Elastic N.V (ESTC) Stock Forecast & Price Target

Elastic demonstrated robust financial performance in Q1, with total revenue reaching $415.3 million, reflecting a year-over-year growth of 20%, which surpassed expectations. Notably, Elastic Cloud Revenue accounted for 47% of total revenue, reaching $195.8 million, a significant increase of 24% year-over-year. The company also reported healthy growth in its high-value customer segment, with a 13% increase in the $100k+ customer count and a stable net expansion rate of approximately 112%, indicating strong demand and customer retention.

The financial outlook for Elastic exhibits caution primarily due to a notable decline in its Annual Recurring Revenue (ARR), with Total New ARR projected to decrease by 22% year-over-year, contrasting sharply with a previous expectation of a 10% increase for FY25. Additionally, there are significant risks related to heightened competition in the GenAI search, observability, and SIEM markets, alongside challenges in the go-to-market strategy that could further impede revenue growth and pressure profit margins. Lastly, while Elastic's guidance of $1,679m-$1,689m in revenue for FY26 appears slightly above prior forecasts, the conservative tone reflects underlying macroeconomic concerns alongside a more substantial drop in Cloud New ARR.