The News: Elastic reported third quarter (Q3) fiscal 2024 financial results earlier this week. Read the full breakdown here.
By the numbers:
- Total revenue was $328 million, an increase of 19% year-over-year (YoY) or 18% on a constant currency (CC) basis
- Elastic Cloud revenue was $143 million, an increase of 29% YoY on a CC basis
- GAAP operating loss was $26 million; GAAP operating margin was -8%
- Non-GAAP operating income was $43 million; non-GAAP operating margin was 13%
- GAAP diluted earnings per share (EPS) was $1.69; non-GAAP diluted EPS was $0.36
- Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 1,270 compared with over 1,220 in Q2 FY 2024 and over 1,110 in Q3 FY 2023
- Total subscription customer count was approximately 20,800 compared with approximately 20,700 in Q2 FY 2024, and over 19,900 in Q3 FY 2023
- Net Expansion Rate was approximately 109%
Elastic’s Q3 Earnings: A Deep Dive into the Data
Analyst Take: Elastic, a leading player in enterprise search software, recently announced its financial results for Q3 fiscal 2024, ending January 31, 2024. During a period of significant change for tech companies, Elastic distinguishes itself by strategically shifting toward AI, utilizing this evolving field to drive more growth and solidify its leading place in the market. This shift is in line with the wider industry trend, as companies such as Teradata and Confluent have also announced their quarterly earnings, providing an interesting point of comparison.
The financial results for Elastic’s Q3 display the company’s strong state and current growth path. Total income rose to $328 million, a 19% increase from the previous year, while revenue from Elastic Cloud showed a remarkable 29% increase to $143 million. This growth is substantial and represents ongoing expansion even when considering CC basis. Of course, it is important to compare these numbers in the larger market context, especially considering the progress of companies like Teradata and Confluent that have experienced a yearly top-line growth of 1.1% and 26.4%, respectively. Elastic’s growth metrics, especially in cloud revenue, highlight its ability to utilize cloud-based solutions and AI to meet the shifting demands of the market.
The focus on AI and cloud integration has been crucial. Elastic’s CEO, Ash Kulkarni, emphasized the progress propelled by generative AI, platform consolidation, and stable cloud consumption trends. Elastic’s AI-focused developments, such as scalar quantization for vector search and the integration with Hugging Face for embedding large language models (LLMs), showcase the company’s dedication to staying at the cutting-edge of AI applications. These steps are not just technological advancements but are strategic necessities that make Elastic more aligned with its customers’ present and upcoming requirements.
Relatively speaking, although Teradata and Confluent have also made substantial progress, Elastic’s concentrated attention on AI and cloud services seems to be beneficial, as indicated by its revenue growth and expanded customer reach. The customer metrics, particularly the surge in those with an ACV exceeding $100,000, provide further affirmation of Elastic’s expanding market presence and the increasing dependence of organizations on its AI-enhanced solutions.
Nevertheless, the financial figures show cause for concern, particularly the GAAP operating loss of $26 million and an operating margin of -8%. While these numbers suggest continued investments in growth and expansion, they highlight the fine financial line that Elastic and its peers have to tread to scale their operations sustainably.
Looking Ahead
Looking ahead, Elastic’s financial projections for the fourth quarter (Q4) of fiscal 2024 indicate total revenue in the range of $328 million to $330 million, implying stable YoY growth at median. The expected non-GAAP operating margin and diluted EPS convey cautious optimism, balancing growth with financial prudence. This forward-looking stance suggests a continued emphasis on AI-driven innovation and cloud integration as central pillars of Elastic’s growth strategy.
Relative to its counterparts, Elastic’s path reveals a wider industry trend toward integrating AI with cloud technologies. Despite persisting difficulties, particularly in terms of operating margins and the requirement for continuous investment in innovation, Elastic’s strategic concentration seems well positioned to cater to the changing demands of the digital economy.
Overall, Elastic’s Q3 fiscal earnings for 2024 indicate a company on the cusp of significant change, using AI to fuel growth in a fiercely competitive market. When compared with Teradata and Confluent, it becomes apparent that strategic approaches and results vary widely within the industry, but Elastic’s focus on AI and cloud-centric approach could serve as an important turning point. Looking to the future, Elastic’s strategic investments and market position indicate a promising outlook for its objectives, although achieving those goals will undoubtedly involve a fine balancing act between growth, innovation, and financial stability.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
Navigating the Expanding Landscape of AI Workloads
Elastic Stack 8.12 Release: An In-Depth Analysis
Elastic Reports Strong Q2 Fiscal 2024 Financial Results: A Deep Dive
Author Information
Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.
Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.
Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.
Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.
Bringing more than a decade of varying experience crossing multiple sectors such as legal, financial, and tech, Sam Holschuh is an accomplished professional that excels in ensuring success across various industries. Currently, Sam serves as an Industry Analyst at The Futurum Group, where collaborates closely with practice leads in the areas of application modernization, DevOps, storage, and infrastructure. With a keen eye for research, Sam produces valuable insights and custom content to support strategic initiatives and enhance market understanding.
Rooted in the fields of tech, law, finance operations and marketing, Sam provides a unique viewpoint to her position, fostering innovation and delivering impactful solutions within the industry.
Sam holds a Bachelor of Science degree in Management Information Systems and Business Analytics from Colorado State University and is passionate about leveraging her diverse skill set to drive growth and empower clients to succeed in today's rapidly evolving landscape.
