SAN FRANCISCO

Elastic N.V. (NYSE: NYSE:ESTC) shares dropped 26% on Friday following disappointing revenue guidance, despite better-than-expected Q1 results.

Q1 Performance

The company reported Q1 adjusted earnings per share of $0.35, surpassing analyst estimates of $0.25. Revenue grew 18% YoY to $347 million, slightly above the consensus of $344.66 million.

Disappointing Outlook

However, the outlook for Elastic fell short of expectations. For Q2, the company forecasts revenue between $353-355 million, below the $360.8 million analyst consensus. The full-year fiscal 2025 revenue guidance is set at $1.436-1.444 billion, missing the $1.478 billion Street estimate.

CEO Ash Kulkarni stated, “We delivered solid first quarter results, outperforming the high end of our guidance for both revenue and profitability. However, we had a slower start to the year with the volume of customer commitments impacted by segmentation changes that we made at the beginning of the year, which are taking longer than expected to settle.”

Cloud Revenue Growth

Elastic Cloud revenue rose 30% YoY to $157 million in Q1, making up 45% of total revenue. The company ended the quarter with over 1,370 customers having an annual contract value above $100,000.

Despite the revenue guidance miss, Elastic raised its full-year adjusted EPS outlook to $1.52-$1.56, exceeding the previous consensus of $1.42.

Analyst Downgrades

Following the report, Bank of America downgraded ESTC from Buy to Neutral, reducing the price target from $140 to $93 per share. They expressed concerns over elevated execution risks due to disruptions in the sales organization during a strategic realignment and soft demand in the EMEA region.

Baird also downgraded Elastic to Neutral, noting that sales execution issues led to significant shortfalls in Q1 customer commitments. They observed, “While management is taking corrective actions, the recovery timeline remains uncertain (at least a couple of quarters), and management has prudently reduced its full-year guidance.”

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