ESTC

ELASTIC (ESTC): Guidance is a problem

● FY1Q25 Earnings Beat Expectations

-FY1Q25 (May-July) revenues and non-GAAP operating income of $350 million (+18% YoY) and $37.19 million (+28% YoY), respectively

-Revenue beat market expectations by 1% and adjusted operating profit by 16%

-Adjusted EPS also came in at $0.35, above consensus ($0.26)

-+20% YoY increase in subscription sales. However, it is regrettable that RPO (remaining contract value) only increased by 13% (FY4Q24 +24% YoY)

● Provide weaker-than-expected guidance

-FY2025 (May 24 to April 25) Revenue guidance downgraded to 14% growth compared to previous (+16% YoY)

-Europe/Middle East demand is partly due to sluggish demand, but it is also due to the fact that sales segment strategy changes have not been smooth inside Elastic

-The transition process to increase sales and reduce the number of customers covered by sales was not smooth

● Need a conservative approach for the time being

-FY1Q25 earnings also show positive changes, such as increasing Vector Database customers to 1,300 (1,000 FY4Q24)

-However, the downward revision of the top line guidance due to internal errors in elastics, not external environmental factors such as macros, is a burden on stock prices