Elastic (ESTC) investor relations material

Business performance and growth trends

• Sales-led subscription revenue growth accelerated to 19%, with a record number of million-dollar deals and strong operating income.

• Segmentation of sales teams into hunting and farming territories has improved strategic deal signings and business growth.

• AI adoption is robust, with nearly a quarter of $100K+ customers using AI, driving a tailwind for revenue.

• Self-managed deployments are increasing, especially in regulated industries, government, and Europe, due to data sovereignty and security needs.

• Full-year sales-led subscription revenue compounded at or above 20% for four years, with risk-adjusted guidance for Q4 reflecting fewer days in the quarter.

AI strategy and competitive positioning

• Platform enables real-time, relevant data context for large language models, supporting AI use cases at scale.

• Differentiation comes from advanced features in paid versions, operational scalability, and enforceable licensing.

• Defensible moat is the data store and context accuracy, making it unlikely for LLM makers to replicate the platform.

• AI workloads are more computationally intensive, increasing platform consumption and revenue uplift, with a 6% average increase among AI users.

• AI adoption among $100K+ customers is in the mid-20% range, expected to drive steady revenue growth through 2029.

Product innovation and platform evolution

• Platform now includes vector search, Jina embedding and re-ranker models, Agent Builder, workflow, LLM observability, and Elastic Inference Service.

• Context engineering is central, providing LLMs with accurate context, memory, retrieval, and deterministic rules for agentic deployments.

• Security and search solutions are benefiting from AI, with security leading recent quarters and observability growing at industry pace.

• New metrics data store, leveraging vector store technology, is set to launch mid-year to enhance observability competitiveness.

• Continuous efficiency improvements in the platform have created headwinds for revenue but are seen as strategic for long-term market share.