Elastic delivered an 18% year-over-year increase in total revenue to $347.42 million in QQ1 2025, with Elastic Cloud contributing $157.0 million (30% YoY), representing 45% of total revenue. Gross margin stood at 76.3%, and non-GAAP operating margin was 10.7%, underscoring ongoing discipline in expense management amid growth. The quarter featured robust GenAI-driven momentum in the Search stack and amplia platform consolidation benefits, but also a notable near-term execution headwind due to a broad segmentation overhaul in the Americas that delayed deal closures. Management emphasized that deals were not lost and highlighted corrective actions and stronger pipeline progression in Q2. The company reaffirmed a long-term growth trajectory toward a multi-billion dollar, profitability-focused model, while guiding for a modest acceleration in revenue and margin in the near term as sales execution normalizes. Management signaled continued investment in GenAI and platform roadmap, accompanied by cost-reduction measures to offset near-term revenue softness, with a stronger emphasis on regions and opportunities with the highest growth potential.
Key Performance Indicators
Revenue
347.42M
QoQ: 3.71% | YoY:18.27%
Gross Profit
255.66M
73.59% margin
QoQ: 3.45% | YoY:18.21%
Operating Income
-33.65M
QoQ: 18.60% | YoY:7.16%
Net Income
-49.23M
QoQ: -19.77% | YoY:-1.48%
EPS
-0.48
QoQ: -17.07% | YoY:4.00%
Revenue Trend
Margin Analysis
Key Insights
QQ1 2025 total revenue: $347.42 million, up 18% YoY and 3.71% QoQ (constant currency implied).
Elastic Cloud revenue: $157.0 million, up 30% YoY and 45% of total revenue; Cloud revenue growth outpaced overall revenue, signaling strong GenAI-driven demand in cloud-based usage.
Gross margin: 76.3% (solid, in line with guidance).
Operating performance: Non-GAAP operating margin of 10.7% (outperformed high end of guidance); GAAP operating income: -$33.65 million (operating margin -9.69%).
Net income: -$49.23 million; net income margin -14.17%; diluted EPS (GAAP): -$0.48.
Financial Highlights
Revenue and profitability snapshot:
- QQ1 2025 total revenue: $347.42 million, up 18% YoY and 3.71% QoQ (constant currency implied).
- Elastic Cloud revenue: $157.0 million, up 30% YoY and 45% of total revenue; Cloud revenue growth outpaced overall revenue, signaling strong GenAI-driven demand in cloud-based usage.
- Gross margin: 76.3% (solid, in line with guidance).
- Operating performance: Non-GAAP operating margin of 10.7% (outperformed high end of guidance); GAAP operating income: -$33.65 million (operating margin -9.69%).
- Net income: -$49.23 million; net income margin -14.17%; diluted EPS (GAAP): -$0.48.
- Cash flow and liquidity: Net cash provided by operating activities $52.75 million; free cash flow (adjusted) $52.01 million; cash and cash equivalents $594.87 million; cash and short-term investments $1.147 billion; net debt is modestly negative (-$4.13 million).
- Balance sheet anchors: Deferred revenue $599.25 million (non-current portion $27.72 million); total debt $590.74 million; total assets $2.1505 billion; total stockholders’ equity $759.42 million.
- Customer metrics: 1,370+ customers with annual contract value >$100K; 4,430+ customers >$10K ACV; ~21,200 total subscription customers; net expansion rate ~112%.
- Guidance: Q2 revenue guided to $353–$355 million (≈14% YoY at midpoint); non-GAAP operating margin ~13%; non-GAAP EPS $0.37–$0.39; full-year revenue guidance $1.436–$1.444 billion; non-GAAP operating margin ~12.5%; non-GAAP EPS $1.52–$1.56.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
347.42M
18.27%
3.71%
Gross Profit
255.66M
18.21%
3.45%
Operating Income
-33.65M
7.16%
18.60%
Net Income
-49.23M
-1.48%
-19.77%
EPS
-0.48
4.00%
-17.07%
Key Financial Ratios
currentRatio
1.91
grossProfitMargin
73.6%
operatingProfitMargin
-9.69%
netProfitMargin
-14.2%
returnOnAssets
-2.29%
returnOnEquity
-6.48%
debtEquityRatio
0.78
operatingCashFlowPerShare
$0.52
freeCashFlowPerShare
$0.51
priceToBookRatio
14.77
priceEarningsRatio
-56.97
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management themes from the QQ1 2025 earnings call:
- Strategy and GenAI momentum: Ash Kulkarni emphasized continued leadership in building real-time GenAI applications on Elastic Stack, noting acceleration in Search tied to GenAI use cases and a strong platform consolidation narrative. Quote: “Total revenue in Q1 grew 18% year-over-year. Cloud revenue grew 30% year-over-year and we delivered non-GAAP operating margin of 10.7%.”
- Sales execution and segmentation changes: Management acknowledged that Americas segmentation changes caused delays in closing deals, with the largest impact in Americas and, to a lesser extent, EMEA. They indicated the deals were not lost and are expected to close in due course, and they have increased deal-stage monitoring and enterprise focus. Quote: “None of these deals were lost and we expect to close these in due course.” (Ash Kulkarni, on deal progression and segmentation effects)
- Corrective actions and outlook: Janesh Moorjani highlighted progress on actions initiated in July and emphasized a return to stronger execution in the next couple of quarters. Quote: “We are progressing with these actions in Q2 and we feel confident that we are on our way towards a return to better execution.”
- Product and open-source strategy: The company announced notable product innovations (scalar quantization optimization, binary vector support, Semantic field types, Playground for RAG development) and a strategic licensing shift to AGPL to bolster ecosystem openness and GenAI adoption. Ash noted the strategic importance of AGPL licensing.
- Customer wins and use cases: Several GenAI-driven wins were cited across verticals (sales enablement Copilot using ELSER, AI-driven security analytics, and vector search deployments). These examples illustrate Elastic’s traction in AI-powered search, security, and data analytics use cases.
- Financial discipline and capital allocation: Elastic reaffirmed a plan to balance revenue growth with investments, with explicit cost-reduction measures to offset near-term revenue headwinds, particularly in self-managed and Elastic Cloud. They underscored that adjusted free cash flow margin for fiscal 2025 should be slightly above non-GAAP operating margin.
Total revenue in Q1 grew 18% year-over-year. Cloud revenue grew 30% year-over-year and we delivered non-GAAP operating margin of 10.7%.
— Ashutosh Kulkarni
We are progressing with these actions in Q2 and we feel confident that we are on our way towards a return to better execution.
— Janesh Moorjani
Forward Guidance
Assessment of near- to medium-term outlook based on management guidance and industry dynamics:
- Short-term trajectory: Q2 revenue guidance of $353–$355 million (up ~14% YoY at midpoint) with non-GAAP operating margin around 13% and non-GAAP EPS in the $0.37–$0.39 band. Full-year FY25 revenue guidance of $1.436–$1.444 billion implies ~14% YoY growth at the midpoint, with non-GAAP operating margin around 12.5% and non-GAAP EPS of $1.52–$1.56. The guidance incorporates the headwind from lower net new commitments in Q1 and the slower start to Elastic Cloud, while assuming a conservative but achievable deal-closing cadence in H2.
- Growth drivers: GenAI-related demand remains a core thrust, with Elastic Cloud and OpenAI-compatible features continuing to attract large enterprise customers. The company highlighted the migration/transition opportunity (Elastic Express Migration) and the AGPL licensing shift as levers to accelerate ecosystem engagement and migrations from incumbents.
- Risks and monitorables: Execution risk around sales force re-segmentation in the Americas and potential EMEA budget pressures. Management indicated ongoing monitoring and corrective actions, and emphasized that the issues are near-term and non-recurring in nature. Investors should monitor: (1) pace of deal progression in the Americas and return to historical execution levels, (2) Elastic Cloud commitments and renewals cadence, (3) progress of migration incentives and partner-driven migrations, (4) progression of GenAI-related deal wins and expansions, (5) SG&A efficiency and the trajectory of R&D investment in GenAI.
- Conclusion: The near-term outlook reflects disciplined financial management and continued investment in AI platform capabilities, with a clear path to margin expansion as sales execution stabilizes. The longer-term growth thesis remains anchored in Elastic’s leadership in vector search, real-time GenAI applications, and platform consolidation, supported by a large installed base and high net expansion rates.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ESTC Focus
73.59%
-9.69%
-6.48%
-56.97%
PD
82.60%
-19.30%
-13.80%
-19.27%
GTLB
88.90%
-31.10%
-9.62%
-37.97%
DT
81.30%
10.50%
1.87%
86.76%
MDB
72.20%
-21.80%
-6.35%
-82.68%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Elastic remains positioned to benefit from the AI and real-time analytics wave, anchored by a scalable platform, a strong customer base, and meaningful GenAI traction. The QQ1 miss was primarily due to near-term sales execution disruptions from segmentation changes; management has committed to tightening deal monitoring and ramping up enterprise focus to restore historical execution. The company plans to invest in GenAI R&D and selective selling and marketing initiatives while pursuing cost efficiency to offset near-term revenue headwinds. The AGPL licensing move and migration incentives should bolster ecosystem engagement and accelerate migrations, potentially expanding addressable market over the medium term. Investors should monitor: (1) pace of deal closures in Q2 and beyond, (2) Elastic Cloud revenue trajectory and conversion of new commitments, (3) progress of migration programs and partner channel contributions, (4) the sustainability of gross margins and the trajectory of adjusted free cash flow as investments scale, (5) the evolution of the GenAI pipeline and cross-sell across the Elastic Stack.
Key Investment Factors
Growth Potential
Medium- to long-term growth supported by GenAI-driven demand, platform consolidation, and a large, high-quality customer base. Elastic aims to become a multi-billion-dollar platform for GenAI and real-time search, leveraging Elastic Cloud, ESQL, and AI-assisted security/observability solutions to deepen wallet share.
Profitability Risk
Short-term execution risk tied to the Americas segmentation changes and slower deal closures; dependence on continued timing of enterprise-level commitments; macro area exposures in EMEA; competitive dynamics with incumbents and AI-focused entrants; potential pressure on Elastic Cloud growth if new commitments remain subdued.
Financial Position
Sound liquidity with $1.15B in cash and equivalents plus short-term investments; net debt near cash neutrality (-$4.1M). Deferred revenue remains substantial at ~$599M, signaling durable customer commitments; balance sheet supports continued investment in R&D, particularly GenAI initiatives, with healthy gross margins (~76%).
SWOT Analysis
Strengths
Leadership in real-time search and GenAI-enabled workloads, with a differentiating Elastic Stack and vector search capabilities.
Large, high-quality installed base with 1,370+ customers >$100K ARR and 112% net expansion rate, signaling durable revenue potential.
GenAI-driven momentum across Search, Security, and Observability, plus ongoing platform consolidation that enhances stickiness.
Weaknesses
Near-term execution headwinds from enterprise sales segmentation changes, notably in the Americas, delaying deal closures.
Elastic Cloud growth was slower than some expectations in the quarter, pressuring near-term revenue progression.
GAAP profitability temporarily negative with -9.7% operating margin and -14.2% net income margin; reliance on non-GAAP metrics for profitability narrative.
Opportunities
Expanding migration incentives (Elastic Express Migration) and AGPL licensing to broaden open-source engagement and GenAI adoption.
Continued enterprise-led adoption of GenAI use cases (RAG, semantic search, AI-assisted security) and cross-sell across the Elastic Stack modules.
Strategic partnerships and hyperscaler collaborations to accelerate migrations and cloud-based deployments.
Threats
Macro headwinds and budget constraints in certain regions (EMEA noted as tighter budgets in Q1) could dampen deal cadence.
Intense competition in AI-enabled search and SIEM-like use cases from incumbents and open-source projects (e.g., alternative vector DBs, OpenSearch ecosystem).
Execution risk around sales reorganization in large enterprise accounts could temporarily suppress revenue momentum.