Elastic N.V. Q1 FY2026 earnings call

• Elastic had an excellent Q1 with 20% revenue growth, surpassing guidance. Sales-led subscription revenue grew 22%. Non-GAAP operating margin was 16%.
• Over 1,550 customers spent over $100,000. Demand for Elasticsearch AI platform strong, driven by search, observability, and security.
• 2,200 Elastic Cloud customers using gen AI use cases, over 330 spending >$100k annually. 1/3 of new and expansion security wins were competitive displacements.
• Named leader in Forrester Wave: Security Analytics Platform and Gartner Magic Quadrant for Observability. Serverless now GA on all 3 cloud hyperscalers, gaining traction.
• Visited multiple regions, highlighting need for data solutions and continued investment in product features.

Total revenue in Q1 was $415 million, growing 20% as reported and 18% on a constant currency basis. Sales-led subscription revenue (excluding monthly Elastic Cloud) was $339 million, growing 22% as reported and 20% on a constant currency basis. CRPO at the end of Q1 was approximately $956 million, growing 18% year-over-year. The $100,000 annual contract value customer count grew approximately 13% year-over-year. Revenue performance was broad-based across cloud and self-managed environments.

• Q2 FY2026 total revenue expected $415M - $417M (14% growth midpoint). Non-GAAP operating margin ~16%. EPS $0.56 - $0.58.
• FY2026 total revenue raised to $1.679B - $1.689B (14% growth midpoint). Non-GAAP operating margin ~16%. EPS $2.29 - $2.35.

Forward-looking statements subject to risks and uncertainties in press release, SEC filings. Macroeconomic uncertainties affecting business.

Q: Congrats on the results. Really, really good to see early in the fiscal year. I guess maybe the first one for you, Ash. It was really good to hear about AI relevance with Elastic Cloud and even the progress on serverless thus far. I guess I'm wondering, is there a way to think about what customers -- the uplift in customer spend is when they start to think about growing usage of Elastic to support AI. It really does feel like you guys are becoming a bit of a center of gravity for that. But any way to kind of think about what this is doing to customer spend or usage and maybe it becomes even more evident with serverless?

A: Yes, Matt, thanks for the question. And like you said, our gen AI momentum is something that we feel really, really good about. The customer adoption has been strong. 2,200 customers in Elastic Cloud now using us for gen AI use cases. What we are seeing is as customers start to use us for all of these AI applications, these workloads tend to be more compute-intensive. And that obviously means that the growth sort of helps. And when we've described it as a tailwind, that's really what it is. Now the extent to which that growth manifests itself, the workload cost depends upon the kind of data, depends upon the kind of use case because these AI computations tend to take up more CPU, tend to take up more memory. And as you know, our consumption model is biased towards that. So it's hard to give a precise number, but what we can say is that there is definitely an improvement in sort of the overall consumption that we see as customers use us for AI. Now let me repeat that fundamentally, we are still early in the AI journey. So we are seeing some contribution from AI, but we are very early, and I see a long path here, where by being the core foundation for AI for our customers as they are making multiyear decisions here, this is going to be a tailwind for us for many years to come.

Q: This is George McGreen on for Koji. I really appreciate it. I have one -- I wanted to ask on the growth mix. Just understanding, obviously, there's a lot of momentum with gen AI in search. But if you could maybe stack rank or give us a framework to think about how growth across the business is kind of playing out in observability and security as well?

A: Yes, George, thanks for the question. So this was a really strong quarter with a very broad performance strength that we saw across all solution areas. Search, driven by gen AI continues to be a very strong tailwind for us. But this quarter, we also saw security and the platform consolidation motion that we've been describing work very, very nicely for us. I think one of the stats that I talked about was the fact that 1/3 of the business in security this quarter came from competitive displacements. And these deals take some time to build, but we are starting to see that momentum. And this is primarily because customers are looking to consolidate onto platforms that tend to see security and observability as a data problem. And we've always done that incredibly well. And as the amount of data, the complexity of data is growing as it's becoming more and more important to use AI techniques to try and drive automation, even in security and observability, we are seeing our ability to compete and take share really improve, and that's something that we see as a very exciting thing for the future.

Q: Robbie David Owens: I really want to drill down on the success that you're seeing on the security front. I think you said 1/3 of it was coming from competitive displacements. And obviously, we're seeing a lot of success, I think, across the board from vendors that are competing for this next-generation SIEM opportunity. So I guess relative to the unlock that happened this quarter, was there anything in particular that drove that momentum? Was it more just how the pipeline set up? And as we look forward, maybe what are some of the different key ingredients to further unlock customers that have been with some of those legacy vendors for some time?

A: Yes, that's a great question. And what's driving that unlock is really a greater and greater appreciation for the fact that security really is a data problem. In the modern landscape today, with attacks getting more and more sophisticated, it is becoming incredibly important to make sure that you're bringing in all of the data, all of the security-related signals, analyzing all of them, correlating across all of them and then using AI automation to really try and make it easier for the SOC analysts to identify what the issues might be. And the way we think about it is you miss 100% of the threats and attacks in the data that you don't see. And for that reason, we've always had this mentality of thinking of security from a data-first perspective. Our back end is designed for that. Our AI capabilities are designed for that. And as customers are appreciating this, we are seeing them make multiyear decisions to consolidate onto our platform and that's driving the momentum. And we are really leaning in. So one of the announcements that we made, the Elastic Security, the AI SOC Engine or EASE, as we call it. What it lets you do is even if you're using an incumbent different SIEM solution, it allows you to take all of the alerts that might be generated in that solution and then use our AI capabilities to identify attacks within that alert data, which is incredibly powerful because what that means is you don't have to change your current infrastructure. You can use Elastic on top of it to get significantly more incremental value, and that becomes a stepping stone sort of an on-ramp for customers to then eventually displace, completely take out their existing incumbent and move completely to our solution. So it's things like that, that we've been working on that give me a lot of confidence on how this is going to progress in the coming years.