Elastic (NYSE:ESTC) Posts Better-Than-Expected Sales In Q1, Stock Soars

Max Juang /
2023/08/31 4:18 pm EDT

Search software company Elastic (NYSE:ESTC) reported results ahead of analysts' expectations in Q1 FY2024, with revenue up 17.5% year on year to $293.8 million. The company also expects next quarter's revenue to be around $304 million, in line with analysts' estimates. Turning to EPS, Elastic made a non-GAAP profit of $0.25 per share, improving from its loss of $0.15 per share in the same quarter last year.

Is now the time to buy Elastic? Find out by accessing our full research report, it's free.

Elastic (ESTC) Q1 FY2024 Highlights:

  • Revenue: $293.8 million vs analyst estimates of $284.5 million (3.26% beat)
  • EPS (non-GAAP): $0.25 vs analyst estimates of $0.11 ($0.14 beat)
  • Revenue Guidance for Q2 2024 is $304 million at the midpoint, above analyst estimates of $302.4 million
  • The company slightly raised its revenue guidance for the full year, which now stands at $1.25 billion at the midpoint
  • Free Cash Flow of $37.2 million, up 43.6% from the previous quarter
  • Net Revenue Retention Rate: 113%, down from 117% in the previous quarter
  • Customers: 20,500, up from 20,200 in the previous quarter
  • Gross Margin (GAAP): 73.6%, up from 71% in the same quarter last year

“We had a strong start to the fiscal year, and delivered better than expected results as customers continued to consolidate vendors and adopt Elastic as their AI-powered data analytics platform of choice for addressing multiple real-time search use cases,” said Ash Kulkarni, CEO, Elastic.

Started by Shay Banon as a search engine for his wife's growing list of recipes at Le Cordon Bleu cooking school in Paris, Elastic (NYSE:ESTC) helps companies integrate search into their products and monitor their cloud infrastructure.

Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.

Sales Growth

As you can see below, Elastic's revenue growth has been strong over the last two years, growing from $193.1 million in Q1 FY2022 to $293.8 million this quarter.

Elastic Total Revenue

This quarter, Elastic's quarterly revenue was once again up 17.5% year on year. We can see that Elastic's revenue increased by $13.8 million quarter on quarter, which is a solid improvement from the $5.38 million increase in Q4 2023. Shareholders should applaud the acceleration of growth.

Next quarter's guidance suggests that Elastic is expecting revenue to grow 15% year on year to $304 million, slowing down from the 28.4% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 16.7% over the next 12 months before the earnings results announcement.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Customer Growth

Elastic reported 20,500 customers at the end of the quarter, an increase of 300 from the previous quarter. That's in line with the customer growth we observed last quarter but a bit below what we've typically seen over the last year, suggesting that sales momentum may be slowing a little.

Elastic Customers

Key Takeaways from Elastic's Q1 Results

Sporting a market capitalization of $5.98 billion, Elastic is among smaller companies, but its more than $957.1 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

It was good to see Elastic beat analysts' revenue and non-GAAP operating profit expectations this quarter. Next quarter's guidance was largely ahead, and the full year outlook was raised as well. On the other hand, its net revenue retention fell. Zooming out, we think this was still a solid quarter, showing that the company is staying on track. The stock is up 5.51% after reporting and currently trades at $65.3 per share.

So should you invest in Elastic right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned in this report.