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 and more than 1,300 using Elastic Cloud for generative AI use cases.

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

• Strong momentum in generative AI and search business, with notable customer wins, platform consolidation, and product innovation.

• Outperformed high end of revenue and profitability guidance, but total customer commitments closed in Q1 fell short of expectations due to sales segmentation changes and macroeconomic headwinds.

Financial highlights

• Total Q1 revenue: $347 million, up 18% year-over-year; subscription revenue: $324 million, up 20% year-over-year; Elastic Cloud revenue: $157 million, up 30% year-over-year.

• Professional services revenue: $24 million, up 1% year-over-year.

• Non-GAAP operating margin: 10.7%–11%; non-GAAP gross margin: 76%–76.3%; adjusted free cash flow margin: 18%.

• Diluted EPS: $0.35 (non-GAAP); GAAP net loss per share: $0.48; net loss: $49.2 million.

• Cash, cash equivalents, and marketable securities totaled $1.15 billion as of July 31, 2024.

Outlook and guidance

• Q2 FY25 revenue expected between $353 million and $355 million, representing 14% year-over-year growth; non-GAAP operating margin expected at ~13%; non-GAAP EPS between $0.37 and $0.39.

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

• Guidance reflects Q1 performance, assumes macro environment remains unchanged, and expects slower deal closures to impact revenue.

• 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.