Summary
Elastic posted total revenue of $250.1 million for FY2023 Q1, up 30% year over year and 34% in constant currency. Elastic Cloud revenue was $97.7 million, up 59% year over year and 62% in constant currency. Cloud now represents 39% of total revenue, up from 32% one year ago. That mix shift is the central growth story, and it also carries margin consequences. Customer metrics point to steady expansion. Total subscription customer count was over 19,300, compared with over 18,600 in Q4 FY22 and over 16,000 in Q1 FY22. Customers with annual contract value greater than $100,000 were over 1,010, compared with over 960 in Q4 FY22 and over 780 in Q1 FY22. Net Expansion Rate was just under 130% and was flat compared with Q4 FY22.
Profitability remained under pressure. GAAP gross margin was 70.8%, down from the prior-year quarter. Management has said Elastic Cloud's rising contribution will modestly hurt gross margin because of third-party hosting costs. GAAP operating loss was $60.6 million, down year over year, and GAAP operating margin was -24.2%, down from the prior-year quarter. GAAP net loss was $69.6 million, down year over year, and diluted EPS was -$0.74, down from the prior-year quarter. On a non-GAAP basis, operating loss was $4.7 million and operating margin was -2%. Non-GAAP net loss per share was $0.15. The gap between GAAP and non-GAAP results is largely tied to stock-based compensation and other adjustments.
Cash flow and backlog give a mixed view. Operating cash flow was -$9.7 million, down year over year. Adjusted free cash flow was $1.7 million. Deferred revenue was $435.1 million, up 19.4% year over year, or 26% in constant currency. Remaining performance obligations were $912.5 million, up 17.6% year over year, or 25% in constant currency. Those backlog figures suggest customers continue to commit to the platform, even as the company invests heavily in growth.
Guidance for the second quarter of fiscal 2023 points to 27% year-over-year revenue growth at the midpoint, or 32% in constant currency. Non-GAAP operating margin is expected to be -0.6% to -0.2%, and non-GAAP net loss per share is expected to be $0.11 to $0.09. For the full fiscal year 2023, guidance points to 26% year-over-year revenue growth at the midpoint, or 30% in constant currency. Full-year non-GAAP operating margin is expected to be 0.3% to 0.7%, and non-GAAP net loss per share is expected to be $0.31 to $0.25. The company noted that the midpoint of its prior full-year revenue guidance equals the midpoint of its current full-year revenue guidance. Business growth excluding currency changes added to the prior midpoint, while currency changes subtracted an equal amount. The outlook assumes 1 Euro equals $1.018 and 1 Great British Pound equals $1.211.
Risks are visible in the outlook. Foreign exchange is a direct headwind, since currency changes cut into the full-year revenue guidance midpoint as business growth added to it. The company also faces pressure from the shift toward Elastic Cloud, which management expects to increase as a share of revenue and to adversely affect gross margin due to hosting costs. COVID-19 and the ongoing conflict between Russia and Ukraine may continue to affect operations, customer spending, and sales cycles. Elastic has historically incurred operating losses and expects to continue incurring operating losses and may generate negative cash flows from operations on an annual basis for the foreseeable future. It may need additional capital if it cannot fund its strategic initiatives from existing resources. Management also expects live events and travel costs to trend higher in the near term, which adds to expense growth.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $250.1M | $239.4M | +4.5% | $193.1M | +29.5% |
| Gross profit | $177.1M | $172.0M | +3.0% | $143.4M | +23.5% |
| Gross margin | 70.8% | 71.9% | -1.0 pp | 74.3% | -3.5 pp |
| Research & development | $78.6M | $78.9M | -0.3% | $59.4M | +32.4% |
| Sales & marketing | $125.0M | $118.6M | +5.4% | $88.0M | +42.0% |
| General & administrative | $34.1M | $34.1M | -0.2% | $27.1M | +26.0% |
| Total operating expenses | $237.7M | $231.6M | +2.6% | $174.5M | +36.3% |
| Operating income (loss) | -$60.6M | -$59.6M | -1.7% | -$31.0M | -95.4% |
| Operating margin | -24.3% | -24.9% | +0.7 pp | -16.1% | -8.2 pp |
| Net income (loss) | -$69.6M | -$65.6M | -6.0% | -$34.5M | -101.7% |
| Net margin | -27.8% | -27.4% | -0.4 pp | -17.9% | -9.9 pp |
| Diluted EPS | -$0.74 | -$0.71 | -$0.03 | — | — |
| Customers | 19,300 | 18,600 | +3.8% | 16,000 | +20.6% |
Risks
The filing highlights Russia's invasion of Ukraine, COVID-19, inflation, and interest-rate changes as factors that could reduce customer IT spending and lengthen sales cycles. MD&A states the full extent of COVID-19 impacts remains uncertain and could negatively affect sales and marketing efforts and the ability to enter customer contracts in a timely manner.
Elastic's February 2021 move to dual license Elasticsearch and Kibana under Elastic License 2.0 and SSPL, ending Apache 2.0 availability, may harm adoption; Amazon has forked the Elastic Stack into OpenSearch and rebranded its Elasticsearch Service to OpenSearch Service. The filing says this could reduce paying customers and harm growth or profitability.
Elastic Cloud contributed 39% of total revenue for the three months ended July 31, 2022, up from 32% in the prior-year period, and the company expects consumption-based Elastic Cloud revenue to keep increasing. The filing says it lacks adequate history with consumption-based arrangements to predict long-term adoption or renewal, and revenue may be less predictable or more variable than historical revenue.
The company reported a net loss of $69.55 million for FY2023 Q1, widened from $34.49 million in FY2022 Q1, and operating cash flow fell to negative $9.70 million from positive $14.05 million. The filing notes a history of losses, an accumulated deficit of $886.7 million as of July 31, 2022, and may not achieve profitability or positive cash flows on a consistent basis.
The filing cites a heightened risk of cybersecurity, phishing, malware, ransomware, and nation-state attacks tied to Russia's invasion of Ukraine. Elastic stopped selling to Russia and Belarus and supports Ukraine with free Elastic Cloud access, which may increase retaliatory cyberattack risk for the company and its third-party vendors.
MD&A expects Elastic Cloud's rising revenue mix to adversely impact gross margin because of third-party hosting costs. Reported total gross margin decreased 3.5 percentage points to 70.8% for FY2023 Q1 from 74.3% in FY2022 Q1.
Growth has strained management and operational resources, and the company must hire, train, and retain sales personnel, including re-training for consumption-based selling. Sales and marketing expense increased 42% for the three months ended July 31, 2022, and the company had 3,056 employees as of that date.
As of July 31, 2022, Elastic had $575.0 million aggregate principal amount of Senior Notes outstanding, and interest expense increased $4.6 million in FY2023 Q1 primarily due to the prior-year issuance. The indenture contains restrictive covenants that could limit financing, capital expenditures, acquisitions, or other corporate actions.
SaaS KPIs
All quarters →Net Expansion Rate
Non-GAAP Operating Margin
Adjusted Free Cash Flow
Adjusted Free Cash Flow Margin
Total subscription customer count
Total remaining performance obligations
Non-GAAP gross margin
Elastic Cloud Revenue
Summary, forecast, risks and KPIs are extracted from Elastic N.V.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.