Elastic
Open-source-anchored (AGPL/Elastic License) subscription SaaS: self-managed subscriptions plus consumption-based Elastic Cloud on AWS/Azure/GCP; land-and-expand sales-led + product-led motion
Earnings, margins, COGS & capex
FY2026 revenue reached $1.739B, up 17%, with total subscription revenue $1.634B (+18%). Elastic Cloud was $837.3M (+22%), now ~48% of total. Non-GAAP operating margin expanded ~120bps to 16.4% and adjusted free cash flow was $346M (~20% margin; operating cash flow $327M). GAAP operating margin was -2% (operating loss ~$33M), yet full-year GAAP net income was $367.8M driven largely by a ~$435M discrete income-tax benefit (valuation-allowance release) rather than operations; non-GAAP net income was $275.3M and FY non-GAAP diluted EPS was $2.57. Growth is decelerating and FY2027 guidance implies ~14.6% top-line growth with margin stepping toward a raised ~25% FY2029 non-GAAP operating-margin target.
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~22¢ is cost of goods and ~62¢ operating expense, leaving ~16¢ of operating profit.
Revenue trend
Margins
stable, high-70s
stable
expanding; guiding ~19% FY2027, ~25% target FY2029
improving but still negative on heavy stock-based comp
improving
COGS structure
Primarily third-party cloud hosting/infrastructure (AWS, Azure, GCP) for Elastic Cloud plus support and services; hosting cost scales with consumption, keeping cloud gross margin below self-managed subscription. Blended non-GAAP gross margin ~78%.
Capex
Not separately highlighted; asset-light SaaS with modest capex (leasehold/IT). Infrastructure economics flow through COGS via hyperscaler hosting rather than owned data centers.
Latest earnings
Beat: management cited exceeding guidance across key metrics; Q4 non-GAAP diluted EPS $0.61, Q4 non-GAAP operating margin 14.8%
Q1 FY2027 revenue $469M-$470M (~13% growth); FY2027 total revenue $1.985B-$2.000B (~14.6% growth), non-GAAP operating margin ~19.0%; raised medium-term FY2029 non-GAAP operating-margin target to ~25%
- Total revenue (Q4)
- $451M (+16%)
- Subscription revenue (Q4)
- $422M (+17%)
- Net expansion rate
- ~112%
- Customers >$100k ACV
- 1,720+ (vs 1,510+ a year ago)
- CRPO
- $1.203B (+20%)
- RPO growth
- +28% YoY
- Non-GAAP EPS (Q4 / FY2026)
- $0.61 / $2.57
- GAAP net income (FY2026)
- $367.8M (incl. ~$435M tax benefit)
- Non-GAAP net income (FY2026)
- $275.3M
Growth drivers
- Elastic Cloud consumption (+22% FY2026), the primary growth engine
- GenAI/vector-search adoption — Elasticsearch as the vector database + Elasticsearch Relevance Engine (ESRE) for RAG; a growing share of $100k+ ACV customers now use Elastic AI capabilities
- Platform consolidation into large deals: 1,720+ customers at $100k+ ACV and a growing $1M+ ACV cohort
- Security/SIEM (Elastic Security) displacing legacy log-analytics/SIEM spend
- Land-and-expand within enterprise: net expansion ~112%, CRPO +20%, RPO +28%
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2026-06-08. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’26
Bull & bear
Elastic is a net-cash, FCF-profitable infrastructure-software compounder whose core search engine is becoming a default enterprise data layer for GenAI, with strengthening large deals, +28% RPO backlog, and a clear margin-expansion runway to ~25%.
- GenAI is a genuine tailwind: Elasticsearch is a leading vector database for RAG, and AI-using customers expand faster than non-AI peers
- Consolidation is real: growing $1M+ ACV cohort, CRPO +20% and RPO +28% signal durable committed demand ahead of recognized revenue
- Margin story intact: non-GAAP operating margin 16.4% to guided ~19% FY2027 to raised ~25% FY2029 target, with ~20% adjusted FCF margin funding it
- Fortress balance sheet (~$800M net cash) and reasonable ~3x forward P/S for a high-gross-margin platform with three attach motions
- Optionality from displacing legacy SIEM/observability incumbents on price and a unified platform
A decelerating ~15% grower still GAAP-unprofitable, sandwiched between Datadog, Cisco/Splunk, and its own hyperscaler hosts who fork and resell its core engine, with softening self-service consumption and a valuation that needs a re-acceleration that may not come.
- Top-line growth is slowing (17% to ~14.6% guide) and net expansion (~112%) sits well below best-in-class SaaS
- Self-service/monthly cloud consumption is soft, leaving growth reliant on lumpy sales-led deals
- AWS OpenSearch fork lets the largest cloud provider undercut Elastic on the very platform Elastic runs on
- Crowded competition: Datadog in observability, Cisco/Splunk in SIEM, MongoDB/Snowflake/Pinecone in vector search
- GAAP operating loss persists; FY2026 GAAP net income was flattered by a ~$435M tax benefit, not operating leverage
- Vector-search differentiation may commoditize as every data platform ships embeddings/search
What it is worth
Forward EV/Sales and P/Sales vs infrastructure-software peers; sanity-checked against adjusted FCF yield
~$40-45 (growth to low-teens
consumption soft, hyperscaler/OpenSearch pressure; compresses toward ~2-2.5x forward sales)
~$60-65 (~15% growth
~19% non-GAAP margin path holds; ~3-3.5x forward sales)
~$80+ (mid-teens re-acceleration on GenAI attach + margin toward ~25%, re-rate toward ~4-4.5x forward sales)
At ~$58.82 and ~$6.0B market cap on FY2026 revenue of $1.739B, ESTC trades ~3.5x trailing P/S (~3.0x on FY2027 guided ~$2.0B) and ~3.0x EV/Sales given ~$800M net cash. That is a discount to hyper-growth observability peers (e.g., Datadog) reflecting slower ~15% growth, but supported by ~20% adjusted FCF margin and a rising margin target. Adjusted FCF of ~$346M implies ~6% FCF yield on market cap. Sell-side targets cluster around $80. Re-rating hinges on GenAI/vector-search re-accelerating growth; de-rating risk if growth slips toward low-teens without margin offset.
SWOT
Strengths
- Elasticsearch is the de facto standard search/log-analytics engine with a massive global installed base and developer mindshare
- Three-solution platform (Search, Observability, Security) enabling cross-sell and consolidation
- Strong balance sheet: $1.370B cash vs $570.9M debt (net cash ~$800M) and ~20% adjusted FCF margin
- Natural positioning as the vector-search/RAG data layer for enterprise GenAI
Weaknesses
- Still GAAP operating-loss-making (-2%) — reported FY2026 GAAP net income of $367.8M was flattered by a ~$435M one-time tax benefit, not operations
- Net expansion moderated to ~112%, and self-service (monthly) cloud consumption growth is soft
- Growth decelerating (17% to guided ~14.6%), pressuring a growth-premium valuation
- Complex open-source/licensing history (2021 SSPL relicensing, 2024 AGPL re-open-sourcing) around the AWS OpenSearch fork that competes directly
Opportunities
- GenAI/RAG demand making Elasticsearch's vector search a first-class enterprise workload
- SIEM/security market share shift away from legacy Splunk-era pricing
- Large-deal consolidation and multi-solution adoption expanding ACV
- Consumption-based cloud model leverages usage growth into revenue
Threats
- Datadog (observability) and Splunk-under-Cisco (SIEM) squeeze both flanks; hyperscalers bundle competing services
- AWS OpenSearch (a fork of Elasticsearch) offered as a managed service on the same cloud Elastic depends on
- Dedicated vector-DB and data-platform entrants (Pinecone, MongoDB, Snowflake) targeting the GenAI search layer
- Macro IT-spend sensitivity to consumption revenue; FX exposure on constant-currency growth
Moats, dependencies & bottlenecks
Moats
Ubiquitous open-source search/log engine; deep ecosystem, tooling, and skills base create default-choice advantage.
Moderate-Strong Indexed data, dashboards, alerting, and security rules embed Elastic into operational workflows; migration is costly.
Cross-sell and consolidation raise ACV and stickiness but each solution faces a stronger point-competitor.
Real early lead as a RAG data layer, but embeddings/vector search are rapidly commoditizing across data platforms.
AGPL re-open-sourcing rebuilt goodwill, but the community also fuels the competing OpenSearch fork.
Dependencies
Infrastructure host + go-to-market channel Elastic Cloud runs on their infrastructure and marketplaces; they are simultaneously suppliers, distribution partners, and competitors.
Coopetition / substitution AWS forked Elasticsearch into OpenSearch (now under the Linux Foundation) and sells it managed, directly substituting Elastic's core.
Core technology base Elasticsearch is built on Lucene; roadmap and talent partly depend on OSS ecosystem health.
Revenue-model exposure Usage-linked revenue is sensitive to customer optimization/cost-cutting and macro IT budgets.
Growth concentration Growth increasingly driven by lumpy $1M+ deals; timing and slippage can swing quarters.
Advantages
- Ubiquitous, developer-loved core engine with an enormous installed base
- Three attach motions (search, observability, security) on one data platform
- Net-cash balance sheet and ~20% adjusted FCF margin funding R&D and margin expansion
- Early, credible position as the enterprise vector/search layer for GenAI/RAG
- Consumption model that captures upside as workloads grow
Weaknesses
- Decelerating growth and ~112% net expansion below elite SaaS
- Persistent GAAP operating losses; heavy stock-based compensation
- Structural coopetition with hyperscalers and the OpenSearch fork
- Soft self-service/monthly cloud consumption growth
- Point-competitors are larger/better-funded in each solution area
Bottlenecks
- Re-accelerating growth above ~15% while self-service consumption softens
- Converting GenAI/vector-search interest into durable paid consumption before competitors commoditize it
- Reaching sustained GAAP operating profitability (reducing stock-based comp intensity)
- Defending against hyperscaler-bundled and OpenSearch-fork alternatives on price
- Balancing open-source openness with monetizable proprietary differentiation
Top signals & trends
Top signals
Signals confidence in durable operating leverage and a higher Rule of 40.
Committed backlog building faster than recognized revenue supports forward growth.
Growth premium under pressure as top line slows toward mid-teens.
Enterprise commitments strong; self-service demand soft.
Evidence GenAI attach lifts expansion in the installed base.
Trends
Drives demand for vector search and retrieval, Elastic's sweet spot.
Consolidation favors platforms but pits Elastic against Datadog and Cisco/Splunk.
OpenSearch and cloud-native services pressure pricing and share.
Every data platform is adding embeddings/vector search, eroding differentiation.
Customers optimizing usage caps consumption-revenue upside.
Rewards Elastic's margin-expansion and FCF trajectory.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Primary cloud host for Elastic Cloud; also competes via OpenSearch.
Cloud host and marketplace channel for Elastic Cloud.
Cloud host and marketplace channel for Elastic Cloud.
financial services, public sector, retail) 1,720+ customers at >$100k ACV; broad diversified base, no single-customer concentration disclosed.
Developers / SMBs (self-managed + self-service cloud) Product-led base feeding land-and-expand into enterprise accounts.
Leading observability/monitoring SaaS; overlaps and outgrows Elastic Observability.
Splunk (acquired by Cisco) is the incumbent in SIEM/log analytics; direct competitor to Elastic Security and Observability.
Managed OpenSearch is a fork of Elasticsearch sold on the same cloud Elastic runs on; both host and rival.
Azure services, Sentinel SIEM, and Azure AI Search compete across observability, security, and vector search.
Atlas Search + vector search overlap Elastic in the GenAI/search-database layer.
Data platform expanding into search, analytics, and Cortex AI/vector workloads.
Next-gen SIEM (Falcon/LogScale) competes with Elastic Security.
Cortex XSIAM targets the SIEM/security-analytics workloads Elastic pursues.
Enterprise observability platform competing in APM/monitoring.
Vertex AI Search and enterprise search compete in the GenAI retrieval layer.