ELASTIC N V earnings calls

Why big growth in $100k customers

Q (Matthew Hedberg · RBC): Why did you add so many $100,000 customers now? Is that growth sustainable and how does AI use affect NRR?

A: Management said the sales segmentation change and a stronger new-and-expand motion drove bigger, longer commitments from high-value customers. They noted the $100,000 cohort now represents 90% of sales-led subscription revenue and AI use in that cohort rose to 37%, which they expect to boost expansion.

"By the way, this $100,000 cohort now represents 90% of our sales-led subscription revenue." — Ashutosh Kulkarni (CEO)

Connection check

Q (Tyler Radke · Citi): Can you guys hear me okay?

A: The analyst checked audio. The operator confirmed the connection before the analyst resumed.

Cloud bookings and mix

Q (Tyler Radke · Citi): Any one-offs in cloud this quarter? How did cloud bookings and consumption compare to historical levels, and what about future cloud growth?

A: Management said cloud performed well with strong commitment volume and steady consumption against annual commitments. They noted annual cloud growth improved to 27% this quarter from 26% last quarter and that cloud is variable quarter-to-quarter since it's consumption-based.

"But our annual cloud growth improved to 27% this quarter, up from 26% last quarter." — Navam Welihinda (CFO)

Where customers run AI (cloud/on-prem)

Q (William Miller Jump · Truist): How are AI deployments split across cloud, on-prem and hybrid? Any differences versus other use cases? Also, any Fed vertical guidance effects from the SSA deal?

A: Management said most customers start in cloud, but regulated and international customers often require on-prem or self-managed deployments for data and operational sovereignty. For the Fed vertical, they said the SSA contract is performing well but they had nothing specific to call out in guidance as a big tailwind or headwind.

"So going forward, what I would expect is AI deployments are going to be based on factors like the criticality of the data, the sensitivity of the data, the kind of customer in their geo location, so those will be bigger factors, but you're going to see AI adoption both in cloud and in self-managed?" — Ashutosh Kulkarni (CEO)

Customers building agent context and security revenue

Q (Brian Essex · JPMorgan): How are customers using Elastic to build agent context and protect proprietary data? Also, what share of revenue is security today?

A: Management said Elastic fits into agent stacks by providing the context retrieval layer, improving accuracy, speed and cost through precomputed context and flexible model choices. They said they do not disclose security as a percentage of revenue but that security is a strong, high-growth area for them.

"As a percentage of revenue, we don't disclose that, Brian." — Navam Welihinda (CFO)

Observability metrics backend and autonomous features

Q (Robbie Owens · Piper Sandler): What are the new metrics capabilities, pricing, and early customer feedback on autonomous security and observability features?

A: Management explained they built a new columnar backend tuned for time series that improves storage efficiency, ingest and query performance, making them competitive in metrics. Early feedback from customers has been positive and their autonomous security capabilities are differentiated by openness and visibility into skills and tools.

"And this columnar backend has been really tuned for basically all kinds of time series data." — Ashutosh Kulkarni (CEO)

Metrics webinar reminder

Q: (No question — procedural note)

A: They reminded listeners the metrics webinar is on September 22 and the information will be posted on the IR website.

Kubernetes support and confidence in guide

Q (Raimo Lenschow · Barclays): How important is the new Kubernetes support for observability? What gives you confidence to raise the full-year guide after only Q1?

A: Management said Kubernetes support fills an important gap by enabling native Prometheus and PromQL ingestion and out-of-the-box dashboards, easing customer migrations. On guidance, they cited a strong pipeline, good consumption against cRPO, and increased productivity from hiring as reasons for confidence.

"First is the strong pipeline build, both for the second quarter and the full year, the out quarter pipeline build is looking good." — Navam Welihinda (CFO)

Cross-sell driving acceleration

Q (Howard Ma · Guggenheim): Is acceleration due to higher multiproduct adoption and does guidance assume faster cross-sell among use cases?

A: Management said their land-and-expand motion continues: they focus on strong standalone products that then lead to cross-sell and expansion. They added the biggest change has been sales segmentation improvements made two years ago, which are now maturing and helping growth, and said guidance does not assume a different cross-sell behavior than they currently see.

"Probably the biggest thing that has happened is as our focus on our enterprise selling motion, the segmentation change that we did 2 years ago, as that has matured, we are seeing the benefits of that play out very, very nicely." — Ashutosh Kulkarni (CEO)

SIEM migrations and cloud consumption

Q (Radi Sultan · UBS): How much did faster SIEM migrations (using automation) boost cloud consumption, and is this broad or one-off?

A: Management said the consumption strength was broad-based, not from one customer. They said faster migrations are driven by customer urgency in a changing threat environment and that their tooling allowed them to migrate a very large agency in under 1 month, which builds customer and field confidence.

"we were able to move their massive real estate over in 1 month, in under 1 month." — Ashutosh Kulkarni (CEO)

Cohort expansion trends and NER lag

Q (Matthew Calitri · Needham): Are expansion trends different across older vs newer cohorts or small vs large customers? When will trailing NER reflect the acceleration?

A: Management said expansion is a durable land-expand motion across cohorts and AI-using customers expand at a higher rate. They added trailing NER will lag and will catch up as constant currency growth improves alongside the provided guidance.

"And as constant currency growth improves alongside guidance that we've provided, it's going to take a lagged effect for the NER to catch up." — Navam Welihinda (CFO)

Why Elastic for context and unstructured data

Q (Sanjit Singh · Morgan Stanley): Why can Elastic build agent context and map agents better than other data platform peers?

A: Management said Elastic is optimized for messy, unstructured data from the start, unlike many data platforms built for structured schemas. That heritage, plus vector and hybrid search, reranking, Jina models and harnesses, gives them an advantage for semantic context and agent performance.

"The simple answer, Sanjit, is because we've always been optimized for dealing with messy data for dealing with unstructured data." — Ashutosh Kulkarni (CEO)

Gross margins and drivers

Q (Ryan MacWilliams · Wells Fargo): Why were gross margins slightly lower this quarter and what should we expect for the year?

A: Management said subscription gross margins remain above 80% and there was no specific trend this quarter affecting margins. Over the longer term they expect gross margins to improve as serverless scales, but quarter-to-quarter fluctuations are normal.

"Really, there's nothing specific in terms of a trend that emerged this quarter." — Navam Welihinda (CFO)