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    ESTC
    Earnings call· Jan 2026(Q3 FY26)

    Elastic N.V. Q3 FY26 earnings call ESTC

    Feb 26, 2026 Source

    Executive summary

    Elastic N.V. Q3 FY26 — Strong AI-Driven Growth and Profitability

    Elastic delivered a strong Q3 FY26, driven by robust demand for its AI-powered platform and consistent sales execution, leading to accelerated sales-led subscription revenue growth and healthy profitability. The company is strategically positioned as a critical infrastructure provider for AI, leveraging its context engineering capabilities to expand its customer base and deepen engagement, particularly within its high-value customer cohort. Management remains confident in its ability to achieve and potentially exceed medium-term growth and free cash flow targets.

    Highlights

    5

    • Total revenue grew 18% as reported to $450 million, beating the high end of guidance.

    • Sales-led subscription revenue accelerated to 21% growth as reported, reaching $376 million.

    • Non-GAAP operating margin reached 18.6%, outperforming expectations.

    • Current remaining performance obligations (CRPO) crossed $1 billion for the first time, growing 19% as reported to approximately $1.06 billion.

    • The number of customers with over $100,000 ACV grew 14% to over 1,660, with AI use cases penetrating over 25% of this cohort.

    Concerns

    2

    • Q4 revenue guidance implies a sequential headwind of $14 million to $15 million due to three fewer days in the quarter.

    • Q4 non-GAAP operating margin is expected to be approximately 14.5%, lower than Q3's 18.6%, due to Q3 expenses shifting to Q4 and seasonally higher employee benefit costs.

    Guidance & targets

    9
    CategoryTargetConfidence
    Total revenue
    $445M-$447M
    high materiality
    High
    Sales-led subscription revenue
    $371M-$373M
    high materiality
    High
    Non-GAAP operating margin
    ~14.5%
    medium materiality
    High
    Non-GAAP diluted earnings per share
    $0.55-$0.57
    high materiality
    High
    Total revenue
    $1.734B-$1.736B
    high materiality
    High
    Sales-led subscription revenue
    $1.434B-$1.436B
    high materiality
    High
    Non-GAAP operating margin
    ~16.3%
    high materiality
    High
    Non-GAAP diluted earnings per share
    $2.50-$2.54
    high materiality
    High
    Adjusted free cash flow margins
    sustain the level of adjusted free cash flow margins that we achieved in fiscal 2025
    medium materiality
    High

    Operational metrics

    20
    Non-GAAP operating margin
    18.6%
    Q3 FY26

    Outperformed expectations.

    Share Repurchase Program
    $186M
    Q3 FY26

    Exceeded goal of using more than 50% of authorized amount in FY26.

    Share Repurchase Program (cumulative)
    3.8M
    Q3 FY26

    Cumulatively repurchased shares.

    AI Customers (total)
    >3,000
    Q3 FY26

    Includes customers using vector database, Agent Builder, and Attack Discovery.

    AI Customers using vector database
    >2,700
    Q3 FY26

    Customers on Elastic Cloud using vector database.

    AI Customers with ACV > $100K
    >470
    Q3 FY26

    Customers with annual contract value of $100,000 or greater using Elastic for AI.

    AI Customers with ACV > $100K using vector database
    >410
    Q3 FY26

    Customers with annual contract value of $100,000 or greater using Elastic for vector database.

    AI Use Cases Penetration in >$100K ACV cohort
    >25%
    Q3 FY26

    Cumulatively, AI use cases have penetrated over one-quarter of this cohort.

    Elasticsearch vector search speed vs OpenSearch
    8x faster
    Q3 FY26

    Superior performance due to optimizations like binary quantization and Acorn filtering.

    RAM required for vector search
    2 orders of magnitude less
    Last 18 months

    Achieved through innovations like binary quantization (BBQ), disc BBQ, and Acorn filtering algorithm.

    GPU plug-in for vector database indexing speed
    12x faster
    Q3 FY26

    Technical preview announced for GPU accelerated Vector database.

    Q4 Revenue Headwind (days)
    $14M-$15M
    Q4 FY26

    Due to 3 fewer days in Q4 compared to prior quarters, translating to a 3% headwind.

    $1M+ ACV commitments growth
    >30%YoY
    Q3 FY26

    Driven by new logos and customer expansion.

    Sales-led subscription revenue growth
    19%YoY constant currency
    Q3 FY26

    Reported growth was 21%.

    Total revenue growth
    16%YoY constant currency
    Q3 FY26

    Reported growth was 18%.

    Subscription gross margin
    82%
    Q3 FY26

    Non-GAAP.

    Total gross margin
    78%
    Q3 FY26

    Non-GAAP.

    Sales-led cloud revenue growth
    27%YoY
    Q3 FY26

    Strong traction on cloud metric.

    Support team headcount
    flat
    Last 2 years

    Managed workload growth without adding headcount due to AI-driven efficiencies.

    AI-driven support ticket deflection
    improved
    Last 2 years

    Improved overall performance and customer experience.

    Industry KPIs

    7
    MetricValueDetails
    Revenue growth$450MUSD
    Rpo current rpo$1.06BUSD
    Pricing model mixconsumption model
    Customer account count>1,660customers
    Large deal new logo metrics>30%%
    Operating FCF margin rule of 4018.6%%
    Ai product adoption monetization>25%%

    Orderbook & backlog

    2
    Current Remaining Performance Obligations (CRPO)~$1.06BQ3 FY26 end

    19% YoY reported, 15% YoY constant currency

    Portion of RPO expected to be recognized as revenue within the next 12 months.

    Remaining Performance Obligations (RPO)Not statedQ3 FY26 end

    22% YoY reported, 18% YoY constant currency

    Strong growth, best in 2 years.

    Product announcements

    5
    ProductTypeDetails
    Agent Builderlaunch
    Elastic Inference Service (GENA AI models)expansion
    Elastic Workflowslaunch
    Cloud Connectlaunch
    Elasticsearch GPU plug-inlaunch

    Deals & partnerships

    9
    Fortune 100 insurance institutionModernizing security operations, replacing legacy SIM solution7-figure

    New logo deal for Elastic Security, leveraging features like Logs DP and searchable snapshots for a single cyber data lake with integrated AI-powered SIM workflows.

    Global leader in data resiliency softwarePowering monitoring layer for new cloud offeringLarge deal

    Chose Elastic Observability, including AI assistant and LogsDB, to transform from reactive troubleshooting to intelligent semantic aware analysis, integrating open telemetry and vector search capabilities.

    Global financial groupCore of online banking application for tens of millions of users7-figure

    Expansion deal for Elasticsearch, supporting both cloud and self-managed architectures. Displaced an existing MongoDB implementation that failed to provide necessary scalability and precision.

    Leading AI recruiting platformPowering core customer-facing software

    New logo deal for Elastic's vector database due to superior search performance at scale compared to competitors.

    AI-enabled driver and fleet safety companyScaling into new global regions

    Expanded use of Elasticsearch for real-time retrieval to manage increasing data volumes without sacrificing performance.

    AI native cybersecurity companyIntegrated SIEM solution into their product

    Elastic centralizes all logs without complication, allowing them to effortlessly scale through massive growth trajectory.

    Global heavy equipment manufacturerMigrating mission-critical workloads from OpenSearch to Elastic Cloud7-figure

    Relying on Elastic platform to power high-speed search for telemetry data collected via StarLink network, achieving significant reduction in cloud costs with Logsdb.

    NVIDIATechnical collaboration for AI deployment

    Announced technical preview of Elasticsearch GPU plug-in for GPU accelerated Vector database. Partnership on Dell AI data platform.

    DellIntegrated AI stack

    Dell AI data platform, now with NVIDIA and Elastic, delivers a tightly integrated AI stack that streamlines the ability to build, deploy and scale AI.

    Risks & headwinds

    2
    Q4 Revenue Headwind from fewer daysQ4 FY26

    $14M-$15M

    Mitigation: Accounted for in guidance.

    Q4 Operating Margin Impact from expense timingQ4 FY26

    Non-GAAP operating margin ~14.5% (lower than Q3)

    Mitigation: Due to Q3 expenses moving to Q4 and seasonally higher employee benefit costs; accounted for in guidance.

    What to watch in Q4 FY26

    5

    AI customer penetration in >$100K ACV cohort

    FY27 guide call
    Current>25%
    TargetContinued increase

    Why it matters

    Indicates the deepening adoption of AI within high-value customers, a key driver for future consumption and revenue acceleration.

    Cumulatively, AI use cases have now penetrated over 1/4 of our 100,000 ACV customer cohort.

    Q&A highlights

    6

    Will the increasing penetration of AI use cases in the $100K+ ACV cohort lead to sustained growth acceleration beyond the previously stated 5% expansion?

    Management confirmed that generative AI cohorts continue to show stronger growth and expansion, and there is indeed a possibility for growth to accelerate beyond the 5% previously discussed, as customers mature in their AI journey and increase usage.

    “Yes, absolutely, there is a possibility. The art of the possible is there for us to actually accelerate beyond that 5% that we laid out during Financial Analyst Day, and the trends remain positive.”

    asked by Sanjit Singh · answered by Navam Welihinda

    2 min read6 chapters

    Detailed Narrative

    01

    AI as a Context Engine

    Elastic positions itself as essential for agentic AI, providing accurate, real-time context by searching through massive, proprietary enterprise data. Its hybrid flexibility allows sensitive data to remain in preferred environments, displacing legacy and niche cloud-native vendors. The company emphasizes that vectors alone are insufficient, offering a full retrieval toolkit from hybrid search to advanced reranking, ensuring agents have relevant context for precise actions.

    02

    Customer Wins and Expansion

    The quarter saw significant deal momentum, including a 7-figure new logo deal with a Fortune 100 insurance institution for Elastic Security, displacing a legacy SIM solution. Another large deal involved a global data resiliency software leader choosing Elastic Observability for its new cloud offering. A global financial group expanded its 7-figure Elasticsearch deal for online banking applications, moving beyond MongoDB's limitations in scalability and precision.

    03

    AI Adoption and Monetization

    AI use cases are growing, with over 3,000 customers using Elastic for AI, including 2,700 for vector database capabilities. Over 470 customers with ACV greater than $100,000 are using Elastic for AI, with AI use cases penetrating over 25% of this cohort. New logo and expansion deals with AI-first innovators validate Elastic's platform as a standard for both established enterprises and disruptors.

    04

    Performance and Technical Moat

    Elastic focuses on optimizing its Search AI platform for relevance, speed, and efficiency. Innovations like binary quantization and Acorn filtering have reduced RAM requirements for vector search by two orders of magnitude and made Elasticsearch vector search up to 8x faster than OpenSearch. Partnerships with NVIDIA and Dell are integrating Elasticsearch into AI factories for GPU-accelerated vector databases and streamlined AI deployment.

    05

    Product Milestones and Hybrid Flexibility

    General availability of Agent Builder allows developers to create secure, context-driven AI agents. Elastic Inference Service expanded to include GENA AI's multilingual reranking models, improving search accuracy. Elastic Workflows, in technical preview, adds automation for agents to orchestrate actions across internal and external systems. Cloud Connect enables self-managed customers to leverage Elastic Cloud's GPU capabilities for high-performance inference while keeping data local.

    06

    Financial Discipline and Capital Return

    The company demonstrated robust operating leverage with an 18.6% non-GAAP operating margin. It continues its $500 million share repurchase program, having completed 60% by the end of Q3 FY26, repurchasing 3.8 million shares cumulatively. Adjusted free cash flow was $54 million, representing a 12% margin, with expectations to sustain FY25 levels for the full year.

    AI-generated summary of the company’s earnings call. Not investment advice.