Elastic N.V. Q3 FY2025 earnings call

• Strong sales execution and ongoing market demand for products led to outperforming guidance metrics. - Gen AI is a powerful tailwind, with over 1,750 Elastic Cloud customers using for Gen AI use cases and over 270 spending $100,000 or more annually. - Product innovations include Elastic Cloud Serverless (general availability on AWS, tech preview on Azure), logsdb index mode, and the Elastic Rerank model. - Customer wins in search, observability, and security, such as a seven-figure deal with a smart water management company and a military unit using Elastic Security. - Participated in events like ElasticON conferences and AWS Reinvent, where Elastic was honored with an award.

Total revenue in the third quarter was $382 million, up 17% year-over-year. Cloud revenue grew 26% year-over-year and represented 47% of total revenue. Subscription revenue totaled $358 million, up 16% year-over-year. Professional services revenue was $24 million, up 18% year-over-year. Search was the fastest-growing solution driven by Gen AI. Geographically, the Americas grew the fastest, followed by EMEA and APJ. Ended the third quarter with over 1,460 customers with annual contract values more than $100,000, and a net expansion rate of approximately 112%.

• Raised full-year total revenue outlook for fiscal 2025. Q4 2025 revenue expected $379M-$381M (13% y/y growth at midpoint). Full-year 2025 revenue expected $1.474B-$1.476B (16% y/y growth at midpoint). - Fiscal 2026 guidance to be provided later, with investments in Gen AI and balancing revenue growth with profitability. - Expect to expand non-GAAP operating margin modestly in fiscal 2026, with investments front-loaded in Q1 2026.

Q: Pinjalim Bora asked about cloud strength and sustainability.

A: Ashutosh Kulkarni said cloud had healthy consumption from enterprise and commercial accounts, but Q4 guide is prudent.

Q: Raimo Lenschow asked about self-service business and security event management.

A: Ashutosh Kulkarni discussed self-service cloud motion being flattish and security interest in AI-led automation.

Q: Sanjit Singh asked about cloud growth drivers and vector search.

A: Ashutosh Kulkarni said strength was broad-based across solutions, and vector search increases TAM.

Q: Matt Hedberg asked about GenAI impact on platform mix.

A: Eric Prengel said historically ~40% observability, ~25% security, rest search, with search growing fast due to GenAI.

Q: Rob Owens asked about customer count and land.

A: Ashutosh Kulkarni said focus on enterprise and mid-market high propensity customers, with more million-dollar customers added in early 2025 than all of 2024.

Q: Howard Ma asked about vector database displacements and self-managed growth.

A: Ashutosh Kulkarni said not baking in specific displacements, and Eric Prengel said happy with growth in both self-managed and cloud.

Q: Michael Cikos asked about industry M&A impact.

A: Ashutosh Kulkarni said benefit from customers wanting to consolidate onto Elastic due to incumbent issues.

Q: Kash Rangan asked about generative AI rollout.

A: Ashutosh Kulkarni said Elastic plays in retrieval for Gen AI applications, increasing TAM.

Q: Andrew Nowinski asked about GenAI customers and cross-sell.

A: Ashutosh Kulkarni said GenAI has strong traction with larger customers, and cross-selling across solutions.

Q: Jake Roberge asked about go-to-market transition and licensing model.

A: Ashutosh Kulkarni said focus on pipeline progression and higher propensity customers, and licensing change to be visible in open source.

Q: Andrew Sherman asked about sales and marketing growth.

A: Eric Prengel said comfortable with headcount and investing in business for fiscal 2026.

Q: Shrenik Kothari asked about up-tier expansions.

A: Ashutosh Kulkarni said multiple factors like AI features drive up-tiering.

Q: Joel Fishbein asked about Q4 renewals.

A: Eric Prengel said no specific color on renewals, but mentioned pull-forward business in Q4 2024 and modeling factors for Q4 2025.