Elastic N.V. Q1 FY2027 earnings

Elastic posted $478.1 million in revenue for the quarter ended July 31, 2026, up 15.1% from the prior-year quarter. Subscription revenue of $448.7 million supplied 94% of the total, with services contributing the rest. Elastic Cloud revenue reached $235.2 million, up 20% year over year, as Annual Elastic Cloud grew 27% and Monthly Elastic Cloud grew 1%. Sales-led subscription revenue, which strips out Monthly Elastic Cloud, was $398.5 million, up 18% as reported and 17% in constant currency. Net additions to the cohort of customers spending more than $100,000 in annual contract value reached their highest level to date.

Profitability is where the quarter gets messy. Gross profit of $356.2 million rose 11.8%, but gross margin fell to 74.5% from 76.7%. Cloud hosting costs climbed $16.0 million. The operating line deteriorated. Operating loss was $23.6 million against a $9.4 million loss a year earlier, and operating margin moved to -4.9% from -2.3%. Restructuring and other related charges of $19.9 million, tied to a June 2026 plan to cut roughly 7% of the workforce, drove much of the swing. Below the line, net loss narrowed to $16.7 million from $24.6 million, and diluted loss per share improved to -$0.16 from -$0.23. Non-GAAP operating income was $77.3 million at a 16.2% margin, and non-GAAP diluted earnings per share came in at $0.70.

Cash generation was the bright spot. Operating cash flow was $132.0 million, up 25.9%. Capital expenditures were $0.6 million, down 10.1%. Adjusted free cash flow, a non-GAAP figure that adds back $11.9 million of interest paid on long-term debt, was $143.3 million, or 30% of revenue, and it absorbed $13.0 million of cash payments for restructuring. Operating cash flow benefited from a $227.0 million decline in accounts receivable and was partly offset by a $139.2 million decrease in deferred revenue. Cash, cash equivalents and marketable securities stood at $1.461 billion as of July 31, 2026.

Backlog and customer metrics held up. Deferred revenue, current portion, rose 18.3% to $839.8 million. Remaining performance obligations rose 26.9% to $1.85 billion, and current RPO of $1.153 billion rose 21% as reported and 20% in constant currency. Customers with more than $100,000 in annual contract value numbered over 1,800, versus over 1,720 at the end of the prior quarter and over 1,550 a year earlier. Net Expansion Rate was approximately 111%. Elastic repurchased about 0.8 million shares at an average price of $49.71 for roughly $40 million, leaving $120.0 million available under the authorization.

Guidance for the second quarter of fiscal 2027 calls for revenue growth of 14.9% at the midpoint, a non-GAAP operating margin of about 19.0%, and non-GAAP diluted earnings per share of $0.80 to $0.82 on 108.0 million to 109.0 million diluted shares. GAAP operating margin is expected to be positive. For the full fiscal year 2027, revenue guidance represents 15.2% growth at the midpoint, alongside a non-GAAP operating margin near 19.4%, non-GAAP diluted earnings per share of $3.29 to $3.37, and an adjusted free cash flow margin of approximately 21.5%.

Several risks hang over the outlook. The restructuring plan, which targets substantial completion by the end of the third quarter of fiscal 2027, carries execution risk. Management cites macroeconomic uncertainty, inflation, shifting interest rates, tariffs and other trade policies, and currency swings as factors that could stretch sales cycles or slow customer consumption. Cloud hosting costs are growing faster than subscription revenue, and Elastic Cloud is expected to keep rising as a share of revenue, which weighs on gross margin. Competition in AI remains a stated concern. The company raised non-cancelable cloud hosting commitments to $978.8 million over the next five years, completed the Deductive AI acquisition, reported an accumulated deficit of $748.7 million as of July 31, 2026, and employed 3,834 people.