Elastic (NYSE:ESTC) Beats Q4 Sales Targets, Stock Jumps 17.5%

February 27, 2025 at 16:15 PM EST

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Search software company Elastic (NYSE: ESTC) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 16.5% year on year to $382.1 million. Guidance for next quarter’s revenue was better than expected at $380 million at the midpoint, 1.5% above analysts’ estimates. Its non-GAAP profit of $0.63 per share was 34.4% above analysts’ consensus estimates.

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Elastic (ESTC) Q4 CY2024 Highlights:

Revenue: $382.1 million vs analyst estimates of $368.7 million (16.5% year-on-year growth, 3.6% beat)
Adjusted EPS: $0.63 vs analyst estimates of $0.47 (34.4% beat)
Adjusted Operating Income: $64.02 million vs analyst estimates of $55.41 million (16.8% margin, 15.5% beat)
Revenue Guidance for Q1 CY2025 is $380 million at the midpoint, above analyst estimates of $374.3 million
Management raised its full-year Adjusted EPS guidance to $1.94 at the midpoint, a 13.8% increase
Operating Margin: -1.2%, up from -8.1% in the same quarter last year
Free Cash Flow Margin: 22.8%, up from 10.3% in the previous quarter
Customers: 21,350, up from 21,300 in the previous quarter
Net Revenue Retention Rate: 112%, in line with the previous quarter
Billings: $450.7 million at quarter end, up 20.6% year on year
Market Capitalization: $10.73 billion

“We exceeded guidance across all revenue and profitability metrics in the third quarter. Our results reflect ongoing momentum across all aspects of our business, led by our strong sales execution, continued market demand for our products, and our relentless pace of innovation, reinforcing Elastic as the leader in Search AI,” said Ash Kulkarni, Chief Executive Officer, Elastic.

Company Overview

Started by Shay Banon as a search engine for his wife's growing list of recipes at Le Cordon Bleu cooking school in Paris, Elastic (NYSE: ESTC) helps companies integrate search into their products and monitor their cloud infrastructure.

Data Infrastructure

Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, Elastic grew its sales at a decent 21.3% compounded annual growth rate. Its growth was slightly above the average software company and shows its offerings resonate with customers.

This quarter, Elastic reported year-on-year revenue growth of 16.5%, and its $382.1 million of revenue exceeded Wall Street’s estimates by 3.6%. Company management is currently guiding for a 13.4% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.9% over the next 12 months, a deceleration versus the last three years. Still, this projection is above the sector average and suggests the market is baking in some success for its newer products and services.

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Billings

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Elastic’s billings punched in at $450.7 million in Q4, and over the last four quarters, its growth was solid as it averaged 17.8% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. Elastic Billings

Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Elastic’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 112% in Q4. This means Elastic would’ve grown its revenue by 11.5% even if it didn’t win any new customers over the last 12 months.

Trending up over the last year, Elastic has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

Key Takeaways from Elastic’s Q4 Results

We were impressed by how significantly Elastic blew past analysts’ billings expectations this quarter, which enabled it to beat on revenue, EPS, and adjusted operating income. We were also glad it lifted its full-year EPS guidance while sharing a 2025 revenue outlook that topped estimates. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 17.5% to $119.20 immediately following the results.

Indeed, Elastic had a rock-solid quarterly earnings result, but is this stock a good investment here? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.

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