Elastic Earnings Beat Estimates. The Stock Is Falling Anyway.

Shares of the search and data-analytics company Elastic were down 17% this year at Thursday’s close. (Michael Nagle/Bloomberg)

Key Points

• Elastic reports adjusted earnings of 64 cents a share, exceeding estimates of 58 cents, with revenue of $423.5 million, up 16%.
• Cloud revenue growth decelerates to 22% from 24.5% in the first quarter.
• Bullish analysts on the stock say Elastic’s ‘beat-and-raise’ quarter was a mixed bag.

Elastic stock dropped Friday after the search-and-data analytics company reported mixed quarterly results that left some investors confused.

The company late Thursday posted adjusted earnings of 64 cents a share for its fiscal second quarter, surpassing the consensus estimate of 58 cents among analysts tracked by FactSet. Revenue totaled $423.5 million, up 16% from the prior year and ahead of Wall Street’s call for $418.4 million.

Elastic shares, however, slumped 10% to $73.81 on Friday. The stock had fallen 17% this year as of Thursday’s close.

While Elastic touted its momentum in striking large deals with customers, revenue growth in its cloud business slowed to 22% from 24.5% in the first quarter. Elastic raised its forecast for full-year revenue, but its call implied growth in cloud will decelerate further in the third quarter, Cantor Fitzgerald analyst Thomas Blakey said in a research note. Blakey reiterated a Neutral rating on Elastic shares and lowered his price target to $85 from $94.

Even Elastic bulls found the “beat-and-raise” quarter a bit of a mixed bag.

“F2Q results left investors scratching their heads on what has already
been a controversial stock,” wrote analysts at Guggenheim Securities in a research note. While growth in annual recurring revenue likely decelerated in the second quarter, according to the analysts’ calculations, commitments from customers may translate into greater consumption growth in the second half of the year or fiscal 2027, they said.

Guggenheim reiterated a Buy rating on Elastic stock and trimmed its price target to $116 from $122. “We’re inclined to give management the benefit for the doubt, especially at this valuation,” the analysts wrote.

Write to Nate Wolf at nate.wolf@barrons.com