10-Q: Elastic N.V. Reports Q3 2025 Results: Cloud Growth Drives Revenue Increase

Elastic N.V. reports a 17% increase in total revenue, driven by strong growth in its Elastic Cloud offering, in its Q3 2025 results.

Summary

• Elastic N.V. reported its Q3 2025 financial results, showing a 17% increase in total revenue, reaching $382.08 million compared to $327.96 million in Q3 2024.
• Subscription revenue grew by 16% to $358.20 million, with Elastic Cloud contributing significantly, growing 26% and representing 47% of total revenue.
• Services revenue also saw an increase of 18%, amounting to $23.89 million.
• The company experienced an operating loss of $4.64 million, an improvement from the $26.40 million loss in the same quarter of the previous year.
• Net loss was $17.06 million, compared to a net income of $176.12 million in Q3 2024, which was impacted by a one-time tax benefit in the prior year.
• The Net Expansion Rate was approximately 112% as of January 31, 2025.
• As of January 31, 2025, Elastic had approximately 21,350 customers, compared to approximately 20,800 customers as of January 31, 2024.
• The number of customers with greater than $100,000 in annual contract value (ACV) was over 1,460 as of January 31, 2025.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While revenue growth is strong, the net loss and ongoing operating losses temper the overall outlook. The strong Net Expansion Rate and growth in Elastic Cloud are positive indicators.

Positives

• Elastic Cloud continues to be a strong growth driver, increasing 26% year-over-year.
• Services revenue is also growing, indicating increased adoption of Elastic's service offerings.
• Operating loss has significantly improved, suggesting better cost management.
• The Net Expansion Rate of 112% indicates strong customer retention and expansion within the existing customer base.
• The customer base continues to grow, with an increase in both total customers and high-value customers (ACV > $100,000).

Negatives

• The company reported a net loss of $17.06 million, although this is largely due to a one-time tax benefit in the prior year making the comparison skewed.
• Gross margin for services revenue was (4)% for the three months ended January 31, 2025 compared to (2)% for the same period of the prior year.
• The company is still incurring operating losses, although they are improving.

Risks

• Macroeconomic conditions, including inflation and economic growth fluctuations, could impact IT spending and sales cycles.
• Increased adoption of consumption-based arrangements could impact revenue or operating results.
• Competition from other products and companies with more resources could affect market share.
• The company's ability to manage growth and international expansion effectively is crucial.
• The company's ability to protect its intellectual property rights is essential for maintaining a competitive advantage.
• The company is subject to legal proceedings, including a shareholder complaint, which could result in significant costs and diversion of resources.

Future Outlook

The company expects Elastic Clouds contribution to subscription revenue to continue to increase over time. The company believes that its existing cash, cash equivalents, and marketable securities and cash from its future operations will be sufficient to fund its operating and capital needs for at least the next 12 months.

Management Comments

• Elastic, the Search AI Company, enables our customers to find the answers they need in real time, using all of their data, at scale.
• Our platform combines the power of search with AI to help companies solve real-time business problems, unlock potential value, and achieve better outcomes.
• As digital transformation drives mission-critical business functions to the cloud, we believe that every company must incorporate search AI capabilities across IT and line-of-business organizations to find the answers that matter from all of its data in real-time and at scale.

Industry Context

The report highlights the increasing importance of cloud-based solutions and AI-powered search capabilities in the current digital landscape. Elastic's focus on these areas aligns with broader industry trends, as organizations seek to leverage data for real-time insights and improved business outcomes.

Comparison to Industry Standards

• Elastic's growth in cloud revenue is comparable to other SaaS and cloud-based companies like Datadog and MongoDB, which have also seen significant growth in their cloud offerings.
• The Net Expansion Rate of 112% is a strong indicator of customer satisfaction and expansion, placing Elastic in a competitive position compared to industry peers.
• The company's focus on search AI aligns with the growing trend of integrating AI and machine learning into various software solutions, similar to initiatives by companies like Google and Microsoft.
• Elastic's open software development model is similar to that of companies like Red Hat and SUSE, which also foster a community of users and developers around their products.

Management Changes

Legal Proceedings

• On February 11, 2025, an alleged shareholder of the Company filed a complaint in the United States District Court for the Eastern District of New York against the Company and one of its executive officers as well as a former executive officer of the Company on behalf of a putative class of shareholders of the Company who purchased or otherwise acquired the Companys ordinary shares during the period from May 31, 2024 to August 29, 2024.
• The complaint alleges that the defendants made materially false and misleading statements and omitted material information about the Companys business and financial results during the foregoing period in violation of Sections 10(b) and 20(a) of the Exchange Act and Exchange Act Rule 10b-5, which allegedly resulted in artificially inflated prices of the Companys shares.

Stakeholder Impact

• Shareholders may be concerned about the net loss, but reassured by the revenue growth and improved operating loss.
• Employees may be affected by restructuring and cost optimization efforts.
• Customers should benefit from continued investment in the Elastic Stack and new features.
• Suppliers and creditors may be impacted by changes in the company's financial performance and liquidity.

Next Steps

• The company plans to continue investing in developing the Elastic Stack and expanding its global sales and marketing footprint.
• The company will continue to focus some of its direct sales efforts on driving adoption of its paid offerings.

Key Dates

Keywords

Elastic Cloud, subscription revenue, Net Expansion Rate, ACV, search AI, Elastic Stack, financial results, Q3 2025, revenue, Elastic