Elastic NV ESTC

Elastic Earnings: AI-Driven Demand Overshadowed by Weak Sales Execution

We keep our $92 per share fair value estimate for narrow-moat Elastic after the firm kicked off fiscal 2025 with a strong set of financial results offset by a reduced sales outlook for the remaining three quarters. While the firm’s search offering, Elasticsearch, continues to benefit from an uptick in customer spending on artificial intelligence, Elastic ran into go-to-market execution issues, which resulted in deals being delayed. While the macroeconomic environment continues to be tough—with customers continuing to keep a keen eye on their expenses—we believe the firm’s weaker sales guidance is primarily due to its execution challenges, which we believe the firm can overcome in the near term. In the bigger picture, we continue to view Elastic as a strong player in its respective end markets of search, observability, and security.