for the first time, growing 19% to $1.06 billion. Elastic's AI capabilities are driving growth, with over 3,000 AI customers, including more than 2,700 on Elastic Cloud using it as a vector database. As Navam Welihinda, CFO, highlighted, the company's strong execution, consumption trends, and customer commitments support future growth.
Valuation Metrics
Elastic's current valuation metrics indicate a P/S Ratio of 3.27 and an EV/EBITDA of 62.87. With analysts estimating next year's revenue growth at 13.5%, the company's current valuation appears to be pricing in a significant growth premium. The Free Cash Flow Yield is 4.68%, which may be attractive to income investors.
AI and Growth Prospects
Elastic sees AI as a key driver of growth, with a focus on penetration of AI within its customer base. The company's context engineering platform provides a critical part of the infrastructure for AI applications, with capabilities including vector search, hybrid search, and agent builder. The recent CISA win for SIEM as a service is expected to drive growth for multiple quarters, and the company feels confident about exceeding its midterm growth guide of 20%.
Operational Highlights
Cloud revenue grew 27% year-over-year, with strong commitments and performance on sales-led subscription revenue. The number of agents and AI services in production has increased, with a broadening of use cases beyond search-related workflows to security and observability workflows. Elastic charges customers based on consumption, with pricing based on compute, storage, and tokens for LLM-related activities.
Guidance and Outlook
For Q4, Elastic expects total revenue of $445-447 million and sales-led subscription revenue of $371-373 million. For the full year, total revenue is expected to be $1.734-1.736 billion, with sales-led subscription revenue of $1.434-1.436 billion and non-GAAP operating margin of approximately 16.3%. The company's guidance suggests a continued strong growth trajectory, driven by AI and cloud revenue growth.