Elastic N.V. (ESTC) | Investment Case

1. Company Snapshot

1.a. Company Description

Elastic N.V., a search company, delivers technology solutions designed to run in public or private clouds in multi-cloud environments.It primarily offers Elastic Stack, a set of software products that ingest and store data from various sources and formats, as well as perform search, analysis, and visualization.The company's Elastic Stack product portfolio comprises Elasticsearch, a distributed, real-time search and analytics engine, and data store for various types of data, including textual, numerical, geospatial, structured, and unstructured; Kibana, a user interface, management, and configuration interface for the Elastic Stack; Beats, a single-purpose data shippers for sending data from edge machines to Elasticsearch or Logstash; Elastic Agent that offers integrated host protection and central management services; and Logstash, a data processing pipeline for ingesting data into Elasticsearch or other storage systems.

It also provides software solutions on the Elastic Stack that address cases, including app search, workplace search, logging, metrics, application performance management, and synthetic monitoring.The company's platform solutions provide new capabilities that helps users to combine the benefits of the Elastic Stack.The company was incorporated in 2012 and is headquartered in Mountain View, California.

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1.b. Last Insights on ESTC

Elastic N.V.'s recent performance was negatively impacted by a decline in institutional ownership, with Federated Hermes Inc. reducing its stake by 14.0% during the third quarter. Additionally, the company's institutional ownership has been decreasing, with Assenagon Asset Management S.A. decreasing its stake by 68.2% in the undefined quarter. Furthermore, the company's recent earnings release showed a decline in revenue and EPS growth, despite beating estimates. The company's AI-driven bearishness has created value in mid-cap software stocks, but the stock has dropped nearly 30% year-to-date.

1.c. Company Highlights

Last Price	59.46
Change Percentage	-9.19%
Open	64.33
Previous Close	65.48
Market Cap ( Millions)	6265
Volume	1782846
Year High	118.84
Year Low	58.74
M A 50	74.3
M A 200	82.46

FCF Yield	4.83%
Dividend Yield	0.00%
ROE	-11.98%
Debt / Equity	66.29%
Net Debt / EBIDTA	-602.39%
Price To Book	7.09
Price Earnings Ratio	-57.77
Price To FCF	20.71
Price To sales	3.89
EV / EBITDA	170.79

2. Elastic's Q2 FY2026 Earnings: Strong Revenue Growth and Expanding Margins

Elastic N.V. reported a robust second quarter fiscal 2026, with revenue growth of 16% to $423 million, driven by an 18% increase in sales-led subscription revenue to $349 million. The company's non-GAAP operating margin expanded to 16.5%, and the subscription gross margin was 82%. However, the non-GAAP diluted earnings per share was -$0.48256, missing estimates of $0.58. The company's adjusted free cash flow was approximately $6 million.

Publication Date: Nov -21

                                    📋 Highlights
                                    Revenue Growth::
                                                Q2 revenue reached $423 million, up 16% YoY, with sales-led subscription revenue rising 18% to $349 million.
Customer Expansion::
                                                High-spending customers ($100K+) surpassed 1,600, including $26M in commitments from CISA and an 8-figure deal with a chemical manufacturer.
Financial Margins::
                                                Non-GAAP operating margin hit 16.5%, with subscription gross margin at 82% and total gross margin at 78%.
Shareholder Returns::
                                                Approximately $114M returned via buybacks in Q2, with a $500M share repurchase program announced for 2026.
Guidance Raised::
                                                FY2026 revenue guidance increased to $1.715B–$1.721B (16% growth), with sales-led subscription revenue targeting $1.417B–$1.423B (18% growth).

                                

Revenue Growth and Customer Expansion

The number of customers spending over $100,000 with Elastic increased to more than 1,600, and the company secured significant customer commitments, including an 8-figure new logo deal with a chemical manufacturer and a $26 million commitment with CISA. Elastic's CEO highlighted the company's leadership in next-gen SIEM and its ability to overcome complex data challenges. The company's deal momentum was significant, with over 30 commitments greater than $1 million in annual contract value.

Margin Expansion and Cash Flow

Elastic's non-GAAP operating margin was 16.5%, with a total gross margin of 78%. The company's adjusted free cash flow was approximately $6 million in Q2. The company announced a $500 million share repurchase program and returned approximately $114 million in cash to shareholders during Q2, buying back 1.4 million shares at an average price of $84.45.

Guidance and Outlook

Elastic raised its full fiscal year 2026 revenue guidance to $437 million to $439 million, representing 15% growth at the midpoint, and sales-led subscription revenue guidance to $364 million to $366 million, representing 17% growth at the midpoint. The company expects non-GAAP operating margin to be approximately 17.5% for Q3 and 16.25% for the full fiscal 2026.

Valuation and Estimates

With a P/S Ratio of 5.42 and an EV/EBITDA of 1613.96, the market seems to be pricing in significant growth expectations. Analysts estimate next year's revenue growth at 15.2%. The company's ROE is -11.98%, and the ROIC is 361.07%, indicating a potentially challenging profitability profile. The Free Cash Flow Yield is 3.47%, which may be attractive to income investors.

3. NewsRoom

Elastic Delivers GPU Infrastructure to Self-Managed Elasticsearch Customers via Cloud Connect

17:29

Source: businesswire.com

Elastic Adds High-Precision Multilingual Reranking to Elastic Inference Service with Jina Models

16:58

Source: businesswire.com

Elastic N.V. (NYSE:ESTC) Given Consensus Rating of “Moderate Buy” by Analysts

Jan -31

Source: defenseworld.net

Why Elastic Could Be the Next AI Winner in 2026

Jan -30

Source: marketbeat.com

Federated Hermes Inc. Cuts Stock Holdings in Elastic N.V. $ESTC

Jan -29

Source: defenseworld.net

Elastic Announces General Availability of Agent Builder with Expanded Capabilities

Jan -22

Source: businesswire.com

Elastic: AI Tailwinds And Undervalued

Jan -22

Source: seekingalpha.com

Elastic Supercharges Performance for Serverless Offering on AWS

Jan -20

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (20.45%)

6. Segments

Other Subscription

Expected Growth: 26.27%

Elastic N.V.'s Other Subscription segment growth of 26.27% is driven by increasing adoption of its Elastic Stack, expansion into new markets, and growing demand for cloud-based solutions. Additionally, the company's strategic partnerships, innovative product offerings, and strong sales execution are contributing to its rapid growth.

Elastic Cloud

Expected Growth: 13.93%

Elastic Cloud's 13.93% growth is driven by increasing adoption of cloud-based search and analytics solutions, expansion into new markets, and growing demand for real-time data insights. Additionally, Elastic's strategic partnerships, innovative product offerings, and strong sales execution contribute to its rapid growth.

Services

Expected Growth: 14.43%

Elastic N.V.'s 14.43% growth is driven by increasing adoption of cloud-based search and analytics solutions, expansion into new markets, and growing demand for real-time data insights. Additionally, the company's innovative products, such as Elastic Stack and Elastic Cloud, are gaining traction among enterprises, contributing to its rapid growth.

7. Detailed Products

Elasticsearch

A search and analytics engine that allows users to store, search, and analyze large volumes of data in real-time.

Kibana

A data visualization tool that provides real-time insights into data stored in Elasticsearch.

Logstash

A data processing pipeline that collects, transforms, and loads data into Elasticsearch.

Beats

A family of lightweight, open-source data shippers that collect data from various sources and send it to Elasticsearch.

Elastic Stack

A suite of products that includes Elasticsearch, Kibana, Logstash, and Beats, providing a comprehensive solution for data collection, storage, and analysis.

Elastic Cloud

A cloud-based service that provides a managed Elasticsearch experience, including deployment, management, and scaling.

Elastic Security

A security solution that provides threat detection, incident response, and security analytics.

Elastic Observability

A solution that provides real-time observability into application performance, infrastructure, and user experience.

8. Elastic N.V.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Elastic N.V. operates in a niche market with limited substitutes, but the threat of substitutes is still present due to the evolving nature of the technology industry.

Bargaining Power Of Customers

Elastic N.V. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products and services are often critical to its customers' operations, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

Elastic N.V. has a diverse supplier base, which reduces the bargaining power of individual suppliers. The company's scale and global presence also give it negotiating power when dealing with suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the technology industry, including the need for significant investments in research and development, marketing, and sales.

Intensity Of Rivalry

The technology industry is highly competitive, with many established players and new entrants vying for market share. Elastic N.V. faces intense competition from companies such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	59.83%
Debt Cost	3.95%
Equity Weight	40.17%
Equity Cost	8.54%
WACC	5.79%
Leverage	148.97%

11. Quality Control: Elastic N.V. passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

PTC

A-Score: 5.1/10

Value: 2.1

Growth: 8.3

Quality: 8.9

Yield: 0.0

Momentum: 4.0

Volatility: 7.3

1-Year Total Return ->

Aspen Technology

A-Score: 4.6/10

Value: 3.3

Growth: 5.1

Quality: 5.9

Yield: 0.0

Momentum: 7.0

Volatility: 6.0

1-Year Total Return ->

Progress Software

A-Score: 4.2/10

Value: 4.4

Growth: 6.4

Quality: 5.9

Yield: 1.0

Momentum: 0.5

Volatility: 6.7

1-Year Total Return ->

Manhattan Associates

A-Score: 4.1/10

Value: 0.8

Growth: 7.9

Quality: 8.7

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

Elastic

A-Score: 3.8/10

Value: 3.2

Growth: 8.0

Quality: 4.9

Yield: 0.0

Momentum: 3.0

Volatility: 4.0

1-Year Total Return ->

Agilysys

A-Score: 3.8/10

Value: 0.0

Growth: 7.9

Quality: 7.5

Yield: 0.0

Momentum: 4.0

Volatility: 3.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-0.51%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.79%

Elastic N.V. - NL0013056914

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ESTC

1.c. Company Highlights

Strong Momentum

Expensive

Average Growth

Earnings Beats

Revenues Beats

Higher Growth

Fairly Valued

Medium Volatility

Stable Momentum

Revenues Miss

Weak Momentum

Average Quality

Average Yield

Lower Quality

Earnings Miss

2. Elastic's Q2 FY2026 Earnings: Strong Revenue Growth and Expanding Margins

Revenue Growth and Customer Expansion

Margin Expansion and Cash Flow

Guidance and Outlook

Valuation and Estimates

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (20.45%)

6. Segments

Other Subscription

Expected Growth: 26.27%

Elastic Cloud

Expected Growth: 13.93%

Services

Expected Growth: 14.43%

7. Detailed Products

Elasticsearch

Kibana

Logstash

Beats

Elastic Stack

Elastic Cloud

Elastic Security

Elastic Observability

8. Elastic N.V.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Elastic N.V. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

59.46$

Current Price

59.46$

Potential

12.e Scoring ^Insights

12.f DCF ^BETA