Elastic grows revenue and expands its customer base, but light guidance weighs on stock

Elastic grows revenue and expands its customer base, but light guidance weighs on stock

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Enterprise search technology provider Elastic N.V. delivered strong fourth quarter earnings results today, beating expectations, only for its stock to fall in after-hours trading on the back of soft guidance.

The company reported a net loss of $46.7 million, improving from the $65.6 million loss it posted one year ago. Earnings before certain costs such as stock compensation came to 22 cents per share on revenue of $279.9 million, up 17% from the year prior. They were good results, with Wall Street analysts targeting earnings of just 9 cents per share on revenue of $277.2 million.

For the full year, Elastic reported a net loss of $236.2 million, up from a loss of $203.8 million in fiscal 2022. Revenue for the year totaled $1.07 billion, up from $862.3 million a year earlier.

Elastic is the creator of the popular open-source Elasticsearch software and sells a commercial version of that platform. Elasticsearch is used by enterprises to store, search and analyze massive volumes of structured and unstructured data very quickly, in close to real time. The software sits at the heart of millions of applications that have complex search capabilities.

In more recent years, Elastic has diversified its business to sell threat detection software and application observability tools that companies can use to track network performance.

Elastic Chief Executive Ash Kulkarni (pictured) said his team managed the business with discipline to achieve a stronger-than-expected operating margin in the fiscal year. “I am proud of how our team executed as we continued to focus on helping customers drive better business outcomes in the current business climate,” he said.

Elastic once more highlighted the growth of its cloud business, which delivered revenue of $122 million in the quarter, up 28% from a year earlier.

Other signs of progress include a total subscription customer count that rose to 20,200 at the end of the quarter, up from 18,600 at the end of fiscal 2022. Elastic’s number of customers who deliver at least $100,000 in annual recurring revenue rose to 1,160, up from just 960 a year earlier. It also reported a net expansion rate of 117%.

Despite the encouraging growth, Elastic caused some dismay with its cautious guidance for the coming quarter. It said it’s expecting to see earnings of between 10 cents and 12 cents per share in the first quarter of fiscal 2024, with revenue of between $283 million and $286 million. Unfortunately, that wasn’t what investors wanted to hear, as Wall Street’s consensus estimate calls for earnings of 13 cents per share on revenue of $285.5 million.

Elastic’s stock had already dipped almost 2% in the regular trading session today, and dropped by another 6% in extended trading.

The company did at least offer more optimistic full-year guidance, saying it expects to see fiscal 2024 earnings of between 94 cents and $1.06 per share on revenue of $1.24 billion to $1.25 billion. Wall Street is looking for full-year earnings of just 89 cents per share on revenue of $1.25 billion.

During the quarter, Elastic announced the availability of a promising new tool called the Elasticsearch Relevance Engine to power generative artificial intelligence applications. ESRE, as it’s known, will enable companies to build highly specialized AI models trained on their own proprietary data, both structured and unstructured.

“We are confident about the opportunity ahead of us, especially in the area of generative AI,” Kulkarni said in a statement.

Photo: SiliconANGLE

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