Elastic (ESTC) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue reached $347 million, up 18% year-over-year, with Elastic Cloud revenue at $157 million, up 30% year-over-year and now representing 45% of total revenue.

• Subscription revenue accounted for 93% of total revenue, with over 1,370 customers having annual contract value above $100,000; total subscription customers reached ~21,200.

• Net expansion rate remained healthy at approximately 112%, reflecting strong customer retention and expansion.

• Outperformed high end of revenue and profitability guidance, but total customer commitments closed fell short of expectations due to sales segmentation changes and macroeconomic headwinds.

• Strong momentum in generative AI, with over 1,300 customers using Elastic Cloud for GenAI use cases and continued investment in product innovation.

Financial highlights

• Total revenue: $347.4 million, up 18% year-over-year; Elastic Cloud revenue: $157 million, up 30% year-over-year, representing 45% of total revenue.

• Subscription revenue: $324 million, up 20% year-over-year; professional services revenue: $24 million, up 1% year-over-year.

• Non-GAAP gross margin: 76.3%; GAAP gross margin: 73.6%; subscription gross margin: 79%.

• Non-GAAP operating margin: 10.7%–11%; GAAP operating margin: -9.7%–-10%.

• Adjusted free cash flow margin: 18% ($64 million); cash, cash equivalents, and marketable securities totaled $1.15 billion.

Outlook and guidance

• Q2 FY25 revenue expected between $353–$355 million (14% year-over-year growth); non-GAAP operating margin ~13%; non-GAAP diluted EPS $0.37–$0.39.

• FY25 revenue guidance: $1.436–$1.444 billion (14% year-over-year growth); non-GAAP operating margin ~12.5%; non-GAAP diluted EPS $1.52–$1.56.

• Guidance reflects Q1 shortfall and assumes macro environment remains unchanged; expects sales execution improvements over next couple of quarters.

• Management expects Elastic Cloud's contribution to continue increasing, with a modest adverse impact on gross margin due to third-party hosting costs.

• The company believes existing liquidity and future operations will fund needs for at least the next 12 months.