Summary
Elastic reported second quarter fiscal 2026 total revenue of $423.5 million, up 15.9% from the prior-year quarter. Gross profit rose to $321.5 million, up 18.1%, and gross margin was 75.9%, up from 74.5%. The company still posted a GAAP operating loss of $8.2 million, which widened from a $4.4 million loss in the prior-year quarter. GAAP net loss was $51.3 million, or diluted EPS of -$0.48, compared with a $25.5 million net loss and -$0.25 diluted EPS in the prior-year quarter. Operating margin was -1.9%, down from -1.2%.
The quarter showed operating momentum in several areas. Elastic Cloud revenue grew 22% year over year, and annual Elastic Cloud grew 27%. Sales-led subscription revenue rose 18%. Total remaining performance obligations were $1.51 billion, up 19.0%, and current remaining performance obligations rose 17% year over year. Deferred revenue was $692.7 million, up 13.9%. Customer count with annual contract value above $100,000 was over 1,600, up from over 1,550 in the first quarter of fiscal 2026 and over 1,420 in the second quarter of fiscal 2025. Net Expansion Rate was approximately 112%. More than 50% of the Fortune 500 uses Elastic.
Product activity stayed heavy. Elastic launched Agent Builder in technical preview, introduced Streams in Observability, and brought out the Elastic Inference Service, DiskBBQ, and cloud-connected AutoOps. It added a fully managed OpenTelemetry Protocol endpoint and new capabilities in the Elastic Distribution of OpenTelemetry. It acquired Jina AI to deepen multimodal and multilingual search capabilities. The company also announced a $500 million share repurchase program and repurchased about 1.4 million shares at an average price of $84.45, for an aggregate value of about $114 million. As of October 31, 2025, $385.9 million remained available under that program. It ended the quarter with 3,827 employees.
Cash generation softened in the quarter. Operating cash flow was $26.6 million, down from $38.4 million. Capital expenditures were $0.6 million. Adjusted free cash flow was $26 million. Non-GAAP operating income was $70 million, with a 16.5% non-GAAP operating margin, and non-GAAP diluted EPS was $0.64.
Guidance points to continued growth. For the third quarter of fiscal 2026, management guides to 15% year-over-year growth at the midpoint, or 13% on a constant currency basis. Non-GAAP operating margin is expected to be about 17.5%, and non-GAAP diluted EPS is expected to be $0.63 to $0.65. For the full fiscal year 2026, management guides to 16% year-over-year growth at the midpoint, or 15% on a constant currency basis, and raised its full-year outlook by $18 million. Full-year non-GAAP operating margin is expected to be about 16.25%, and non-GAAP diluted EPS is expected to be $2.40 to $2.46.
Risks remain visible in the filing. The 10-Q cites macroeconomic uncertainty, possible inflation resurgence, changing trade policies, and foreign exchange fluctuations as factors that could lengthen sales cycles, increase scrutiny of deals, and slow customer consumption. Elastic Cloud's rising mix carries a modest adverse impact on gross margin because of third-party hosting costs. The company also maintains a full valuation allowance against deferred tax assets in the Netherlands, the United Kingdom, and certain U.S. states, and a release could produce a material income tax benefit. The quarter's GAAP profitability remained under pressure despite higher gross margin and revenue growth. Management still sees AI as a driver across search, observability, and security.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $423.5M | $415.3M | +2.0% | $365.4M | +15.9% |
| Gross profit | $321.5M | $318.5M | +0.9% | $272.2M | +18.1% |
| Gross margin | 75.9% | 76.7% | -0.8 pp | 74.5% | +1.4 pp |
| Research & development | $108.2M | $109.1M | -0.9% | $88.2M | +22.7% |
| Sales & marketing | $173.6M | $174.1M | -0.3% | $144.3M | +20.3% |
| General & administrative | $48.0M | $44.8M | +7.0% | $44.1M | +8.8% |
| Total operating expenses | $329.7M | $328.0M | +0.5% | $276.6M | +19.2% |
| Operating income (loss) | -$8.2M | -$9.4M | +12.8% | -$4.4M | -86.1% |
| Operating margin | -1.9% | -2.3% | +0.3 pp | -1.2% | -0.7 pp |
| Net income (loss) | -$51.3M | -$24.6M | -108.4% | -$25.4M | -101.5% |
| Net margin | -12.1% | -5.9% | -6.2 pp | -7.0% | -5.1 pp |
| Diluted EPS | -$0.48 | -$0.23 | -$0.25 | -$0.25 | -$0.23 |
Risks
The provision for income taxes increased 122% to $52.6 million for the three months ended October 31, 2025 and 76% to $77.2 million for the six months, contributing to the quarter's net loss widening to $51.3 million. The company maintains a full valuation allowance against deferred tax assets in the Netherlands, the United Kingdom, and certain U.S. states, and the OBBBA enacted July 4, 2025 introduced changes to U.S. federal tax law that the company continues to assess.
In October 2025 the board authorized a share repurchase program of up to $500.0 million. The program does not obligate the company to repurchase any specific amount, may be modified, suspended, or terminated at any time, and could increase volatility of the trading price of ordinary shares while decreasing cash reserves that may be needed for deployment in the business.
MD&A states that macroeconomic events, including a possible resurgence in inflation, fluctuations in economic growth, changes in international trade policies, and political unrest, continue to evolve. The company has experienced and may continue to experience longer and more unpredictable sales cycles, increased scrutiny of prospective sales, slowing consumption and overall customer expenditures, and impacts from changing foreign exchange rates.
Elastic Cloud contributed 48% of total revenue for the six months ended October 31, 2025, up from 46% in the prior-year period, and the company expects the increasing mix to continue to have a modest adverse impact on gross margin due to third-party hosting costs. Services gross margin declined to 1% for the quarter and to negative 1% for the six months, and may fluctuate or decline further in the near term.
SaaS KPIs
All quarters →Net Expansion Rate
Non-GAAP Operating Margin
Adjusted Free Cash Flow
Adjusted Free Cash Flow Margin
Total remaining performance obligations
Current remaining performance obligations
Sales-led Subscription Revenue
Summary, forecast, risks and KPIs are extracted from Elastic N.V.'s SEC filings for Q2 FY2026 (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.