Q2 2026 Elastic NV Earnings Call

November 20, 2025

Speaker #1: Good day and welcome to the Elastic N.V. second quarter fiscal 2026 earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero.

Operator: Good day and welcome to the Elastic N.V. Q2 2026 Earnings Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Eric Prengel, Group Vice President of Finance. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad.

Speaker #1: To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Eric Prengel, GVP of Finance.

Speaker #1: Please go

Speaker #1: ahead. Thank you.

Eric Prengel: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic's Q2 of Fiscal 2026 financial results. On the call, we have Ashutosh Kulkarni, Chief Executive Officer, and Navam Welihinda, Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued today after the close of market and is posted on our website. Slides, which are supplemental to the call, can also be found on the Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements, which may include predictions, estimates, our expectations regarding demand for our products and solutions, and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as of the date of this call, and are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #2: Good afternoon and thank you for joining us on today's conference call to discuss Elastic's second quarter fiscal 2026 financial results. On the call, we have Ashutosh Kulkarni, Chief Executive Officer, and Navam Welihinda, Chief Financial Officer.

Speaker #2: Following their prepared remarks, we will take questions. Our press release was issued today after the close of market and is posted on our website.

Speaker #2: Slides that are supplemental to the call can also be found on the Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements, which may include predictions, estimates, our expectations regarding demand for our products and solutions, and our future revenue and other information.

Speaker #2: These forward-looking statements are based on factors currently known to us, speak only as of the date of this call, and are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #2: We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today.

Eric Prengel: We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website, and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. The webcast replay of this call will be available on our company website under the Investor Relations link. Our third quarter of fiscal 2026 quiet period begins at the close of business on Friday, 16 January 2026.

We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website, and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. The webcast replay of this call will be available on our company website under the Investor Relations link. Our third quarter of fiscal 2026 quiet period begins at the close of business on Friday, 16 January 2026.

Speaker #2: Included in the slides posted on the Investor Relations website and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures.

Speaker #2: Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. In less specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis.

Speaker #2: The webcast replay of this call will be available on our company website under the Investor Relations link. Our third quarter fiscal 2026 quiet period begins at the close of business on Friday, January 16th, 2026.

Speaker #2: We will be participating in Barclays Global Technology Conference on December 10th, and the Needham Growth Conference on January 14th. With that, I'll turn it over to

Eric Prengel: We will be participating in the Barclays Global Technology Conference on 10 December and the Needham Growth Conference on 14 January. With that, I'll turn it over to Ash.

We will be participating in the Barclays Global Technology Conference on 10 December and the Needham Growth Conference on 14 January. With that, I'll turn it over to Ash.

Speaker #2: Ash. Thank you, Eric, and thank you.

Ashutosh Kulkarni: Thank you, Eric, and thank you everyone for joining us on today's call. Q2 was an outstanding quarter for Elastic, driven by robust growth across the company, with AI positively impacting all areas of our business. We beat the high end of our guidance across all metrics, delivering revenue growth of 16% and a non-GAAP operating margin of 16.5%. Our team drove strong execution, achieving sales-led subscription revenue growth of 18%, with strength in both Elastic Cloud and our self-managed offerings. We also increased the number of customers spending over $100,000 with us to more than 1,600 at quarter end. The importance of data, especially unstructured data, is growing at an unprecedented rate as enterprises continue to expand their use of AI.

Ash Kulkarni: Thank you, Eric, and thank you everyone for joining us on today's call. Q2 was an outstanding quarter for Elastic, driven by robust growth across the company, with AI positively impacting all areas of our business. We beat the high end of our guidance across all metrics, delivering revenue growth of 16% and a non-GAAP operating margin of 16.5%. Our team drove strong execution, achieving sales-led subscription revenue growth of 18%, with strength in both Elastic Cloud and our self-managed offerings. We also increased the number of customers spending over $100,000 with us to more than 1,600 at quarter end. The importance of data, especially unstructured data, is growing at an unprecedented rate as enterprises continue to expand their use of AI.

Speaker #3: Everyone, thank you for joining us on today's call. Q2 was an outstanding quarter for Elastic, driven by robust growth across the company, with AI positively impacting all areas of our business. We beat the high end of our guidance across all metrics, delivering revenue growth of 16% and a non-GAAP operating margin of 16.5%.

Speaker #3: Our team drove strong execution, achieving sales-led subscription revenue growth of 18%, with strength in both Elastic Cloud and our self-managed offerings. We also increased the number of customers spending over $100,000 with us to more than 1,600 at quarter-end.

Speaker #3: The importance of data, especially unstructured data, is growing at an unprecedented rate as enterprises continue to expand their use of AI. The Elastic platform, with its ability to sift through and find relevant insights in petabytes of structured and unstructured data in real time, is uniquely suited to address the need for context in this age of AI.

Ashutosh Kulkarni: The Elastic platform, with its ability to sift through and find relevant insights in petabytes of structured and unstructured data in real time, is uniquely suited to address the need for context in this age of AI. This ability is driving the acceleration and adoption of the Elastic platform by organizations for their search, AI, observability, and security needs. In Q2, we secured significant customer commitments across all solution areas. We maintained strong momentum in search and AI, while also seeing an uptick in platform consolidation for security and observability, with an increasing number of customers migrating from legacy products to our platform. These factors led to an acceleration in the number of large deals we were able to secure this quarter. In Q2, we signed over 30 commitments valued over $1 million in annual commitment value, with five representing over $10 million in total contract value.

The Elastic platform, with its ability to sift through and find relevant insights in petabytes of structured and unstructured data in real time, is uniquely suited to address the need for context in this age of AI. This ability is driving the acceleration and adoption of the Elastic platform by organizations for their search, AI, observability, and security needs. In Q2, we secured significant customer commitments across all solution areas. We maintained strong momentum in search and AI, while also seeing an uptick in platform consolidation for security and observability, with an increasing number of customers migrating from legacy products to our platform. These factors led to an acceleration in the number of large deals we were able to secure this quarter. In Q2, we signed over 30 commitments valued over $1 million in annual commitment value, with five representing over $10 million in total contract value.

Speaker #3: This ability is driving the acceleration in adoption of the Elastic platform by organizations for their search, AI, observability, and security needs. In Q2, we secured significant customer commitments across all solution areas.

Speaker #3: We maintain strong momentum in search and AI, while also seeing an uptick in platform consolidation for security and observability, with an increasing number of customers migrating from legacy products to our platform.

Speaker #3: These factors led to an acceleration in the number of large deals we were able to secure this quarter. In Q2, we signed over 30 commitments valued at over $1 million in annual commitment value, with five representing over $10 million in total contract value.

Speaker #3: Of these five deals, two were greater than $20 million a new record this quarter. In Q1 2025, we strategically realigned our sales team to focus capacity on our highest value opportunities.

Ashutosh Kulkarni: Of these five deals, two were greater than $20 million, a new record this quarter. In Q1 2025, we strategically realigned our sales team to focus capacity on our highest value opportunities. This quarter marked the fifth consecutive quarter of disciplined sales execution, demonstrating our continued commitment to driving enhanced performance and consistency across the field. These increasingly larger commitments are exemplified by an eight-figure new logo deal where Elastic Security was chosen by one of the largest chemical manufacturers in the world. The company initiated a competitive search to replace its fragmented security tools and simplify its IT infrastructure, seeking an XDR platform that could deliver advanced threat protection and a 35% increase in operational efficiency. Elastic prevailed against multiple competitors. We demonstrated superior capabilities by detecting threats overlooked by all other solutions.

Of these five deals, two were greater than $20 million, a new record this quarter. In Q1 2025, we strategically realigned our sales team to focus capacity on our highest value opportunities. This quarter marked the fifth consecutive quarter of disciplined sales execution, demonstrating our continued commitment to driving enhanced performance and consistency across the field. These increasingly larger commitments are exemplified by an eight-figure new logo deal where Elastic Security was chosen by one of the largest chemical manufacturers in the world. The company initiated a competitive search to replace its fragmented security tools and simplify its IT infrastructure, seeking an XDR platform that could deliver advanced threat protection and a 35% increase in operational efficiency. Elastic prevailed against multiple competitors. We demonstrated superior capabilities by detecting threats overlooked by all other solutions.

Speaker #3: This quarter marked the fifth consecutive quarter of disciplined sales execution, demonstrating our continued commitment to driving enhanced performance and consistency across the field. These increasingly larger commitments are exemplified by an eight-figure new logo deal where Elastic Security was chosen by one of the largest chemical manufacturers in the world.

Speaker #3: The company initiated a competitive search to replace its fragmented security tools and simplify its IT infrastructure. Seeking an XDR platform that could deliver advanced threat protection and a 35% increase in operational efficiency.

Speaker #3: Elastic prevailed against multiple competitors. We demonstrated superior capabilities by detecting threats overlooked by all other solutions. The customer chose Elastic due to the proven effectiveness of our technology, our open ecosystem, and our ability to scale across their global operations.

Ashutosh Kulkarni: The customer chose Elastic due to the proven effectiveness of our technology, our open ecosystem, and ability to scale across their global operations. With the customer now progressing towards an AI-driven SOC, we believe our AI features will enable them to realize even more ambitious efficiency targets. Building on our momentum in security, our leadership in NextGen SIM led to a $26 million commitment with CISA, the US federal agency responsible for safeguarding critical civilian infrastructure. CISA selected Elastic Security on Elastic Cloud for a unified SIM-as-a-service offering that will help to secure US federal civilian agencies. This program will standardize security data collection, enabling real-time threat detection and rapid incident response across agencies, while leveraging our standards-based, highly efficient platform to significantly reduce costs associated with data access and retention.

The customer chose Elastic due to the proven effectiveness of our technology, our open ecosystem, and ability to scale across their global operations. With the customer now progressing towards an AI-driven SOC, we believe our AI features will enable them to realize even more ambitious efficiency targets. Building on our momentum in security, our leadership in NextGen SIM led to a $26 million commitment with CISA, the US federal agency responsible for safeguarding critical civilian infrastructure. CISA selected Elastic Security on Elastic Cloud for a unified SIM-as-a-service offering that will help to secure US federal civilian agencies. This program will standardize security data collection, enabling real-time threat detection and rapid incident response across agencies, while leveraging our standards-based, highly efficient platform to significantly reduce costs associated with data access and retention.

Speaker #3: With the customer now progressing towards an AI-driven SOC, we believe our AI features will enable them to realize even more ambitious efficiency targets. Building on our momentum in security, our leadership in NextGen SIM led to a 26 million commitment with CISA, the US federal agency responsible for safeguarding critical civilian infrastructure.

Speaker #3: CISA selected Elastic Security on Elastic Cloud for a unified SIM-as-a-service offering that will help to secure US federal civilian agencies. This program will standardize security data collection, enabling real-time threat detection and rapid incident response across agencies, while leveraging our standards-based highly efficient platform to significantly reduce costs, associated with data access and retention.

Speaker #3: We architected our NextGen SIM solution knowing that security is fundamentally a data problem. One our search AI platform is uniquely suited to solve. Capabilities like attack discovery, ESQL, and cross-cluster search help analysts investigate incidents and correlate events across environments without manually aggregating data or switching contexts.

Ashutosh Kulkarni: We architected our NextGen SIM solution knowing that security is fundamentally a data problem, one our Search AI platform is uniquely suited to solve. Capabilities like attack discovery, ESQL, and cross-cluster search help analysts investigate incidents and correlate events across environments without manually aggregating data or switching contexts, accelerating detection, response, and forensic analysis. Our ability to overcome complex data challenges by unlocking the value of unstructured data is directly linked to our continuing success in generative AI. In Q2, we saw strong demand for our platform as an increasing number of customers adopted Elastic for developing semantic search and agentic applications. Our deep expertise in managing unstructured data, combined with our clear product differentiation and context engineering leadership, positions Elastic as the natural choice for building GenAI applications. This has led to widespread adoption and successful deal closures across numerous industries, addressing a wide variety of use cases.

We architected our NextGen SIM solution knowing that security is fundamentally a data problem, one our Search AI platform is uniquely suited to solve. Capabilities like attack discovery, ESQL, and cross-cluster search help analysts investigate incidents and correlate events across environments without manually aggregating data or switching contexts, accelerating detection, response, and forensic analysis. Our ability to overcome complex data challenges by unlocking the value of unstructured data is directly linked to our continuing success in generative AI. In Q2, we saw strong demand for our platform as an increasing number of customers adopted Elastic for developing semantic search and agentic applications. Our deep expertise in managing unstructured data, combined with our clear product differentiation and context engineering leadership, positions Elastic as the natural choice for building GenAI applications. This has led to widespread adoption and successful deal closures across numerous industries, addressing a wide variety of use cases.

Speaker #3: Accelerating detection, response, and forensic analysis. Our ability to overcome complex data challenges by unlocking the value of unstructured data is directly linked to our continuing success in generative AI.

Speaker #3: In Q2, we saw strong demand for our platform as an increasing number of customers adopted Elastic for developing semantic search and agentic applications. Our deep expertise in managing unstructured data, combined with our clear product differentiation and context engineering leadership, positions Elastic as the natural choice for building GenAI applications.

Speaker #3: This has led to widespread adoption and successful deal closures across numerous industries, addressing a wide variety of use cases. For example, a global financial institution operating in over 100 countries expanded its use of Elasticsearch in a seven-figure deal.

Ashutosh Kulkarni: For example, a global financial institution operating in over 100 countries expanded its use of Elasticsearch in a seven-figure deal. This customer leverages the full Elastic platform in a self-managed environment for hundreds of use cases. Their search capabilities continue to grow as they centralize unstructured data to power insights for customer and employee-facing applications. Previously, they attempted to leverage a hyperscaler's Copilot product, but it did not surface sufficient relevant results. Now they are using Elasticsearch as their context engineering platform, paired with an LLM for their internal AI applications. Elastic's ability to ensure accurate context and relevance has improved their results, and they are preparing to move the application into production. Our leadership in context engineering and relevance is translating directly into significant GenAI customer adoption. In Q2, new customer commitments with GenAI continue to grow.

For example, a global financial institution operating in over 100 countries expanded its use of Elasticsearch in a seven-figure deal. This customer leverages the full Elastic platform in a self-managed environment for hundreds of use cases. Their search capabilities continue to grow as they centralize unstructured data to power insights for customer and employee-facing applications. Previously, they attempted to leverage a hyperscaler's Copilot product, but it did not surface sufficient relevant results. Now they are using Elasticsearch as their context engineering platform, paired with an LLM for their internal AI applications. Elastic's ability to ensure accurate context and relevance has improved their results, and they are preparing to move the application into production. Our leadership in context engineering and relevance is translating directly into significant GenAI customer adoption. In Q2, new customer commitments with GenAI continue to grow.

Speaker #3: This customer leverages the full Elastic platform in a self-managed environment for hundreds of use cases. Their search capabilities continue to grow as they centralize unstructured data to power insights for customer- and employee-facing applications.

Speaker #3: Previously, they attempted to leverage a hyperscaler's Copilot product, but it did not surface sufficient relevant results. Now they are using Elastic Search as their context engineering platform, paired with an LLM for their internal AI applications.

Speaker #3: Elastic's ability to ensure accurate context and relevance has improved their results, and they are preparing to move the application into production. Our leadership in context engineering and relevance is translating directly into significant GenAI customer adoption.

Speaker #3: In Q2, new customer commitments with GenAI continue to grow. We signed four GenAI deals that included new business of greater than $1 million in annual contract value.

Ashutosh Kulkarni: We signed four GenAI deals that included new business of greater than $1 million in annual contract value. We now have over 2,450 customers on Elastic Cloud using us for GenAI use cases, with over 370 of these amongst our cohort of customers spending $100,000 or more with us annually, representing nearly a quarter of our greater than $100,000 ACV customer cohort leveraging Elastic for GenAI use cases. In another GenAI win from Q2, a global supply chain software provider expanded its use of Elastic Search in an eight-figure deal to leverage our AI and vector search features in an embedded fashion in their key products. The customer is now also expanding the use of our platform to support future agentic use cases. We are seeing customers expand their use of Elastic Search to develop their own agentic workflows and to further empower enterprises in adopting AI agents.

We signed four GenAI deals that included new business of greater than $1 million in annual contract value. We now have over 2,450 customers on Elastic Cloud using us for GenAI use cases, with over 370 of these amongst our cohort of customers spending $100,000 or more with us annually, representing nearly a quarter of our greater than $100,000 ACV customer cohort leveraging Elastic for GenAI use cases. In another GenAI win from Q2, a global supply chain software provider expanded its use of Elastic Search in an eight-figure deal to leverage our AI and vector search features in an embedded fashion in their key products. The customer is now also expanding the use of our platform to support future agentic use cases. We are seeing customers expand their use of Elastic Search to develop their own agentic workflows and to further empower enterprises in adopting AI agents.

Speaker #3: We now have over 2,450 customers on Elastic Cloud using us for GenAI use cases, with over 370 of these amongst our cohort of customers spending $100,000 or more with us annually. This represents nearly a quarter of our greater than $100,000 ACV customer cohort leveraging Elastic for GenAI use cases.

Speaker #3: In another GenAI win from Q2, a global supply chain software provider expanded its use of Elastic Search in an eight-figure deal to leverage our AI and vector search features in an embedded fashion in their key products.

Speaker #3: The customer is now also expanding the use of our platform to support future agentic use cases. We are seeing customers expand their use of Elasticsearch to develop their own agentic workflows and to further empower enterprises in adopting AI agents.

Speaker #3: We've recently introduced Agent Builder. This new product builds on the Elastic Inference Service and provides an out-of-the-box conversational experience, allowing users to interact directly with any data in Elasticsearch and extends our technology into a new frontier beyond the vector database.

Ashutosh Kulkarni: We've recently introduced Agent Builder. This new product builds on the Elastic Inference service and provides an out-of-the-box conversational experience, allowing users to interact directly with any data in Elasticsearch and extends our technology into a new frontier beyond the vector database. It embodies a truly relevance-centric approach rooted in context engineering by enabling users to explore their data and assemble the necessary tools for quickly building AI agents with robust workflow capabilities. Agent Builder dramatically simplifies the entire operational lifecycle of agents, including their development, configuration, execution, customization, and observability, all directly within Elasticsearch. This powerful capability strengthens our moat of broader GenAI differentiation, which is also helping us land deals in observability and security as customers grow with Elastic because of our AI features. An increase in AI-based security threats fueled a large expansion deal with one of the world's leading investment management companies.

We've recently introduced Agent Builder. This new product builds on the Elastic Inference service and provides an out-of-the-box conversational experience, allowing users to interact directly with any data in Elasticsearch and extends our technology into a new frontier beyond the vector database. It embodies a truly relevance-centric approach rooted in context engineering by enabling users to explore their data and assemble the necessary tools for quickly building AI agents with robust workflow capabilities. Agent Builder dramatically simplifies the entire operational lifecycle of agents, including their development, configuration, execution, customization, and observability, all directly within Elasticsearch. This powerful capability strengthens our moat of broader GenAI differentiation, which is also helping us land deals in observability and security as customers grow with Elastic because of our AI features. An increase in AI-based security threats fueled a large expansion deal with one of the world's leading investment management companies.

Speaker #3: It embodies a truly relevant-centric approach rooted in context engineering, by enabling users to explore their data and assemble the necessary tools for quickly building AI agents with robust workflow capabilities.

Speaker #3: Agent Builder dramatically simplifies the entire operational lifecycle of agents, including their development, configuration, execution, customization, and observability, all directly within Elasticsearch. This powerful capability strengthens our moat of broader GenAI differentiation.

Speaker #3: Which is also helping us land deals in observability and security, as customers grow with Elastic because of our AI features. An increase in AI-based security threats fueled a large expansion deal with one of the world's leading investment management companies.

Speaker #3: They are deploying our AI capabilities to proactively combat evolving attacks. This customer expanded its use of Elastic Security to enhance runtime protection with integrated AI, a critical need for securing applications.

Ashutosh Kulkarni: They are deploying our AI capabilities to proactively combat evolving attacks. This customer expanded its use of Elastic Security to enhance runtime protection with integrated AI, a critical need for securing applications. Default LLM security controls alone were insufficient. The customer required a security solution capable of evolving with their unique requirements. Elastic's automation-first architecture provided them the ability to rapidly evolve to keep up with ever-changing security challenges. As bad actors grow in sophistication, leveraging Elastic's attack discovery and AI assistant allows their SOC to scale their capabilities and proactively address issues. We are seeing similar success in adoption of our platform capabilities across our observability solution. In one observability win from the quarter, a leading US municipal technology and innovation agency signed a seven-figure expansion deal for Elastic Observability. The agency is tasked with providing infrastructure as a service to all municipality offices.

They are deploying our AI capabilities to proactively combat evolving attacks. This customer expanded its use of Elastic Security to enhance runtime protection with integrated AI, a critical need for securing applications. Default LLM security controls alone were insufficient. The customer required a security solution capable of evolving with their unique requirements. Elastic's automation-first architecture provided them the ability to rapidly evolve to keep up with ever-changing security challenges. As bad actors grow in sophistication, leveraging Elastic's attack discovery and AI assistant allows their SOC to scale their capabilities and proactively address issues. We are seeing similar success in adoption of our platform capabilities across our observability solution. In one observability win from the quarter, a leading US municipal technology and innovation agency signed a seven-figure expansion deal for Elastic Observability. The agency is tasked with providing infrastructure as a service to all municipality offices.

Speaker #3: Default LLM security controls alone were insufficient; the customer required a security solution capable of evolving with their unique requirements. Elastic's automation-first architecture provided them the ability to rapidly evolve to keep up with ever-changing security challenges.

Speaker #3: As bad actors grow in sophistication, leveraging Elastic's attack discovery and AI assistant allows their SOC to scale their capabilities and proactively address issues. We are seeing similar success in adoption of our platform capabilities across our observability solution.

Speaker #3: In one observability win from the quarter, a leading U.S. municipal technology and innovation agency signed a seven-figure expansion deal for Elastic Observability. The agency is tasked with providing infrastructure as a service to all municipality offices.

Speaker #3: They launched a new project to unify the city's data in a first-class data environment to modernize operations and decision-making. They chose Elastic Observability as the foundational technology due to our flexibility, open architecture, and ability to deliver cost savings at scale through features like searchable snapshots.

Ashutosh Kulkarni: They launched a new project to unify the city's data in a first-class data environment to modernize operations and decision-making. They chose Elastic Observability as the foundational technology due to our flexibility, open architecture, and ability to deliver cost savings at scale through features like Searchable Snapshots. The agency is now leveraging our AI assistant, which helps them remediate and triage issues, reducing their reliance on external consultant services. Building on foundational components for working with observability data, we introduced Streams this quarter. Streams is an agentic AI solution that simplifies working with logs to help SRE teams rapidly understand the why behind an issue for faster resolution. Streams can automatically organize logs, find meaning and problems in logs by applying AI and the power of Elastic Search to this unstructured, messy log data.

They launched a new project to unify the city's data in a first-class data environment to modernize operations and decision-making. They chose Elastic Observability as the foundational technology due to our flexibility, open architecture, and ability to deliver cost savings at scale through features like Searchable Snapshots. The agency is now leveraging our AI assistant, which helps them remediate and triage issues, reducing their reliance on external consultant services. Building on foundational components for working with observability data, we introduced Streams this quarter. Streams is an agentic AI solution that simplifies working with logs to help SRE teams rapidly understand the why behind an issue for faster resolution. Streams can automatically organize logs, find meaning and problems in logs by applying AI and the power of Elastic Search to this unstructured, messy log data.

Speaker #3: The agency is now leveraging our AI assistant, which helps them remediate and triage issues reducing their reliance on external consultant services. Building on foundational components, for working with observability data we introduced Streams.

Speaker #3: This quarter, Streams is an agentic AI solution that simplifies working with logs to help SRE teams rapidly understand the why behind an issue, for faster resolution.

Speaker #3: Streams can automatically organize logs, find meaning and problems in logs by applying AI and the power of Elasticsearch to this unstructured, messy log data.

Speaker #3: In Q2, we introduced a steady set of new AI capabilities, including a number of features that improve our performance as a vector database. We introduced a managed inference service natively through Elastic Cloud.

Ashutosh Kulkarni: In Q2, we introduced a steady set of new AI capabilities, including a number of features that improve our performance as a vector database. We introduced a managed inference service natively through Elastic Cloud. Inference at scale is incredibly important for vector search, semantic search, and GenAI workflows, and we provide our customers with an API-based inference service using NVIDIA GPUs with our vector database for low-latency, high-throughput inference. We also continue to improve our vector database performance with new functionality, including the release of DiskBBQ. DiskBBQ is a new disk-friendly vector similarity search algorithm that delivers more efficient vector search at scale than traditional industry-standard search techniques used in many other vector databases. Finally, we announced our acquisition of Jina AI. Jina AI has developed leading frontier-class multilingual and multimodal embedding and re-ranker models, helping businesses and developers build powerful search applications.

In Q2, we introduced a steady set of new AI capabilities, including a number of features that improve our performance as a vector database. We introduced a managed inference service natively through Elastic Cloud. Inference at scale is incredibly important for vector search, semantic search, and GenAI workflows, and we provide our customers with an API-based inference service using NVIDIA GPUs with our vector database for low-latency, high-throughput inference. We also continue to improve our vector database performance with new functionality, including the release of DiskBBQ. DiskBBQ is a new disk-friendly vector similarity search algorithm that delivers more efficient vector search at scale than traditional industry-standard search techniques used in many other vector databases. Finally, we announced our acquisition of Jina AI. Jina AI has developed leading frontier-class multilingual and multimodal embedding and re-ranker models, helping businesses and developers build powerful search applications.

Speaker #3: Inference at scale is incredibly important for vector search, semantic search, and GenAI workflows. We provide our customers with an API-based inference service using NVIDIA GPUs with our vector database for low latency, high throughput inference.

Speaker #3: We also continue to improve our vector database performance with new functionality, including the release of Disk BBQ. Disk BBQ is a new disk-friendly vector similarity search algorithm that delivers more efficient vector search at scale than traditional industry-standard search techniques used in many other vector databases.

Speaker #3: And finally, we announced our acquisition of Jina AI. Jina AI has developed leading frontier-class multilingual and multimodal embedding and re-ranker models, helping businesses and developers build powerful search applications.

Speaker #3: As enterprises build AI agents and develop software in new ways, defining context and grounding LLMs remains essential. This is why we have invested for years in developing our own embedding models, re-ranker models, data chunking strategies, and more.

Ashutosh Kulkarni: As enterprises build AI agents and develop software in new ways, defining context and grounding LLMs remains essential. This is why we have invested for years in developing our own embedding models, re-ranker models, data chunking strategies, and more. Jina AI extends and accelerates this strategy. These advancements in AI and vector search are not isolated. They are integral to our overarching strategy of delivering a powerful and flexible platform. This commitment to innovation extends across our diverse deployment options, ensuring our customers can leverage the full potential of Elastic regardless of their preferred architecture, Elastic Cloud, or self-managed. We continue to innovate, making our platform more capable across both cloud and self-managed deployment profiles. As part of this, we made AutoOps available for the first time to our self-managed customers.

As enterprises build AI agents and develop software in new ways, defining context and grounding LLMs remains essential. This is why we have invested for years in developing our own embedding models, re-ranker models, data chunking strategies, and more. Jina AI extends and accelerates this strategy. These advancements in AI and vector search are not isolated. They are integral to our overarching strategy of delivering a powerful and flexible platform. This commitment to innovation extends across our diverse deployment options, ensuring our customers can leverage the full potential of Elastic regardless of their preferred architecture, Elastic Cloud, or self-managed. We continue to innovate, making our platform more capable across both cloud and self-managed deployment profiles. As part of this, we made AutoOps available for the first time to our self-managed customers.

Speaker #3: Jina AI extends and accelerates this strategy. These advancements in AI and vector search are not isolated; they are integral to our overarching strategy of delivering a powerful and flexible platform.

Speaker #3: This commitment to innovation extends across our diverse deployment options, ensuring our customers can leverage the full potential of Elastic regardless of their preferred architecture.

Speaker #3: Elastic Cloud or self-managed. We continue to innovate, making our platform more capable across both cloud and self-managed deployment profiles. As part of this, we made AutoOps available for the first time to our self-managed customers.

Speaker #3: AutoOps simplifies cluster management through a cloud-powered service that processes telemetry for real-time issue detection and resolution. All while ensuring the underlying customer data remains within the self-managed deployment.

Ashutosh Kulkarni: AutoOps simplifies cluster management through a cloud-powered service that processes telemetry for real-time issue detection and resolution, all while ensuring the underlying customer data remains within the self-managed deployment. It is these organic innovations and strategic acquisitions that give us the confidence to be the leading data retrieval and context engineering platform for the AI era. Just last week, IDC recognized Elastic as a leader in multiple MarketScape reports, including in the Worldwide Observability Platforms Report, and in the Worldwide General Purpose Knowledge Discovery for Search Report. In the General Purpose Knowledge Discovery Report, we had the strongest position of any vendor in the analysis. We are proud of this recognition, which affirms our unique ability to deliver a unified platform that solves the most complex data and AI challenges.

AutoOps simplifies cluster management through a cloud-powered service that processes telemetry for real-time issue detection and resolution, all while ensuring the underlying customer data remains within the self-managed deployment. It is these organic innovations and strategic acquisitions that give us the confidence to be the leading data retrieval and context engineering platform for the AI era. Just last week, IDC recognized Elastic as a leader in multiple MarketScape reports, including in the Worldwide Observability Platforms Report, and in the Worldwide General Purpose Knowledge Discovery for Search Report. In the General Purpose Knowledge Discovery Report, we had the strongest position of any vendor in the analysis. We are proud of this recognition, which affirms our unique ability to deliver a unified platform that solves the most complex data and AI challenges.

Speaker #3: It is these organic innovations and strategic acquisitions that give us the confidence to be the leading data retrieval and context engineering platform for the AI era.

Speaker #3: Just last week, IDC recognized Elastic as a leader in multiple marketscape reports, including in the worldwide observability platforms report and in the worldwide general-purpose knowledge discovery for search report.

Speaker #3: In the general-purpose knowledge discovery report, we had the strongest position of any vendor in the analysis. We are proud of this recognition, which affirms our unique ability to deliver a unified platform that solves the most complex data and AI challenges.

Speaker #3: In closing, our market opportunity is stronger than ever. Driven by robust growth, clear GenAI leadership, and a unique platform built for this moment, our foundational investments in search uniquely position Elastic to deliver AI to enterprises everywhere.

Ashutosh Kulkarni: In closing, our market opportunity is stronger than ever, driven by robust growth, clear GenAI leadership, and a unique platform built for this moment. Our foundational investments in search uniquely position Elastic to deliver AI to enterprises everywhere. I would like to thank our customers, our partners, and our shareholders for their continued trust and confidence in Elastic. To our employees, thank you for your tireless spirit of innovation. Now I'll turn it over to Navam to go through our financial results in more detail. Thank you, Ash. Good afternoon, everyone. As you may recall, we raised our guidance for the quarter during analyst day on 9 October 2024, and I'm pleased to report that we exceeded both the top line and profitability of that improved guidance. We saw continued broad-based demand and notable strength in commitments across all geos, supported by healthy consumption trends.

In closing, our market opportunity is stronger than ever, driven by robust growth, clear GenAI leadership, and a unique platform built for this moment. Our foundational investments in search uniquely position Elastic to deliver AI to enterprises everywhere. I would like to thank our customers, our partners, and our shareholders for their continued trust and confidence in Elastic. To our employees, thank you for your tireless spirit of innovation. Now I'll turn it over to Navam to go through our financial results in more detail.

Speaker #3: I would like to thank our customers, our partners, and our shareholders for their continued trust and confidence in Elastic. And to our employees, thank you for your tireless spirit of innovation.

Speaker #3: And now I'll turn it over to Navam to go through our financial results in more detail.

Speaker #3: detail. Thank

Navam Welihinda: Thank you, Ash. Good afternoon, everyone. As you may recall, we raised our guidance for the quarter during analyst day on 9 October 2024, and I'm pleased to report that we exceeded both the top line and profitability of that improved guidance. We saw continued broad-based demand and notable strength in commitments across all geos, supported by healthy consumption trends.

Speaker #2: Good afternoon, everyone. As you may recall, we raised our guidance for the quarter during Analyst Day on October 9th, and I am pleased to report that we exceeded both the top line and profitability of that improved guidance.

Speaker #2: We saw continued broad-based demand and notable strength in commitments across all geographies, supported by healthy consumption trends. As GenAI adoption and platform consolidation continue to be top priorities for enterprises, we are seeing sustained momentum in demand for our platform, reflected in the continued customer momentum and expansion in our sales pipeline during the quarter.

Ashutosh Kulkarni: As GenAI adoption and platform consolidation continue to be top priorities for enterprises, we are seeing sustained momentum in demand for our platform, reflected in the continued customer momentum and expansion in our sales pipeline during the quarter. Our total revenue in the second quarter was $423 million, representing growth of 16% as reported and 15% on a constant currency basis. Our sales-led subscription revenue in the second quarter was $349 million, growing 18% as reported and 17% on a constant currency basis. This strong performance reflects the strategic advantages of the Elastic Search AI platform in addressing critical consolidation and generative AI use cases. Our current remaining performance obligation, or CRPO, which is a portion of RPO that we expect to recognize as revenue over the next 12 months, remains solid.

As GenAI adoption and platform consolidation continue to be top priorities for enterprises, we are seeing sustained momentum in demand for our platform, reflected in the continued customer momentum and expansion in our sales pipeline during the quarter. Our total revenue in the second quarter was $423 million, representing growth of 16% as reported and 15% on a constant currency basis. Our sales-led subscription revenue in the second quarter was $349 million, growing 18% as reported and 17% on a constant currency basis. This strong performance reflects the strategic advantages of the Elastic Search AI platform in addressing critical consolidation and generative AI use cases. Our current remaining performance obligation, or CRPO, which is a portion of RPO that we expect to recognize as revenue over the next 12 months, remains solid.

Speaker #2: Our total revenue in the second quarter was $423 million, representing growth of 16% as reported and 15% on a constant currency basis. Our sales-led subscription revenue in the second quarter was $349 million.

Speaker #2: Growing 18% as reported and 17% on a constant currency basis. This strong performance reflects the strategic advantages of the Elasticsearch AI platform in addressing critical consolidation and generative AI use cases.

Speaker #2: Our current remaining performance obligation, or CRPO, which is a portion of RPO that we expect to recognize as revenue over the next 12 months, remains solid.

Speaker #2: At the end of Q2, CRPO was approximately $971 million and grew 17% as reported, and 15% in constant currency over Q2 of the prior year.

Ashutosh Kulkarni: At the end of Q2, CRPO was approximately $971 million and grew 17% as reported and 15% in constant currency over Q2 of the prior year. Our top line metrics were driven by strong consumption, deal momentum, and traction with greater than $100,000 ACV customers, all three drivers supported by GenAI tailwinds. First, the primary driver of revenue was healthy consumption across solution areas. We saw steady consumption growth throughout the quarter, fueled by a strong demand environment, driven by solid organic consumption growth from existing customers as well as revenue from new customers. Second, deal momentum during the quarter was significant. As Ash referenced, we saw an uptick in consolidation and GenAI use cases, which led to overall strength in large deals.

At the end of Q2, CRPO was approximately $971 million and grew 17% as reported and 15% in constant currency over Q2 of the prior year. Our top line metrics were driven by strong consumption, deal momentum, and traction with greater than $100,000 ACV customers, all three drivers supported by GenAI tailwinds. First, the primary driver of revenue was healthy consumption across solution areas. We saw steady consumption growth throughout the quarter, fueled by a strong demand environment, driven by solid organic consumption growth from existing customers as well as revenue from new customers. Second, deal momentum during the quarter was significant. As Ash referenced, we saw an uptick in consolidation and GenAI use cases, which led to overall strength in large deals.

Speaker #2: Our top-line metrics were driven by strong consumption, deal momentum, and traction with greater than 100k ACV customers. All three drivers were supported by GenAI tailwinds.

Speaker #2: First, the primary driver of revenue was healthy consumption across solution areas. We saw steady consumption growth throughout the quarter, fueled by a strong demand environment.

Speaker #2: Driven by solid organic consumption growth from existing customers, as well as revenue from new customers. Second, deal momentum during the quarter was significant. As Ash referenced, we saw an uptick in consolidation and GenAI use cases, which led to overall strength in large deals.

Speaker #2: We closed over 30 commitments greater than $1 million in annual contract value, with five of them representing greater than $10 million in total contract value, and two of those greater than $20 million in total contract value.

Ashutosh Kulkarni: We closed over 30 commitments greater than $1 million in annual contract value, with five of them representing greater than $10 million in total contract value, and two of those greater than $20 million in total contract value. The strength of this can be seen through RPO, which grew 19% in the quarter as reported, and 17% in constant currency. Our deal momentum occurred globally in both enterprise and public sector segments. Despite the US government shutdown in October, the team closed a notable win with CISA, as Ash noted earlier. In the second quarter, deal momentum continued and supported our expansion of enterprise accounts and high-propensity commercial accounts. During the quarter, our greater than $100,000 annual contract value customer count grew approximately 13%, representing approximately 180 net new customers over the past four quarters.

We closed over 30 commitments greater than $1 million in annual contract value, with five of them representing greater than $10 million in total contract value, and two of those greater than $20 million in total contract value. The strength of this can be seen through RPO, which grew 19% in the quarter as reported, and 17% in constant currency. Our deal momentum occurred globally in both enterprise and public sector segments. Despite the US government shutdown in October, the team closed a notable win with CISA, as Ash noted earlier. In the second quarter, deal momentum continued and supported our expansion of enterprise accounts and high-propensity commercial accounts. During the quarter, our greater than $100,000 annual contract value customer count grew approximately 13%, representing approximately 180 net new customers over the past four quarters.

Speaker #2: The strength of this can be seen through RPO, which grew 19% in the quarter as reported and 17% in constant currency. Our deal momentum occurred globally in both enterprise and public sector segments.

Speaker #2: Despite the U.S. government's shutdown in October, the team closed a notable win with CISA, as Ash noted earlier. In the second quarter, deal momentum continued and supported our expansion of enterprise accounts and high-propensity commercial accounts.

Speaker #2: During the quarter, our greater than $100K annual contract value customer count grew approximately 13%, representing approximately 180 net new customers over the past four quarters.

Speaker #2: Quarter over quarter, we added approximately 50 net new customers, and we continue to see strong expansion from our existing customer base. GenAI is proving to be a powerful catalyst for customer expansion.

Ashutosh Kulkarni: Quarter over quarter, we added approximately 50 net new customers, and we continue to see strong expansion from our existing customer base. GenAI is proving to be a powerful catalyst for customer expansion. 23% of our greater than $100,000 cohort now utilizes Elastic for GenAI use cases, an increase from 17% just one year ago. We see significant headroom for customers to initiate their GenAI journey and scale into a $100,000 annual contract value cohort. Even with our existing $100,000 plus GenAI customers, adoption is in its early stages. Now, turning to second quarter margins and profitability, I will discuss all measures on a non-GAAP basis. Our commitment to balancing growth with disciplined spending translated to robust operating leverage, and strong bottom line results. We continue to focus on costs and efficiency in our business.

Quarter over quarter, we added approximately 50 net new customers, and we continue to see strong expansion from our existing customer base. GenAI is proving to be a powerful catalyst for customer expansion. 23% of our greater than $100,000 cohort now utilizes Elastic for GenAI use cases, an increase from 17% just one year ago. We see significant headroom for customers to initiate their GenAI journey and scale into a $100,000 annual contract value cohort. Even with our existing $100,000 plus GenAI customers, adoption is in its early stages. Now, turning to second quarter margins and profitability, I will discuss all measures on a non-GAAP basis. Our commitment to balancing growth with disciplined spending translated to robust operating leverage, and strong bottom line results. We continue to focus on costs and efficiency in our business.

Speaker #2: 23% of our greater than $100K cohort now utilizes Elastic for GenAI use cases, an increase from 17% just one year ago. We see significant headroom for customers to initiate their GenAI journey and scale into a $100K annual contract value cohort.

Speaker #2: Even with our existing $100K plus GenAI customers, adoption is in its early stages. Now, turning to second-quarter margins and profitability, I will discuss all measures on a non-GAAP basis.

Speaker #2: Our commitment to balancing growth with disciplined spending translated to robust operating leverage and strong bottom-line results. We continue to focus on costs and efficiency in our business.

Speaker #2: We delivered subscription gross margins of 82%, total gross margins of 78%, and an operating margin of 16.5%. Our disciplined approach to costs, combined with increasing revenue, underpins our strong profitability and free cash flow generation.

Ashutosh Kulkarni: We delivered subscription gross margins of 82%, total gross margins of 78%, and an operating margin of 16.5%. Our disciplined approach to costs, combined with increasing revenue, underpins our strong profitability and free cash flow generation. Regarding cash flow, adjusted free cash flow was approximately $26 million in Q2, representing a margin of 6%. The second quarter is typically a seasonally low free cash flow margin quarter for us, and we manage and view adjusted free cash flow on a full year basis. For fiscal 2026, we expect to sustain the level of adjusted free cash flow margin that we achieved in fiscal 2025. In October, during our analyst day, we announced a $500 million share repurchase program as part of our capital allocation framework. I am pleased to say that we are already underway on our program and began returning capital to shareholders during Q2.

We delivered subscription gross margins of 82%, total gross margins of 78%, and an operating margin of 16.5%. Our disciplined approach to costs, combined with increasing revenue, underpins our strong profitability and free cash flow generation. Regarding cash flow, adjusted free cash flow was approximately $26 million in Q2, representing a margin of 6%. The second quarter is typically a seasonally low free cash flow margin quarter for us, and we manage and view adjusted free cash flow on a full year basis. For fiscal 2026, we expect to sustain the level of adjusted free cash flow margin that we achieved in fiscal 2025. In October, during our analyst day, we announced a $500 million share repurchase program as part of our capital allocation framework. I am pleased to say that we are already underway on our program and began returning capital to shareholders during Q2.

Speaker #2: Regarding cash flow, adjusted free cash flow was approximately $26 million in Q2, representing a margin of 6%. The second quarter is typically a seasonally low free cash flow margin quarter for us.

Speaker #2: And we manage and view adjusted free cash flow on a full-year basis. For fiscal 2026, we expect to sustain the level of adjusted free cash flow margin that we achieved in fiscal 2025.

Speaker #2: In October, during our Analyst Day, we announced a $500 million share repurchase program. As part of our capital allocation framework, I am pleased to say that we are already underway on our program and began returning capital to shareholders during Q2.

Speaker #2: During the quarter, we returned approximately $114 million in cash to shareholders. This represents purchases of approximately $1.4 million shares at an average price per share of $84.45.

Ashutosh Kulkarni: During the quarter, we returned approximately $114 million in cash to shareholders. This represents purchases of approximately 1.4 million shares at an average price per share of $84.45. As I mentioned at our financial analyst day, we expect to use more than 50% of our $500 million authorized amount in fiscal 2026. Now, for outlook for the third quarter and the remainder of fiscal 2026. Starting this quarter, we will begin providing guidance for sales-led subscription revenue. As we detailed during our recent analyst day and in the past two quarters, sales-led subscription revenue is a key metric for measuring our success with larger strategic and enterprise accounts, and high-propensity commercial accounts. Sales-led subscription revenue is the fundamental driver of our financial framework, and we incentivize our sales team to meet customers where they are, in cloud or in self-managed environments.

During the quarter, we returned approximately $114 million in cash to shareholders. This represents purchases of approximately 1.4 million shares at an average price per share of $84.45. As I mentioned at our financial analyst day, we expect to use more than 50% of our $500 million authorized amount in fiscal 2026. Now, for outlook for the third quarter and the remainder of fiscal 2026. Starting this quarter, we will begin providing guidance for sales-led subscription revenue. As we detailed during our recent analyst day and in the past two quarters, sales-led subscription revenue is a key metric for measuring our success with larger strategic and enterprise accounts, and high-propensity commercial accounts. Sales-led subscription revenue is the fundamental driver of our financial framework, and we incentivize our sales team to meet customers where they are, in cloud or in self-managed environments.

Speaker #2: As I mentioned at our Financial Analyst Day, we expect to use more than 50% of our $500 million authorized amount in fiscal 2026. Now, for the outlook for the third quarter and the remainder of fiscal 2026.

Speaker #2: Starting this quarter, we will begin providing guidance for sales-led subscription revenue. As we detailed during our recent Analyst Day, and in the past two quarters, sales-led subscription revenue is a key metric for measuring our success with larger strategic and enterprise accounts, as well as high-propensity commercial accounts.

Speaker #2: Sales-led subscription revenue is the fundamental driver of our financial framework, and we incentivize our sales team to meet customers where they are, in cloud or in self-managed environments.

Speaker #2: The momentum we are building in this quarter is evident. Our sales pipeline is very healthy, and it has grown throughout the year. Given the strength of our business, we are raising our full fiscal year 2026 revenue guidance.

Ashutosh Kulkarni: The momentum we are building in this quarter is evident. Our sales pipeline is very healthy, and it has grown throughout the year. Given the strength of our business, we are raising our full fiscal year 2026 revenue guidance. For the third quarter of fiscal 2026, we expect total revenue in the range of $437 million to $439 million, representing 15% growth at the midpoint, or 13% in constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $364 million to $366 million, representing 17% growth at the midpoint, or 16% in constant currency growth at the midpoint. We expect non-GAAP operating margin to be approximately 17.5%. We expect non-GAAP diluted earnings per share in the range of $0.63 to $0.65, using between 108 million and 109 million diluted weighted average ordinary shares outstanding.

The momentum we are building in this quarter is evident. Our sales pipeline is very healthy, and it has grown throughout the year. Given the strength of our business, we are raising our full fiscal year 2026 revenue guidance. For the third quarter of fiscal 2026, we expect total revenue in the range of $437 million to $439 million, representing 15% growth at the midpoint, or 13% in constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $364 million to $366 million, representing 17% growth at the midpoint, or 16% in constant currency growth at the midpoint. We expect non-GAAP operating margin to be approximately 17.5%. We expect non-GAAP diluted earnings per share in the range of $0.63 to $0.65, using between 108 million and 109 million diluted weighted average ordinary shares outstanding.

Speaker #2: For the third quarter of fiscal 2026, we expect total revenue in the range of $437 million, to $439 million, representing 15% growth at the midpoint or 13% in constant currency growth at the midpoint.

Speaker #2: We expect sales-led subscription revenue in the range of $364 million to $366 million, representing 17% growth at the midpoint, or 16% in constant currency growth at the midpoint.

Speaker #2: We expect non-gap operating margin to be approximately $17.5%. We expect non-gap diluted earnings per share in the range of $63 to $65, using between $108 million and $109 million diluted weighted average ordinary shares outstanding.

Speaker #2: For fiscal 2026, we are raising our total revenue, which improves our expected non-GAAP diluted EPS. We expect total revenue in the range of $1.715 billion to $1.721 billion, representing approximately 16% growth at the midpoint or 15% constant currency growth at the midpoint.

Ashutosh Kulkarni: For fiscal 2026, we are raising our total revenue, which improves our expected non-GAAP diluted EPS. We expect total revenue in the range of $1.715 billion to $1.721 billion, representing approximately 16% growth at the midpoint, or 15% constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $1.417 billion to $1.423 billion, representing 18% growth at the midpoint, or 17% in constant currency growth at the midpoint. We expect non-GAAP operating margin for the full fiscal 2026 to be approximately 16.25%. We expect non-GAAP diluted earnings per share in the range of $2.40 to $2.46, using between 108 million and 110 million diluted weighted average ordinary shares outstanding. The diluted weighted average shares outstanding reflect only share buybacks completed as of 31 October 2025. In summary, I am pleased with our second quarter results.

For fiscal 2026, we are raising our total revenue, which improves our expected non-GAAP diluted EPS. We expect total revenue in the range of $1.715 billion to $1.721 billion, representing approximately 16% growth at the midpoint, or 15% constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $1.417 billion to $1.423 billion, representing 18% growth at the midpoint, or 17% in constant currency growth at the midpoint. We expect non-GAAP operating margin for the full fiscal 2026 to be approximately 16.25%. We expect non-GAAP diluted earnings per share in the range of $2.40 to $2.46, using between 108 million and 110 million diluted weighted average ordinary shares outstanding. The diluted weighted average shares outstanding reflect only share buybacks completed as of 31 October 2025. In summary, I am pleased with our second quarter results.

Speaker #2: We expect sales-led subscription revenue in the range of $1.417 billion to $1.423 billion, representing 18% growth at the midpoint, or 17% in constant currency growth at the midpoint.

Speaker #2: We expect non-gap operating margin for the full fiscal 26 to be approximately $16.25%. We expect non-gap diluted earnings per share in the range of $2.40 to $2.46, using between a $108 million and $110 million diluted weighted average ordinary shares outstanding.

Speaker #2: The diluted weighted average shares outstanding reflect only share buybacks completed as of October 31, 2025. In summary, I am pleased with our second quarter results.

Speaker #2: We remain on track in our execution this fiscal year and are on track to achieve the medium-term sales-led subscription revenue target growth rate we laid out during our Financial Analyst Day.

Ashutosh Kulkarni: We remain on track on our execution this fiscal year and on track to achieve the medium-term sales-led subscription revenue target growth rate we laid out during our financial analyst day. Elastic stands uniquely positioned as we bring relevance to unstructured data and allow enterprises to transform data into value. Our opportunity continues to grow. With that, I'll open it up for Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from Matt Hedberg with RBC Capital Markets. Please go ahead. Great. Thanks for taking my question, guys.

We remain on track on our execution this fiscal year and on track to achieve the medium-term sales-led subscription revenue target growth rate we laid out during our financial analyst day. Elastic stands uniquely positioned as we bring relevance to unstructured data and allow enterprises to transform data into value. Our opportunity continues to grow. With that, I'll open it up for Q&A.

Speaker #2: Elastic stands uniquely positioned as we bring relevance to unstructured data and allow enterprises to transform data into value. Our opportunity continues to grow. With that, I'll open it up for Q&A.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from Matt Hedberg with RBC Capital Markets. Please go ahead.

Speaker #2: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad.

Speaker #2: If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Speaker #2: The first question comes from Matt Hedberg with RBC Capital Markets. Please go ahead.

Matt Hedberg: Great. Thanks for taking my question, guys.

Speaker #3: Great. Thanks for taking my question, guys. Ash, I want to start with you. I assume you're seeing strong consumption trends from your AI-native customer base, but I'm curious if you could talk about the performance of your non-AI-native customers.

Ashutosh Kulkarni: Ash, I want to start with you. I assume you're seeing strong consumption trends from your AI-native customer base, but I'm curious if you could talk about the performance of your non-AI-native customers. Are they seeing an increase or an acceleration in consumption due to sort of an increased AI focus within that customer base? Yeah, that's a great question. Yes, we are seeing that it's not just the AI-native cohort, but we are seeing strong consumption across the board, even in our traditional businesses, not just in search, but also in observability and security. Part of this is also that we are winning more and more commitments, like I talked about in my prepared remarks. This was a remarkable quarter in terms of the number of commitments that we were able to secure, large commitments where customers are consolidating onto our platform for security, for observability.

Ash, I want to start with you. I assume you're seeing strong consumption trends from your AI-native customer base, but I'm curious if you could talk about the performance of your non-AI-native customers. Are they seeing an increase or an acceleration in consumption due to sort of an increased AI focus within that customer base?

Speaker #3: Are they seeing an increase or an acceleration in consumption due to sort of an increased AI focus within that customer base?

Ash Kulkarni: Yeah, that's a great question. Yes, we are seeing that it's not just the AI-native cohort, but we are seeing strong consumption across the board, even in our traditional businesses, not just in search, but also in observability and security. Part of this is also that we are winning more and more commitments, like I talked about in my prepared remarks. This was a remarkable quarter in terms of the number of commitments that we were able to secure, large commitments where customers are consolidating onto our platform for security, for observability.

Speaker #4: Yeah, that's a great question. And yes, we are seeing that it's not just the AI-native cohort, but we are seeing strong consumption across the board.

Speaker #4: Even in our traditional businesses, and not just in search, but also in observability and security, part of this is also that we are winning more and more commitments.

Speaker #4: Like I talked about in my prepared remarks, this was a remarkable quarter in terms of the number of commitments that we were able to secure—large commitments, where customers are consolidating onto our platform for security and observability. The five deals that we mentioned, which were all greater than $10 million in total contract value, are all cloud-based.

Ashutosh Kulkarni: The five deals that we mentioned that were all greater than $10 million in total contract value are all cloud. I would expect that as deals like those, as customers start to consume, we are going to start to see the benefit of that in our cloud revenue and our total revenue. Just to bring everybody's attention to the fact that when we think about our business, we think about both cloud and self-managed. That's the reason why sales-led subscription revenue is such an important metric. It came in at 18% this year, so very happy about it, continuing to drive the momentum. Consumption is strong, commitments are strong, and we feel really good about the rest of the year. That's really good to hear. Maybe for Navam, just a follow-up.

The five deals that we mentioned that were all greater than $10 million in total contract value are all cloud. I would expect that as deals like those, as customers start to consume, we are going to start to see the benefit of that in our cloud revenue and our total revenue. Just to bring everybody's attention to the fact that when we think about our business, we think about both cloud and self-managed. That's the reason why sales-led subscription revenue is such an important metric. It came in at 18% this year, so very happy about it, continuing to drive the momentum. Consumption is strong, commitments are strong, and we feel really good about the rest of the year.

Speaker #4: So I would expect that as deals like those, as customers start to consume, we are going to start to see the benefit of that in our cloud revenue and our total revenue.

Speaker #4: And just to bring everybody's attention to the fact that when we think about our business, we think about both cloud and self-managed. That's the reason why sales-led subscription revenue is such an important metric.

Speaker #4: And it came in at 18% this year, so we are very happy about it. Continuing to drive the momentum, consumption is strong, commitments are strong, and we feel really good about the rest of the year.

Matt Hedberg: That's really good to hear. Maybe for Navam, just a follow-up.

Speaker #3: That's really good to hear. And then maybe for Navam, just a follow-up. All of your reported growth metrics were strong, including both CRPO and RPO.

Ashutosh Kulkarni: All of your reported growth metrics were strong, including both CRPO and RPO, all kind of growing in the mid-teens or better. I'm curious, though, billing isn't a key metric for you guys, but it did lag some of those focus metrics. Wondering if you could talk a little bit about why that was the case. Thanks. Yeah, thanks for the question, Matt. I agree with you. Q2, to us, was a great quarter. We saw strength across the business, and what matters to us is commitments and consumption, and both commitments and consumption were strong. You noted correctly, CRPO grew 17% in Q2 compared to 16% last year, and also RPO grew 19%, and that was because of the strength of the multi-year commitments that we laid out. Overall, the commitment side of the business was very, very strong.

All of your reported growth metrics were strong, including both CRPO and RPO, all kind of growing in the mid-teens or better. I'm curious, though, billing isn't a key metric for you guys, but it did lag some of those focus metrics. Wondering if you could talk a little bit about why that was the case. Thanks.

Speaker #3: All kinds of growing in the mid-teens or better. I'm curious, though; Billings isn't a key metric for you guys, but it did lag some of those focus metrics.

Speaker #3: Wondering if you could talk a little bit about why that was the case.

Speaker #3: Thanks. Yeah,

Navam Welihinda: Yeah, thanks for the question, Matt. I agree with you. Q2, to us, was a great quarter. We saw strength across the business, and what matters to us is commitments and consumption, and both commitments and consumption were strong. You noted correctly, CRPO grew 17% in Q2 compared to 16% last year, and also RPO grew 19%, and that was because of the strength of the multi-year commitments that we laid out. Overall, the commitment side of the business was very, very strong.

Speaker #4: Thanks for the question, Matt, and I agree with you. Q2 to us was a great quarter. We saw strength across the business, and what matters to us is commitments and consumption.

Speaker #4: And both commitments and consumption were strong. You noted correctly, CRPO grew 17% in Q2 compared to 16% last year, and also RPO grew 19%. That was due to the strength of the multi-year commitments that we laid out.

Speaker #4: So overall, the commitment side of the business was very, very strong. Now, as it pertains to your specific question on the year-over-year comparison, going into the quarter, we expected variability in the second quarter for a few reasons.

Ashutosh Kulkarni: Now, as it pertains to your specific question on the year-over-year compare, going into the quarter, we expected variability in the second quarter for a few reasons. One of the main reasons is seasonality. You have to keep in mind that last year was anomalous because of a weaker Q1 commitments that we saw. The billings distribution, the revenue distribution in last year throughout the year was just atypical. You can't over-index on the quarterly seasonality this year. As a matter of fact, when you think about sort of the ACV, which doesn't have the cross-currents of billings, the ACV growth this year to date is stronger than what it was last year to date, right? That's a great sign.

Now, as it pertains to your specific question on the year-over-year compare, going into the quarter, we expected variability in the second quarter for a few reasons. One of the main reasons is seasonality. You have to keep in mind that last year was anomalous because of a weaker Q1 commitments that we saw. The billings distribution, the revenue distribution in last year throughout the year was just atypical. You can't over-index on the quarterly seasonality this year. As a matter of fact, when you think about sort of the ACV, which doesn't have the cross-currents of billings, the ACV growth this year to date is stronger than what it was last year to date, right? That's a great sign.

Speaker #4: And one of the main reasons is seasonality. You have to keep in mind that last year was anomalous because of weaker Q1 commitments that we saw.

Speaker #4: So the billings distribution, the revenue distribution in last year throughout the year was just atypical. So you can't over-index on the quarterly seasonality this year. As a matter of fact, when you think about sort of the ACV, which doesn't have the cross-currents of billings, the ACV growth this year to date is stronger than what it was last year to date, right?

Speaker #4: And that's a great sign. The second point I want to make is that you all know there was a government shutdown that impacted our third month of the quarter and affected everybody.

Ashutosh Kulkarni: The second point I want to make was you all know there was a government shutdown that impacted our third month of the quarter, impacted everybody, and that caused a few renewals, specifically self-managed renewals, to slip from Q2 to Q3. Net of all that, from a commitment perspective, the business is seeing really strong commitments, consumption's going good, and also the pipeline side is seeing strong growth as well. That's what gave us confidence to raise the guidance to the back half of the year meaningfully. Keep in mind, since Q1, we've raised FY26 by $34 million, or 2% year over year, and that's mainly because of the commitment strength of the business. Great to hear. Thanks, guys. The next question comes from Koji Akira with Bank of America. Please go ahead. Yeah, hey, guys. Thanks so much for taking the question.

The second point I want to make was you all know there was a government shutdown that impacted our third month of the quarter, impacted everybody, and that caused a few renewals, specifically self-managed renewals, to slip from Q2 to Q3. Net of all that, from a commitment perspective, the business is seeing really strong commitments, consumption's going good, and also the pipeline side is seeing strong growth as well. That's what gave us confidence to raise the guidance to the back half of the year meaningfully. Keep in mind, since Q1, we've raised FY26 by $34 million, or 2% year over year, and that's mainly because of the commitment strength of the business.

Speaker #4: And that caused a few renewals, specifically self-managed renewals, to slip from Q2 to Q3. But net of all that, from a commitment perspective, the business is seeing really strong commitments, consumption's going good, and also the pipeline side is seeing strong growth as well.

Speaker #4: So that's what gave us confidence to raise the guidance for the back half of the year meaningfully. Keep in mind, since Q1, we've raised FY26 by $34 million, or 2% year-over-year, and that's mainly because of the commitment strength of the business.

Matt Hedberg: Great to hear. Thanks, guys.

Speaker #3: Great to hear. Thanks,

Speaker #3: guys. The

Operator: The next question comes from Koji Akira with Bank of America. Please go ahead.

Speaker #2: The next question comes from Koji Akira with Bank of America. Please go

Speaker #2: ahead. Yeah, hey guys,

Koji Ikeda: Yeah, hey, guys. Thanks so much for taking the question.

Speaker #4: thanks so much for taking the question. And so definitely appreciate the newly introduced guidance for sales subscription or sales-led subscription revenue. And so I wanted to ask kind of the compositions of that.

Ashutosh Kulkarni: I definitely appreciate the newly introduced guidance for sales-led subscription revenue. I wanted to ask about the compositions of that. I know underlying assumptions around monthly cloud, should we assume that's roughly flat with where it was in the fiscal second quarter? That really leaves cloud and self-managed as the other inputs. I do think cloud is probably the more watched metric of the two, so I'll focus there. What should we assume is implied in the guide there? Is cloud growth higher, the same, or lower compared to the fiscal second quarter to get to that sales-led sub-guide? Thank you. Sure. This is the first time we're doing a sales-led subscription revenue guide. We are doing it because it's one of the most important metrics of the company.

I definitely appreciate the newly introduced guidance for sales-led subscription revenue. I wanted to ask about the compositions of that. I know underlying assumptions around monthly cloud, should we assume that's roughly flat with where it was in the fiscal second quarter? That really leaves cloud and self-managed as the other inputs. I do think cloud is probably the more watched metric of the two, so I'll focus there. What should we assume is implied in the guide there? Is cloud growth higher, the same, or lower compared to the fiscal second quarter to get to that sales-led sub-guide? Thank you.

Speaker #4: I know the underlying assumptions around monthly cloud. Should we assume that's roughly flat with where it was in the fiscal second quarter? And that really leaves cloud and self-managed as the other inputs.

Speaker #4: And I do think cloud is probably the more watched metric of the two, and so I'll focus there. So what should we assume is implied in the guide there?

Speaker #4: Is cloud growth higher the same or lower in the compared to the fiscal second quarter to get to that sales-led sub-guide? Thank you. Sure.

Navam Welihinda: Sure. This is the first time we're doing a sales-led subscription revenue guide. We are doing it because it's one of the most important metrics of the company.

Speaker #4: So this is the first time we're doing a sales-led subscription revenue guide. We are doing it because it's one of the most important metrics of the company.

Speaker #4: That's what we drive our salespeople to go and get commitments for, both cloud and self-managed. We also detailed what our medium-term targets are for sales-led subscription revenue.

Ashutosh Kulkarni: That's what we drive our salespeople to go and get commitments for, both cloud and self-managed. We also detailed what our medium-term targets are for sales-led subscription revenue. Because of that, we thought it was very important to start guiding to sales-led subscription revenue in addition to disclosing sales-led subscription revenue. In terms of what the composition of that number is, it's what our sales team drives other than the monthly cloud self-serve business, which we, as you mentioned, expected to be moving along the SMB segment. We expect it to be flat. If it grows, that's great, but our goal is to drive what the sales team delivers from a commitment perspective, which is the self-managed commitments and the cloud commitments. Our expectations for how commitments and consumption flows is detailed in the guidance side.

That's what we drive our salespeople to go and get commitments for, both cloud and self-managed. We also detailed what our medium-term targets are for sales-led subscription revenue. Because of that, we thought it was very important to start guiding to sales-led subscription revenue in addition to disclosing sales-led subscription revenue. In terms of what the composition of that number is, it's what our sales team drives other than the monthly cloud self-serve business, which we, as you mentioned, expected to be moving along the SMB segment. We expect it to be flat. If it grows, that's great, but our goal is to drive what the sales team delivers from a commitment perspective, which is the self-managed commitments and the cloud commitments. Our expectations for how commitments and consumption flows is detailed in the guidance side.

Speaker #4: So, because of that, we thought it was very important to start guiding to sales-led subscription revenue in addition to disclosing sales-led subscription revenue. In terms of what the composition of that number is, it's what our sales team drives, other than the monthly cloud self-serve business, which we, as you mentioned, expect to be moving along the SMB segment.

Speaker #4: We expected it to be flat. So we're not, if it grows, that's great. But our goal is to drive what the sales team delivers from a commitment perspective, which is the self-managed commitments and the cloud commitments.

Speaker #4: And our expectations for how commitments and consumption flows are detailed in the guidance side. As I said, we're very pleased with how Q2 went.

Ashutosh Kulkarni: As I said, we're very pleased with how Q2 went, and we are very pleased with being able to raise the full year by another percentage point from just a month ago. Got it. Thank you. Maybe a follow-up, just focusing on that sales-led subscription revenue result of 18%, 17% in constant currency. Last quarter was 22%, and I know there were some cloud kind of tailwinds there, pricing tailwinds in there. Maybe excluding the pricing tailwinds, can you help us bridge the gap between the growth between the second quarter and the first quarter on sales-led sub-growth? Was there any GenAI revenue growth contributions in the second quarter this year that you can call out? Thank you. Yeah. Let me maybe first start by addressing this because we've talked about this at least in the last 90 days.

As I said, we're very pleased with how Q2 went, and we are very pleased with being able to raise the full year by another percentage point from just a month ago.

Speaker #4: And we're very pleased with being able to raise the full year by another percentage point from just a month

Speaker #4: ago. Got it.

Koji Ikeda: Got it. Thank you. Maybe a follow-up, just focusing on that sales-led subscription revenue result of 18%, 17% in constant currency. Last quarter was 22%, and I know there were some cloud kind of tailwinds there, pricing tailwinds in there. Maybe excluding the pricing tailwinds, can you help us bridge the gap between the growth between the second quarter and the first quarter on sales-led sub-growth? Was there any GenAI revenue growth contributions in the second quarter this year that you can call out? Thank you.

Speaker #3: Thank you. And maybe a follow-up, just focusing on that sales-led subscription revenue result of 18%, 17%, and constant currency. Last quarter was 22%. And I know there was some cloud kind of tailwinds there, pricing tailwinds in there.

Speaker #3: So, maybe excluding the pricing tailwinds, can you help us bridge the gap between the growth between the second quarter and the first quarter on sales-led sub-growth?

Speaker #3: And was there any Gen AI revenue growth contributions in the second quarter this year that you can call out? Thank you.

Ash Kulkarni: Yeah. Let me maybe first start by addressing this because we've talked about this at least in the last 90 days.

Speaker #4: Yeah, let me maybe first start by addressing this. Because we've talked about this at least in the last 90 days, I think the most important thing to understand is that looking at pricing in isolation is just an incorrect way to look at our overall model.

Ashutosh Kulkarni: I think the most important thing to understand is looking at pricing in isolation is just an incorrect way to look at our overall model. When you're looking at a consumption business, there are lots of factors that lead to an increase in consumption. First is when customers bring new workloads onto the platform, when customers increase the data that's coming into the platform, all of those things increase the consumption. At the same time, we are constantly making our platform more efficient. In the past, we've released functionality like Searchable Snapshots. We've released functionality like LogsDB, like TSDB. All of these things make it possible for you to execute the same workload with fewer resources. When we come up with support for new instance types from the hyperscalers, that also makes our platform more efficient and sort of access something that brings down the consumption.

I think the most important thing to understand is looking at pricing in isolation is just an incorrect way to look at our overall model. When you're looking at a consumption business, there are lots of factors that lead to an increase in consumption. First is when customers bring new workloads onto the platform, when customers increase the data that's coming into the platform, all of those things increase the consumption. At the same time, we are constantly making our platform more efficient. In the past, we've released functionality like Searchable Snapshots. We've released functionality like LogsDB, like TSDB. All of these things make it possible for you to execute the same workload with fewer resources. When we come up with support for new instance types from the hyperscalers, that also makes our platform more efficient and sort of access something that brings down the consumption.

Speaker #4: When you're looking at a consumption business, there are lots of factors that lead to an increase in consumption. First is when customers bring new workloads onto the platform.

Speaker #4: When customers increase the data that's coming into the platform, all of those things increase the consumption. At the same time, we are constantly making our platform more efficient.

Speaker #4: In the past, we've released functionality like searchable snapshots. We've released functionality like LogsDB, like TSDB. All of these things make it possible for you to execute the same workload with fewer resources when we come up with support for new instance types from the hyperscalers.

Speaker #4: That also makes our platform more efficient and allows us to access something that brings down consumption. What we care about is, when we look at the net of everything, including the pricing changes that we do from time to time, how is consumption tracking overall?

Ashutosh Kulkarni: What we care about is when we look at the net of everything, including the pricing changes that we do from time to time, how is consumption tracking overall? Net of all of these things that push consumption up or push consumption down, the net consumption has been very strong. We see our customers consuming in a really healthy way. We see them bringing new workloads onto our platform, and we are capturing new commitments and new wins like the ones that we detailed. CISA is one of them. All of those large commitments are going to turn into revenue over time. Fundamentally, trying to disaggregate pricing as one element is just wrong, and I would encourage you to not look at it that way, but look at the net.

What we care about is when we look at the net of everything, including the pricing changes that we do from time to time, how is consumption tracking overall? Net of all of these things that push consumption up or push consumption down, the net consumption has been very strong. We see our customers consuming in a really healthy way. We see them bringing new workloads onto our platform, and we are capturing new commitments and new wins like the ones that we detailed. CISA is one of them. All of those large commitments are going to turn into revenue over time. Fundamentally, trying to disaggregate pricing as one element is just wrong, and I would encourage you to not look at it that way, but look at the net.

Speaker #4: A net of all of these things that push consumption up or push consumption down, the net consumption has been very strong. So we see our customers consuming in a really healthy way.

Speaker #4: We see them bringing new workloads onto our platform. We are capturing new commitments and new wins, like the ones that we detailed; CISA is one of them.

Speaker #4: But all of those large commitments are going to turn into revenue over time. So fundamentally, trying to disaggregate pricing as one element is just wrong.

Speaker #4: And I would encourage you to not look at it that way, but look at the net. Also, add to that what I talked about earlier, which is you have to remember not to over-index on a single quarter because the seasonality aspects of this quarter are very different from what it was last quarter, right?

Ashutosh Kulkarni: To also add to that what I talked about earlier, you have to remember not to over-index on a single quarter because the seasonality aspects of this quarter are very different from what it was last quarter, right? The second point I want to make is that because of the renewal slips, you are seeing self-managed revenue change its shape from the second quarter to third quarter as well. By the way, one thing to say about those renewal slips, those government customers are continuing to use our software. They're very happy with our software. We just expect those renewals to come in in Q3. There wasn't anybody that was working during that shutdown in those agencies to be able to process those orders. Those are firm customers, firm workloads for us, just a shift from Q2 to Q3. Thanks, guys.

Navam Welihinda: To also add to that what I talked about earlier, you have to remember not to over-index on a single quarter because the seasonality aspects of this quarter are very different from what it was last quarter, right? The second point I want to make is that because of the renewal slips, you are seeing self-managed revenue change its shape from the second quarter to third quarter as well.

Speaker #4: And the second point I want to make is that, because of the renewal slips, you are seeing self-managed revenue change its shape from the second quarter to the third quarter as well.

Ash Kulkarni: By the way, one thing to say about those renewal slips, those government customers are continuing to use our software. They're very happy with our software. We just expect those renewals to come in in Q3. There wasn't anybody that was working during that shutdown in those agencies to be able to process those orders. Those are firm customers, firm workloads for us, just a shift from Q2 to Q3.

Speaker #3: And by the way, one thing to say about those renewal slips: those government customers are continuing to use our software. They're very happy with our software.

Speaker #3: So we just expect those renewals to come in in Q3. There wasn't anybody that was working during that shutdown in those agencies to be able to process those orders.

Speaker #3: So those are firm customers. Firm workloads for us. Just a shift from Q2 to Q3.

Koji Ikeda: Thanks, guys.

Speaker #2: Thanks,

Speaker #5: The next question comes from Sanjeet Singh with Morgan Stanley. Please go ahead.

Speaker #5: The next question comes from Sanjeet Singh with Morgan Stanley. Please go ahead. Thank you for taking the time.

Ashutosh Kulkarni: The next question comes from Sanjeet Singh with Morgan Stanley. Please go ahead. Thank you for taking the question. Ash, I had a two-parter for you. If we can rewind back to the go-to-market changes at the beginning of last fiscal year or the beginning of the fiscal year, just sort of mark to market where we are from a productivity standpoint. It sounds like productivity is going well. If that's the case, is there a case given the momentum you're seeing with commitments to drive more capacity on the sales side? Maybe we tackle that first and then add a follow-up. Yeah, absolutely. You are exactly right that the changes that we made six quarters ago are clearly now showing bearing fruits, right? This is the fifth quarter of strong sales execution that we've seen. The commitments are doing incredibly well.

Operator: The next question comes from Sanjeet Singh with Morgan Stanley. Please go ahead.

Sanjit Singh: Thank you for taking the question. Ash, I had a two-parter for you. If we can rewind back to the go-to-market changes at the beginning of last fiscal year or the beginning of the fiscal year, just sort of mark to market where we are from a productivity standpoint. It sounds like productivity is going well. If that's the case, is there a case given the momentum you're seeing with commitments to drive more capacity on the sales side? Maybe we tackle that first and then add a follow-up.

Speaker #4: Question. I actually had a two-part question for you. If we can rewind back to the go-to-market changes at the beginning of last fiscal year, or the beginning of the fiscal year, sort of mark-to-market where we are from a productivity standpoint. It sounds like productivity is going well.

Speaker #4: And if that's the case, is there a case given the momentum you're seeing with commitments to drive more capacity on the sales side? So maybe we tackle that first and add a follow-up.

Ash Kulkarni: Yeah, absolutely. You are exactly right that the changes that we made six quarters ago are clearly now showing bearing fruits, right? This is the fifth quarter of strong sales execution that we've seen. The commitments are doing incredibly well.

Speaker #4: Yeah, absolutely. So you're exactly right that the changes we made six quarters ago are clearly now bearing fruit, right? So this is the fifth quarter of strong sales execution that we've seen.

Speaker #4: The commitments are doing incredibly well, and what that means for us is both the way our sales teams are executing, the kinds of deals they're able to get across the line, and what that means for our future is very, very bright.

Ashutosh Kulkarni: What that means for us is both the way our sales teams are executing, the kinds of deals they're able to get across the line, and what that means for our future is very, very bright. Absolutely, like we've said in the past, this is an investment year for us. We are continuing to invest both in terms of our go-to-market capacity on the selling side, but also in AI, where our engineering differentiation is helping us win these deals, not just on the search side, but also differentiate with things like Streams, significant events, and observability, and with attack discovery and other capabilities in security. Those are the areas where we will continue to invest in. We expect to see the returns as we go along. My follow-up, Ash, is sort of on RAG.

What that means for us is both the way our sales teams are executing, the kinds of deals they're able to get across the line, and what that means for our future is very, very bright. Absolutely, like we've said in the past, this is an investment year for us. We are continuing to invest both in terms of our go-to-market capacity on the selling side, but also in AI, where our engineering differentiation is helping us win these deals, not just on the search side, but also differentiate with things like Streams, significant events, and observability, and with attack discovery and other capabilities in security. Those are the areas where we will continue to invest in. We expect to see the returns as we go along.

Speaker #4: So absolutely, like we've said in the past, this is an investment year for us. We are continuing to invest both in terms of our go-to-market capacity on the selling side, but also in AI, where our engineering differentiation is helping us win these deals. This differentiation is evident not just on the search side, but also in areas like streams, significant events, and observability.

Speaker #4: And with attack discovery and other capabilities in security, those are the areas where we will continue to invest. We expect to see the returns as we go along.

Sanjit Singh: My follow-up, Ash, is sort of on RAG.

Speaker #5: And then my follow-up ask is sort of on RAG. As we have the industry conversation that we talked to some leading engineering departments at innovative companies, there does seem to be a friction with RAG.

Ashutosh Kulkarni: As we have the industry conversation and we talk to some leading engineering departments at innovative companies, there does seem to be a friction with RAG. There still seems to be the hallucination problem. Chunking data seems to be a complicated task, if you will. When it comes to monetizing your guys' AI search capabilities, is there a world where you have opportunities for growth outside of RAG, maybe some of the Agent Builder stuff that you discussed on your script? Just to get your point of view on how durable is the RAG opportunity, and then are there other ways to monetize the company's AI search capabilities outside of RAG?

As we have the industry conversation and we talk to some leading engineering departments at innovative companies, there does seem to be a friction with RAG. There still seems to be the hallucination problem. Chunking data seems to be a complicated task, if you will. When it comes to monetizing your guys' AI search capabilities, is there a world where you have opportunities for growth outside of RAG, maybe some of the Agent Builder stuff that you discussed on your script? Just to get your point of view on how durable is the RAG opportunity, and then are there other ways to monetize the company's AI search capabilities outside of RAG?

Speaker #5: There still seems to be the hallucination problem, chunking data seems to be a complicated task, if you will. And so when it comes to monetizing your guys' AI search capabilities, do you guys—is there a world where you have opportunities for growth outside of RAG, maybe some of the agent builder stuff that you discussed on your script?

Speaker #5: Just to get your point of view on how durable the RAG opportunity is, are there other ways to monetize the company's AI search capabilities outside of that?

Speaker #5: Just to get your point of view on how durable the RAG opportunity is, and then are there other ways to monetize the company's AI search capabilities outside of RAG?

Speaker #4: Sanjeet, that's really an "and," not an "or," because the way you should think about it is, fundamentally, it's all about connecting your private data with the large language model to make that large language model actually become relevant in the context of your business and your enterprise workflows.

Ashutosh Kulkarni: Sanjeet, that's really an and, not an or, because the way you should think about it is fundamentally, it's all about connecting your private data with the large language model to make that large language model actually become relevant in the context of your business and your enterprise workflows. That's really what it's all about. The thing that you're pointing out is building these kinds of agentic applications takes some amount of work because getting that relevance just right. By the way, relevance has always been our sweet spot. We specialize in messy, unstructured data. We specialize in relevance. This is what we've been doing the entire existence of the company. We are specialists at this, and we do this better than just about anybody else. The complexity of this whole effort is what we are continually working to simplify.

Ash Kulkarni: Sanjeet, that's really an and, not an or, because the way you should think about it is fundamentally, it's all about connecting your private data with the large language model to make that large language model actually become relevant in the context of your business and your enterprise workflows. That's really what it's all about. The thing that you're pointing out is building these kinds of agentic applications takes some amount of work because getting that relevance just right. By the way, relevance has always been our sweet spot. We specialize in messy, unstructured data. We specialize in relevance. This is what we've been doing the entire existence of the company. We are specialists at this, and we do this better than just about anybody else. The complexity of this whole effort is what we are continually working to simplify.

Speaker #4: So that's really what it's all about. Now, the thing that you're pointing out is that building these kinds of agentic applications takes some amount of work because getting that relevance just right.

Speaker #4: And by the way, relevance has always been our sweet spot. We specialize in messy, unstructured data. We specialize in relevance. This is what we've been doing.

Speaker #4: The entire existence of the company, and so we are specialists at this. We do this better than just about anybody else. However, the complexity of this whole effort is what we are continually working to simplify.

Speaker #4: And that's what Agent Builder does. Agent Builder, under the covers, uses our vector database and hybrid search capabilities, but also comes with embedding models that we have tuned to ensure they can perform incredibly well for that grounding to connect the LLM to your data. That was what the acquisition of Gina AI was all about: to bring multilingual and multimodal capabilities to everything that we could do.

Ashutosh Kulkarni: That's what Agent Builder does. Agent Builder, under the covers, uses our vector database, uses our hybrid search capabilities, but also comes with embedding models that we have tuned to make sure that they can perform incredibly well. For that grounding, to connect the LLM to your data, that was what the acquisition of Jina AI was all about, to bring multilingual and multimodal capabilities to everything that we could do. Agent Builder will absolutely be yet another way for us to monetize our core strength in context engineering, but it's going to be an and. Understood. Thank you, Ash. The next question comes from Ray Molenstra with Barclays. Please go ahead. Yeah. You talked about the slippage in the quarter. The one question I got from a lot of people was, historically, you guys kind of beat in the quarter by a little bit more.

That's what Agent Builder does. Agent Builder, under the covers, uses our vector database, uses our hybrid search capabilities, but also comes with embedding models that we have tuned to make sure that they can perform incredibly well. For that grounding, to connect the LLM to your data, that was what the acquisition of Jina AI was all about, to bring multilingual and multimodal capabilities to everything that we could do. Agent Builder will absolutely be yet another way for us to monetize our core strength in context engineering, but it's going to be an and.

Speaker #4: So, Agent Builder will absolutely be yet another way for us to monetize our core strength in context engineering, but it's going to be an "and."

Sanjit Singh: Understood. Thank you, Ash.

Speaker #3: Understood. Thank you, Ash.

Operator: The next question comes from Ray Molenstra with Barclays. Please go ahead.

Speaker #5: The next question comes from Ray Molenstra with Barclays. Please go ahead.

Raimo Lenschow: Yeah. You talked about the slippage in the quarter. The one question I got from a lot of people was, historically, you guys kind of beat in the quarter by a little bit more.

Speaker #3: Yeah. You talked about these slippages in the quarter. The one question I got from a lot of people was, like, historically, you guys kind of beat in the quarter by a little bit more.

Speaker #3: And obviously, I appreciate we have a new CFO, so there could be a new guidance philosophy. But there also could be the slippage situation.

Ashutosh Kulkarni: Obviously, I appreciate we have a new CFO, so there could be a new guidance philosophy, but there also could be the slippage situation. How do you think about the quarter? I appreciate the bookings, but on kind of cloud speed, on total revenue, the beat level was kind of lower than what we've seen before. Were there any kind of puts and takes there? Yeah, Raymond, thanks for the question. You may remember that we guided the quarter at the end of Q1, and we also updated that during Financial Analyst Day, which was just a month ago. At the time, we gave you a much closer-to-the-pin number for the quarter and the year. As I mentioned, the second quarter was a very strong quarter, so we beat that number by $5.5 million in Q2.

Obviously, I appreciate we have a new CFO, so there could be a new guidance philosophy, but there also could be the slippage situation. How do you think about the quarter? I appreciate the bookings, but on kind of cloud speed, on total revenue, the beat level was kind of lower than what we've seen before. Were there any kind of puts and takes there?

Speaker #3: How do you think about the quarter? I appreciate the bookings, but on kind of cloud speech, on total revenue, the beat level was kind of lower than what we've seen before.

Speaker #3: Were there any kind of puts and takes there?

Navam Welihinda: Yeah, Raymond, thanks for the question. You may remember that we guided the quarter at the end of Q1, and we also updated that during Financial Analyst Day, which was just a month ago. At the time, we gave you a much closer-to-the-pin number for the quarter and the year. As I mentioned, the second quarter was a very strong quarter, so we beat that number by $5.5 million in Q2.

Speaker #4: Yeah, Raymond, thanks for the question. You may remember that we guided the quarter in the beginning at the end of Q1, and we also updated that during Financial Analyst Day, which was just a month ago.

Speaker #4: And at the time, we gave you a much closer to the pin number for the quarter and the year. And as I mentioned, the second quarter was a very strong quarter, so we beat that number by five and a half million in Q2.

Speaker #4: And we raised a very, very healthy $16 million at FAD D and another $34 million in total.

Ashutosh Kulkarni: We raised very, very heavily, $16 million at FAD and another $34 million in total. A total of $34 million. A total of $34 million from Q1 to Q1 for the year. We feel the business is going very well. The guidance obviously gives you a sense, the guidance closer to the quarter gives you a sense of where the quarter is ending. That's the first point. The second one on the slips, this was expected variability in the quarter. Like I mentioned, we don't over-rotate on a single quarter's performance, but the renewal side obviously is going to come in the year, and that's reflected by our strong year. The bookings shape is just going to be different this quarter than it was last quarter. Okay. Perfect. And then, Ash, one for you.

We raised very, very heavily, $16 million at FAD and another $34 million in total. A total of $34 million. A total of $34 million from Q1 to Q1 for the year. We feel the business is going very well. The guidance obviously gives you a sense, the guidance closer to the quarter gives you a sense of where the quarter is ending. That's the first point. The second one on the slips, this was expected variability in the quarter. Like I mentioned, we don't over-rotate on a single quarter's performance, but the renewal side obviously is going to come in the year, and that's reflected by our strong year. The bookings shape is just going to be different this quarter than it was last quarter.

Speaker #3: A total of 34 million.

Speaker #4: $34 million from Q1 to Q1 for the year. So we feel the business is going very well. The guidance obviously gives you a sense; the guidance is closer to the quarter, giving you a sense of where the quarter is ending.

Speaker #4: So that's the first point. The second one on the slips: this was expected variability in the quarter, like I mentioned. We don't over-rotate on a single quarter's performance.

Speaker #4: But the renewal side obviously is going to come in the year, and that's reflected by our strong year. The bookings shape is just going to be different this quarter than it was in Q2.

Speaker #4: was last quarter. Okay,

Raimo Lenschow: Okay. Perfect. And then, Ash, one for you.

Speaker #3: Perfect. And then, Ash, one for you. And on the big win and sin, is that clear? Do I have to think about that as, or maybe broader, is this kind of like there is obviously a player that used to be strong in that space that is takeaways from that? Or what are you seeing here in terms of the momentum?

Ashutosh Kulkarni: On the big win and sin, do I have to think about that as, or maybe broader, is this kind of like there is obviously a player that used to be strong in that space that it's takeaways from that, or what are you seeing here in terms of the momentum? Thank you. Yeah, actually, both of our two largest deals this quarter were both $20-plus million security wins. What this highlights is just the level to which our security offering has evolved and matured, and the AI capabilities that we offer are absolutely unmatched. You are seeing an organization like CISA, the Cybersecurity and Infrastructure Security Agency of the US. I mean, this agency is responsible really for shaping the direction of cybersecurity for all federal civilian agencies in the US government.

On the big win and sin, do I have to think about that as, or maybe broader, is this kind of like there is obviously a player that used to be strong in that space that it's takeaways from that, or what are you seeing here in terms of the momentum? Thank you.

Speaker #3: Thank

Speaker #3: you. Yeah, actually, both of

Ash Kulkarni: Yeah, actually, both of our two largest deals this quarter were both $20-plus million security wins. What this highlights is just the level to which our security offering has evolved and matured, and the AI capabilities that we offer are absolutely unmatched. You are seeing an organization like CISA, the Cybersecurity and Infrastructure Security Agency of the US. I mean, this agency is responsible really for shaping the direction of cybersecurity for all federal civilian agencies in the US government.

Speaker #4: Our—the two largest deals this quarter were both $20-plus million security wins. And what this highlights is just the level to which our security offering has evolved and matured.

Speaker #4: And the AI capabilities that we offer are absolutely unmatched. And you're seeing an organization like CISA, the Cybersecurity and Infrastructure Security Agency of the United States.

Speaker #4: I mean, these agencies are really responsible for shaping the direction of cybersecurity for all federal civilian agencies in the United States government. And them choosing Elastic to offer a SIM as a service on Elastic Cloud is an unbelievable endorsement.

Ashutosh Kulkarni: Them choosing Elastic to offer a SIM as a service on Elastic Cloud is an unbelievable endorsement. It just shows the strength of the platform, the flexibility, and capability, the AI capabilities. As you can imagine, these kinds of agencies have been using other incumbents in the past. This is a consolidation onto our platform. This is us taking share. This is us now really being in a place where, with all the experience that we've had with our security technology, now really demonstrating what we can do. This is very exciting, the way I look at it going forward. Yeah. Okay. Perfect. Perfect. Congrats. Thank you. The next question comes from Rob Owens with Piper Sandler. Please go ahead. Great. Good evening, and thanks for taking my question here.

Them choosing Elastic to offer a SIM as a service on Elastic Cloud is an unbelievable endorsement. It just shows the strength of the platform, the flexibility, and capability, the AI capabilities. As you can imagine, these kinds of agencies have been using other incumbents in the past. This is a consolidation onto our platform. This is us taking share. This is us now really being in a place where, with all the experience that we've had with our security technology, now really demonstrating what we can do. This is very exciting, the way I look at it going forward.

Speaker #4: It just shows the strength of the platform, the flexibility and capability, the AI capabilities. And, as you can imagine, these kinds of agencies have been using other incumbents in the past.

Speaker #4: So this is a consolidation onto our platform. This is us taking share. This is us now really being in a place where, with all the experience that we've had with our security technology, we are now really demonstrating what we can do.

Speaker #4: And this is very exciting, the way I look at it going forward.

Raimo Lenschow: Yeah. Okay. Perfect. Perfect. Congrats. Thank you.

Speaker #3: Yeah, okay, perfect. Perfect. Congrats. Thank you.

Speaker #3: You. The next question comes from Rob.

Operator: The next question comes from Rob Owens with Piper Sandler. Please go ahead.

Speaker #5: Owens with Piper Sandler. Please, go ahead.

Rob Owens: Great. Good evening, and thanks for taking my question here.

Speaker #6: Great. Good evening, and thanks for taking my question here. Ash, I want to build on one of your initial comments in your script about how AI is positively impacting all areas of the business. I appreciate all of the color that you've given.

Ashutosh Kulkarni: Ash, I want to build on one of your initial comments in your script about how AI is positively impacting all areas of the business, and appreciate all of the color that you've given. The question's really around, as far as a percentage, both of overall customers and of large deals. It's great to see that growing. I think it was 23% of your $100,000 deals. Why isn't that number greater if everyone has some level of proof of concept right now going on in GenAI? Where's the unlock for Elastic relative to those types of opportunities? Thanks. Yeah, that's a great question. A couple of things to keep in mind. First of all, the number that we've given is only on Elastic Cloud because that number is something for which the telemetry that we see is very, very clear, and it's sort of indisputable.

Ash, I want to build on one of your initial comments in your script about how AI is positively impacting all areas of the business, and appreciate all of the color that you've given. The question's really around, as far as a percentage, both of overall customers and of large deals. It's great to see that growing. I think it was 23% of your $100,000 deals. Why isn't that number greater if everyone has some level of proof of concept right now going on in GenAI? Where's the unlock for Elastic relative to those types of opportunities? Thanks.

Speaker #6: And the question is really around, as a percentage, both of overall customers and of large deals. It's great to see that growing. I think it was 23% of your 100K deals.

Speaker #6: But why isn't that number greater? If everyone that has some level of proof of concept right now going on in GenAI, where's the unlock for Elastic relative to those types of opportunities?

Speaker #6: Thanks. Yeah, that's a great question.

Ash Kulkarni: Yeah, that's a great question. A couple of things to keep in mind. First of all, the number that we've given is only on Elastic Cloud because that number is something for which the telemetry that we see is very, very clear, and it's sort of indisputable.

Speaker #4: A couple of things to keep in mind. First of all, the number that we've given is only on Elastic Cloud because that number is something for which the telemetry that we see is very, very clear.

Speaker #4: And it's sort of indisputable. For customers that are using us on self-managed, we have many customers. I gave one example of, in my prepared remarks, a financial services institution that is using us.

Ashutosh Kulkarni: For customers that are using us on self-managed, we have many customers. I gave one example in my prepared remarks of a financial services institution that is using us, and they're using us in a self-managed way. For those, those are over and above the numbers that we sort of call out. The penetration is growing. It's meaningful. Like you called out, 23% in our $100,000 cohort. We feel really good about it. As more and more companies start to deploy more and more of these kinds of applications, I would expect our penetration to grow. I would expect the breadth of revenue that we capture from each of these accounts to grow.

For customers that are using us on self-managed, we have many customers. I gave one example in my prepared remarks of a financial services institution that is using us, and they're using us in a self-managed way. For those, those are over and above the numbers that we sort of call out. The penetration is growing. It's meaningful. Like you called out, 23% in our $100,000 cohort. We feel really good about it. As more and more companies start to deploy more and more of these kinds of applications, I would expect our penetration to grow. I would expect the breadth of revenue that we capture from each of these accounts to grow.

Speaker #4: And they're using us in a self-managed way. So, for those, those are over and above the numbers that we sort of call out. So the penetration is growing.

Speaker #4: It's meaningful. Like you called out, 23% in our 100K cohort. So we feel really good about it. As more and more companies start to deploy more and more of these kinds of applications, I would expect our penetration to grow.

Speaker #4: I would expect the breadth of revenue that we capture from each of these accounts to grow. As I outlined in our Financial Analyst Day, which happened about a month ago, in the cohort of AI users, we see them growing faster than the rest of the cohort.

Ashutosh Kulkarni: As Navam had outlined in our financial day and this day that happened about a month ago, in the cohort of AI users, we see them growing faster than the rest of the cohort. That, to us, is a very important metric. We measure it, we track it, we are constantly looking to make sure that we win the AI workloads in every account. This is going to be something that we just keep working on. It's going to keep growing. All right. Thanks for the color. The next question comes from Brian Essex with JPMorgan. Please go ahead. Hi. Good afternoon. Thank you for taking the question. I guess maybe, Ash, for you, I'd like to dig into the security side of the business a little bit.

As Navam had outlined in our financial day and this day that happened about a month ago, in the cohort of AI users, we see them growing faster than the rest of the cohort. That, to us, is a very important metric. We measure it, we track it, we are constantly looking to make sure that we win the AI workloads in every account. This is going to be something that we just keep working on. It's going to keep growing.

Speaker #4: So that, to us, is a very important metric. We measure it, we track it, and we are constantly looking to make sure that we win the AI workloads in every account.

Speaker #4: This is going to be something that we just keep working on. It's going to keep growing.

Rob Owens: All right. Thanks for the color.

Speaker #6: All right. Thanks for the color.

Operator: The next question comes from Brian Essex with JPMorgan. Please go ahead.

Speaker #5: The next question comes from Brian Essex with JP Morgan. Please go ahead.

Speaker #5: ahead.

Brian Essex: Hi. Good afternoon. Thank you for taking the question. I guess maybe, Ash, for you, I'd like to dig into the security side of the business a little bit.

Speaker #7: Hi, good

Speaker #7: afternoon. Thank you for taking the question. I guess maybe ask for you, I'd like to dig into the security side of the business a little bit.

Speaker #7: I would love to understand what you're seeing competitively, whether the deal wins that you're seeing are against or at the expense of more observability-focused vendors.

Ashutosh Kulkarni: Would love to understand what you're seeing competitively, whether the deal wins that you're seeing are against or at the expense of more observability-focused vendors. Are you starting to see maybe what I'll call some of the next-gen security platform vendors more frequently in the marketplace? I have a quick follow-up. When it comes to security, we tend to see all the players that you would think of. We consider ourselves to be the leading next-gen security SIM platform out there. From that perspective, we tend to typically be the ones displacing incumbents. The reason why we see that is, first and foremost, security is a data problem. I think everybody's starting to say that now. Our backend data platform is the best in terms of the flexibility, the scalability that it offers.

Would love to understand what you're seeing competitively, whether the deal wins that you're seeing are against or at the expense of more observability-focused vendors. Are you starting to see maybe what I'll call some of the next-gen security platform vendors more frequently in the marketplace? I have a quick follow-up.

Speaker #7: And are you starting to see what I'll call some of the next-gen security platform vendors more frequently in the marketplace? And I have a quick follow-up.

Ash Kulkarni: When it comes to security, we tend to see all the players that you would think of. We consider ourselves to be the leading next-gen security SIM platform out there. From that perspective, we tend to typically be the ones displacing incumbents. The reason why we see that is, first and foremost, security is a data problem. I think everybody's starting to say that now. Our backend data platform is the best in terms of the flexibility, the scalability that it offers.

Speaker #4: So we tend to see all the players that you would think of when it comes to security. We consider ourselves to be the leading next-gen security SIM platform out there.

Speaker #4: So, from that perspective, we tend to typically be the ones displacing incumbents. The reason why we see that is, first and foremost, security is a data problem.

Speaker #4: I think everybody's starting to say that now. Our backend data platform is the best in terms of the flexibility and scalability that it offers. We were built first and foremost as a data platform.

Ashutosh Kulkarni: We were built first and foremost as a data platform, and that allows us to do the kinds of analytics that others struggle to do. The second thing is our AI functionality. That, again, comes back to our core differentiation, and we are able to apply that AI depth to things like attack discovery, which are capabilities that, again, are very, very differentiated, which allows somebody to reduce massively the amount of time that it takes to do the actual threat detection and then remediation of that problem. That's where we are seeing a lot of success displacing incumbents. On the observability side, we tend to lead with log analytics. When it comes to log analytics, that's where we land, and then we expand into metrics and traces.

We were built first and foremost as a data platform, and that allows us to do the kinds of analytics that others struggle to do. The second thing is our AI functionality. That, again, comes back to our core differentiation, and we are able to apply that AI depth to things like attack discovery, which are capabilities that, again, are very, very differentiated, which allows somebody to reduce massively the amount of time that it takes to do the actual threat detection and then remediation of that problem. That's where we are seeing a lot of success displacing incumbents. On the observability side, we tend to lead with log analytics. When it comes to log analytics, that's where we land, and then we expand into metrics and traces.

Speaker #4: And that allows us to do the kinds of analytics that others struggle to do. The second thing is our AI functionality. That, again, comes back to our core differentiation.

Speaker #4: And we are able to apply that AI depth to things like attack discovery, which are capabilities that, again, are very, very differentiated. This allows somebody to massively reduce the amount of time it takes to do the actual threat detection and then remediation of that problem.

Speaker #4: So that's where we are seeing a lot of success displacing incumbents. On the observability side, we tend to lead with log analytics. And when it comes to log analytics, that's where we land.

Speaker #4: And then we expand into metrics and traces. So, as you can imagine, the number of players that are able to do sophisticated log analytics at scale is a very small number.

Ashutosh Kulkarni: As you can imagine, the number of players that are able to do sophisticated log analytics at scale is a very small number. We have a very, very differentiated advantage, especially with new AI-related features like Streams, like significant events that we talked about in the Financial Analyst Day. That is what is helping us win these deals faster. Of the five deals that were over $10 million, like I mentioned, two were security, the largest two, two were observability, and one of them was AI. There is a really nice breadth of wins that we are seeing, and each of our business areas is seeing great success. Got it. Maybe just to follow up on that point, we've seen a couple of recent acquisitions by some of the larger platform vendors.

As you can imagine, the number of players that are able to do sophisticated log analytics at scale is a very small number. We have a very, very differentiated advantage, especially with new AI-related features like Streams, like significant events that we talked about in the Financial Analyst Day. That is what is helping us win these deals faster. Of the five deals that were over $10 million, like I mentioned, two were security, the largest two, two were observability, and one of them was AI. There is a really nice breadth of wins that we are seeing, and each of our business areas is seeing great success.

Speaker #4: And so we have a very, very differentiated advantage, especially with new AI-related features like streams and significant events that we talked about in the financial analyst day.

Speaker #4: And that's what is helping us win these deals faster. So, of the five deals that were over $10 million, like I mentioned, two were security—the largest two.

Speaker #4: Two were observability, and one of them was AI. So there is a really nice breadth of wins that we are seeing, and each of our business areas is seeing great success.

Brian Essex: Got it. Maybe just to follow up on that point, we've seen a couple of recent acquisitions by some of the larger platform vendors.

Speaker #7: Got it. Maybe just to follow up on that point, we've seen a couple of recent acquisitions by some of the larger platform vendors. We saw the acquisition of Chronosphere last night and then Onom a little while earlier from CrowdStrike.

Ashutosh Kulkarni: We saw the acquisition of Chronosphere last night and then ONUM a little while earlier from CrowdStrike. Any initial thoughts on those and whether or not you see those in the marketplace, or are they maybe responding to the capabilities that you have in that space in that regard? Yeah. It's a great question. Look, we've been talking about the fact that observability and security are two sides of the same coin. We've been saying it now for at least the last seven to eight years. It's because fundamentally, it's all about the data. The two things I'd say is, one, we have the best data platform, like I said, in terms of our ability to scale, in terms of our flexibility.

We saw the acquisition of Chronosphere last night and then ONUM a little while earlier from CrowdStrike. Any initial thoughts on those and whether or not you see those in the marketplace, or are they maybe responding to the capabilities that you have in that space in that regard?

Speaker #7: Any initial thoughts on those and whether or not you see those in the marketplace, or are they maybe responding to the capabilities that you have in that space in that regard?

Ash Kulkarni: Yeah. It's a great question. Look, we've been talking about the fact that observability and security are two sides of the same coin. We've been saying it now for at least the last seven to eight years. It's because fundamentally, it's all about the data. The two things I'd say is, one, we have the best data platform, like I said, in terms of our ability to scale, in terms of our flexibility.

Speaker #4: Yeah, it's a great question. And look, we've been talking about the fact that observability and security are two sides of the same coin. We've been saying it now for at least the last seven to eight years.

Speaker #4: And it's because, fundamentally, it's all about the data. The two things I'd say are: one, we have the best data platform. Like I said, in terms of our ability to scale and in terms of our flexibility, we can bring in all kinds of telemetry, including the telemetry from these other players that you referred to.

Ashutosh Kulkarni: We can bring in all kinds of telemetry, including the telemetry from these other players that you referred to, and we are able to do analysis on them. That's not something that others are able to do. We have a tremendous way to get into accounts and then expand that others just don't share. The second thing is we've been at this for the last eight years, and we've built out our security capabilities, our observability capabilities. We are way ahead of everybody in terms of our AI functionality, in terms of our ability to bring in all signal types and observability, whether it's logs, metrics, traces, in one single platform. It's a great validation, first and foremost, that others are trying to emulate us.

We can bring in all kinds of telemetry, including the telemetry from these other players that you referred to, and we are able to do analysis on them. That's not something that others are able to do. We have a tremendous way to get into accounts and then expand that others just don't share. The second thing is we've been at this for the last eight years, and we've built out our security capabilities, our observability capabilities. We are way ahead of everybody in terms of our AI functionality, in terms of our ability to bring in all signal types and observability, whether it's logs, metrics, traces, in one single platform. It's a great validation, first and foremost, that others are trying to emulate us.

Speaker #4: And we are able to do analysis on them. That's not something that others are able to do. So we have a tremendous way to get into accounts and then expand that others just don't share.

Speaker #4: The second thing is we've been at this for the last eight years, and we've built out our security capabilities and our observability capabilities. So we are way ahead of everybody in terms of our AI functionality and our ability to bring in all signal types.

Speaker #4: An observability, whether it's logs, metrics, or traces, in one single platform. So, it's a great validation, first and foremost, that others are trying to emulate us.

Speaker #4: But it also means that our advantage in terms of us being in this for so long is just showing fruits in terms of the wins that we are seeing in terms of the customer commitments.

Ashutosh Kulkarni: It also means that our advantage in terms of us being in this for so long is just showing fruits in terms of the wins that we are seeing in terms of the customer commitments. I expect that to continue. Got it. That's helpful color. Thank you so much. The next question comes from Tyler Raskay with Citi. Please go ahead. Yeah. Thank you for taking the question. You talked about in prior quarters how you introduced some product optimizations into the platforms, like the LogsDB product, which cut storage costs for customers to take advantage of that. I was just wondering if you could tie in that dynamic into sort of the cloud revenue trajectory because, obviously, last quarter, you saw some of the pricing dynamics impacted. I imagine the optimization side impacted that as well.

It also means that our advantage in terms of us being in this for so long is just showing fruits in terms of the wins that we are seeing in terms of the customer commitments. I expect that to continue.

Brian Essex: Got it. That's helpful color. Thank you so much.

Operator: The next question comes from Tyler Raskay with Citi. Please go ahead.

Speaker #5: Question comes from Tyler Raske with Much. City. Please go ahead.

Tyler Radke: Yeah. Thank you for taking the question. You talked about in prior quarters how you introduced some product optimizations into the platforms, like the LogsDB product, which cut storage costs for customers to take advantage of that. I was just wondering if you could tie in that dynamic into sort of the cloud revenue trajectory because, obviously, last quarter, you saw some of the pricing dynamics impacted. I imagine the optimization side impacted that as well.

Speaker #7: Yeah, thank you for taking the question. You talked about in prior quarters how you introduced some product optimizations into the platforms, like the LogsDB product, which cut storage costs for customers that took advantage of that.

Speaker #7: I was just wondering if you could tie in that dynamic into sort of the cloud revenue trajectory because, obviously, last quarter you saw some of the pricing dynamics impacted, and I imagine the optimization side impacted that as well.

Speaker #7: But I guess the question is, are most customers kind of through that optimization in terms of adopting the LogsDB product? And now you're starting to see those come on in terms of greater use cases and greater commitments.

Ashutosh Kulkarni: I guess the question is, are most customers kind of through that optimization in terms of adopting the LogsDB product? Now you're starting to see those come on in terms of greater use cases and greater commitments. Perhaps that can sort of drive an acceleration in the cloud growth sequentially, just as they've been able to kind of optimize and bring on new use cases. Yeah. That's a great question. Look, the first thing I'd say is overall data growth is just expanding at an unbelievable pace, right? The reason why we are constantly introducing features that make the platform more and more efficient is because without us doing that, it would be just near impossible for anybody to be able to really store and analyze all the data that they're generating. Data volumes in most organizations are doubling, tripling every year.

I guess the question is, are most customers kind of through that optimization in terms of adopting the LogsDB product? Now you're starting to see those come on in terms of greater use cases and greater commitments. Perhaps that can sort of drive an acceleration in the cloud growth sequentially, just as they've been able to kind of optimize and bring on new use cases.

Speaker #7: And perhaps that can sort of drive an acceleration in the cloud growth sequentially, just as they've been able to kind of optimize and bring on new use cases.

Ash Kulkarni: Yeah. That's a great question. Look, the first thing I'd say is overall data growth is just expanding at an unbelievable pace, right? The reason why we are constantly introducing features that make the platform more and more efficient is because without us doing that, it would be just near impossible for anybody to be able to really store and analyze all the data that they're generating. Data volumes in most organizations are doubling, tripling every year.

Speaker #4: Yeah, that's a great question. Look, the first thing I'd say is overall data growth is just expanding at an unbelievable pace, right? So the reason why we are constantly introducing features that make the platform more and more efficient is because, without us doing that, it would be just near impossible for anybody to be able to really store and analyze all the data that they're generating.

Speaker #4: Data volumes in most organizations are doubling and tripling every year. It just does not make sense for them to be able to manage all of that.

Ashutosh Kulkarni: It just does not make sense for them to be able to manage all of that. Making the platform more efficient does two things. One, it allows customers to keep up and continue to use our platform in more ways. Second, it makes our platform more attractive for customers to bring other workloads from other observability vendors, from other security vendors onto our platform, because we become a much more efficient way for them to do all the analysis that they might have been paying somebody a lot more for. That's how we grow. You need to look at everything in the overall context of things. What really drives consumption growth, Tyler, is the commitments. As we get bigger and bigger commitments, that, as it turns into consumption, is what drives our revenue.

It just does not make sense for them to be able to manage all of that. Making the platform more efficient does two things. One, it allows customers to keep up and continue to use our platform in more ways. Second, it makes our platform more attractive for customers to bring other workloads from other observability vendors, from other security vendors onto our platform, because we become a much more efficient way for them to do all the analysis that they might have been paying somebody a lot more for. That's how we grow. You need to look at everything in the overall context of things. What really drives consumption growth, Tyler, is the commitments. As we get bigger and bigger commitments, that, as it turns into consumption, is what drives our revenue.

Speaker #4: So, making the platform more efficient does two things. One, it allows customers to keep up and continue to use our platform in more ways.

Speaker #4: And second, it makes our platform more attractive for customers to bring other workloads from other observability vendors, from other security vendors onto our platform because we become a much more efficient way for them to do all the analysis that they might have been paying somebody a lot more for.

Speaker #4: And that's how we grow. So you need to look at everything in the overall context of things, and what really drives consumption growth, Tyler, is the commitments.

Speaker #4: So as commitments as we get bigger and bigger commitments, that as it turns into consumption is what drives our revenue. And so what I feel most excited about is not just the fact that consumption has been strong this quarter, but also the fact that commitments have just been absolutely wonderful for us.

Ashutosh Kulkarni: What I feel most excited about is not just the fact that consumption has been strong this quarter, but also the fact that commitments have just been absolutely wonderful for us. That is what gives us a lot of confidence, and you're seeing that reflected in the guide and the fact that we raised the guide again in such a meaningful way. I'd add to that, I just want to add to what Ash said. Both of our largest deals, the $20 million-plus deals that we talked about, were cloud deals. That's something we'll recognize over time. The $20 million security deals, those were all cloud? Not the security deals, but we referenced $20 million-plus TCV deals. Both of those largest deals were cloud deals. Okay. Okay. Great. Just a quick follow-up for you, Navam.

What I feel most excited about is not just the fact that consumption has been strong this quarter, but also the fact that commitments have just been absolutely wonderful for us. That is what gives us a lot of confidence, and you're seeing that reflected in the guide and the fact that we raised the guide again in such a meaningful way.

Speaker #4: So that is what gives us a lot of confidence in your seeing that reflected in the guide and the fact that we raised the guide again in such a meaningful way.

Speaker #4: Way, I’d add to that the...

Navam Welihinda: I'd add to that, I just want to add to what Ash said. Both of our largest deals, the $20 million-plus deals that we talked about, were cloud deals. That's something we'll recognize over time.

Speaker #3: I just want to add to that what Ash said. Both of our largest deals, the $20 billion-plus deals that we talked about, were cloud deals.

Speaker #3: So, that's something we'll recognize over time.

Tyler Radke: The $20 million security deals, those were all cloud?

Speaker #7: The $20 million security deals, those were all.

Speaker #7: cloud? Not the security

Navam Welihinda: Not the security deals, but we referenced $20 million-plus TCV deals. Both of those largest deals were cloud deals.

Speaker #3: Deals, but we referenced $20 million plus TCV deals. Both of those largest deals were cloud deals.

Tyler Radke: Okay. Okay. Great. Just a quick follow-up for you, Navam.

Speaker #7: Okay. Okay. Great. And just a quick follow-up for you, Navam. You talked about ACV growth being stronger. In the first half, I assume net new ACV was stronger as well.

Ashutosh Kulkarni: You talked about ACV growth being stronger in the first half. I assume net new ACV stronger as well. Is that ACV growth kind of tracking above what we see in terms of reported subscription or sales subscription growth too? Yes, for the reason that cloud revenue trails these subscriptions, right? You'd have commitments that then eventually turn into revenue over time. Sales-led subscription revenue is always going to trail the ACV aggregate amount that you have. Yes is the answer. Also the point that I made earlier, which is that the ACV growth year over year has been accelerating. Okay. Very helpful. Thank you. The next question comes from Miller Jumps with Truist Securities. Please go ahead. Hey, great. Thank you for taking the question.

You talked about ACV growth being stronger in the first half. I assume net new ACV stronger as well. Is that ACV growth kind of tracking above what we see in terms of reported subscription or sales subscription growth too?

Speaker #7: Is that ACV growth kind of tracking above what we see in terms of reported subscription or sales subscription growth too?

Navam Welihinda: Yes, for the reason that cloud revenue trails these subscriptions, right? You'd have commitments that then eventually turn into revenue over time. Sales-led subscription revenue is always going to trail the ACV aggregate amount that you have. Yes is the answer. Also the point that I made earlier, which is that the ACV growth year over year has been accelerating.

Speaker #4: Yes, for the reason that cloud revenue trails these subscriptions, right? So you'd have commitments that then eventually turn into revenue over time. Sales-led subscription revenue is always going to trail the ACV aggregate amount that you have.

Speaker #4: So yes, is the answer. And also the point that I made earlier, which is that the ACV growth year over year has been accelerating.

Tyler Radke: Okay. Very helpful. Thank you.

Speaker #7: Okay. Very helpful. Thank

Speaker #7: You. The next question comes from Miller.

Operator: The next question comes from Miller Jumps with Truist Securities. Please go ahead.

Speaker #5: Jumps with Tourist Security. Please, go ahead.

Miller Jump: Hey, great. Thank you for taking the question.

Speaker #8: Hey, great. Thank you for taking the question. So, Navam, you mentioned the cloud strength, but you all have also called out some pretty strong data points on the self-managed side as well.

Ashutosh Kulkarni: Navam, you mentioned the cloud strength, but you all have also called out some pretty strong data points on the self-managed side as well. I'm just curious, we've talked about strength across all three use cases here. Are those distributed the same when you look at the people consuming in cloud versus those consuming on self-managed, or do they skew differently? There's going to be variability quarter over quarter. Some of them are going to be cloud, and some of them are going to be self-managed. Like we said, we incentivize our sales team to go meet the customers where they are, be it on cloud or self-managed. Some quarters, we're going to have some self-managed strength, and some quarters, we're going to have some cloud mixed strength. There hasn't been any meaningful change in the mixed trajectory.

Navam, you mentioned the cloud strength, but you all have also called out some pretty strong data points on the self-managed side as well. I'm just curious, we've talked about strength across all three use cases here. Are those distributed the same when you look at the people consuming in cloud versus those consuming on self-managed, or do they skew differently?

Speaker #8: So, I'm just curious. We've talked about strength across all three use cases here. Are those distributed the same when you look at the people consuming in cloud versus those consuming on self-managed, or do they skew differently?

Navam Welihinda: There's going to be variability quarter over quarter. Some of them are going to be cloud, and some of them are going to be self-managed. Like we said, we incentivize our sales team to go meet the customers where they are, be it on cloud or self-managed. Some quarters, we're going to have some self-managed strength, and some quarters, we're going to have some cloud mixed strength. There hasn't been any meaningful change in the mixed trajectory.

Speaker #4: There's going to be variability quarter over quarter. So, some of them are going to be cloud, and some of them are going to be self-managed, like we said.

Speaker #4: We incentivized our sales team to go meet the customers where they are, be it on cloud or self-managed. So, some quarters we're going to have some self-managed strength and some quarters we're going to have some cloud mixed strength.

Speaker #4: There hasn't been any meaningful change in the mixed trajectory. Both of those lines of business are expected to grow to reach our sales-led subscription revenue target that we laid out in the.

Ashutosh Kulkarni: Both of those lines of business are expected to grow to reach our sales-led subscription revenue target that we laid out in the midterm. Okay. I had a model question looking at the monthly subscription. I know that that's not part of the revenue you're guiding to, but it did tick down in the second quarter in each of the last two years. Is there a seasonal element to that, or is there anything else to unpack in this year's downtick? Broadly speaking, that's going to be self-serve customers that are mostly smaller SMB customers. We'd expect that line to be flat, and that's our expectation. Our revenue guide of sales-led subscription revenue is basically where we're driving the business to, which is why we've separated out and given it to you as a guidance point starting this quarter. Thank you.

Both of those lines of business are expected to grow to reach our sales-led subscription revenue target that we laid out in the midterm.

Speaker #4: midterm. Okay.

Miller Jump: Okay. I had a model question looking at the monthly subscription. I know that that's not part of the revenue you're guiding to, but it did tick down in the second quarter in each of the last two years. Is there a seasonal element to that, or is there anything else to unpack in this year's downtick?

Speaker #7: And then just a model question I had was looking at the monthly subscription. I know that that's not part of the revenue you're guiding to, but it did tick down in the second quarter in each of the last two years.

Speaker #7: So, is there a seasonal element to that, or is there anything else to unpack in this year's?

Speaker #7: downtick?

Navam Welihinda: Broadly speaking, that's going to be self-serve customers that are mostly smaller SMB customers. We'd expect that line to be flat, and that's our expectation. Our revenue guide of sales-led subscription revenue is basically where we're driving the business to, which is why we've separated out and given it to you as a guidance point starting this quarter.

Speaker #4: Broadly speaking, that's going to

Speaker #4: We are serving self-serve customers that are mostly smaller SMB customers. So, we’d expect that line to be flat, and that’s our expectation. Our revenue guidance for sales-led subscription revenue is basically where we’re driving the business to, which is why we’ve separated it out and provided it to you as a guidance point starting this.

Speaker #4: quarter. Thank

Miller Jump: Thank you.

Speaker #5: The next question comes from Shrani Kothari with Robert Baird. Please go ahead.

Ashutosh Kulkarni: The next question comes from Srini Kothari with Robert Baird. Please go ahead. Yeah. Thanks for taking my question. You called out, or you had called out, production GenAI workloads across DocuSign, NHSC, my guess, Proofpoint at the analyst day. Just curious, how are you seeing these large-scale embedded use cases evolving and just how enterprise customers are deploying workloads involving vector search inference? Are these usage patterns proving to be more stickier, more voluminous than your traditional sort of logs, metrics, which I would think are often more compressible? How to think from an NRR point of view? Yeah. I'd follow up. Yeah. Let me maybe answer the what's the nature of these kinds of use cases.

Operator: The next question comes from Srini Kothari with Robert Baird. Please go ahead.

Shrenik Kothari: Yeah. Thanks for taking my question. You called out, or you had called out, production GenAI workloads across DocuSign, NHSC, my guess, Proofpoint at the analyst day. Just curious, how are you seeing these large-scale embedded use cases evolving and just how enterprise customers are deploying workloads involving vector search inference? Are these usage patterns proving to be more stickier, more voluminous than your traditional sort of logs, metrics, which I would think are often more compressible? How to think from an NRR point of view? Yeah. I'd follow up.

Speaker #9: Yeah. Thanks for taking my question. So you called out, or you had called out, production Gen AI workloads across DocuSign, NHS East, my guess, Proofpoint's at the analyst day.

Speaker #9: Just curious, how are you seeing these large-scale embedded use cases evolving? And just how are enterprise customers deploying workloads involving vector search inference? Are these usage patterns proving to be stickier and more voluminous than your traditional sort of logs and metrics, which I would think are often more compressible?

Speaker #9: And how do you think from an NRR point of view? Yeah. And then I had a follow-up.

Ash Kulkarni: Yeah. Let me maybe answer the what's the nature of these kinds of use cases.

Speaker #4: Yeah. Let me maybe answer the what's the nature of these kinds of use cases. So, first of all, anybody that's using us for any of the AI use cases tends to be more compute-intensive than if it were just, say, textual search.

Ashutosh Kulkarni: First of all, anybody that's using us for any of the AI use cases, it tends to be more compute-intensive, Srini, than if it were just, say, textual search. That's just by nature of what these algorithms are like. As we described, the cohort analysis that we laid out at the Financial Analyst Day kind of talked about the fact that those cohorts, the AI cohorts, are growing faster than the other cohorts. That's just something that is built in. If you haven't had a chance to look at that information, I'd encourage you to look at it. We laid it out at Financial Analyst Day.

First of all, anybody that's using us for any of the AI use cases, it tends to be more compute-intensive, Srini, than if it were just, say, textual search. That's just by nature of what these algorithms are like. As we described, the cohort analysis that we laid out at the Financial Analyst Day kind of talked about the fact that those cohorts, the AI cohorts, are growing faster than the other cohorts. That's just something that is built in. If you haven't had a chance to look at that information, I'd encourage you to look at it. We laid it out at Financial Analyst Day.

Speaker #4: That's just by nature of what these algorithms are like. As we described, the cohort analysis that we laid out at the financial analyst day talked about the fact that those cohorts, the AI cohorts, are growing faster than the other cohorts.

Speaker #4: So that's just something that is built in. If you haven't had a chance to look at that information, I'd encourage you to look at it.

Speaker #4: But we laid it out at Financial Analyst Day. In terms of those use cases, what we're seeing is broadly across all industries, not just in AI-native companies; there are also customers of ours.

Ashutosh Kulkarni: In terms of those use cases, what we're seeing is broadly across all industries, not just in AI-native companies that are also customers of ours, but broadly across all kinds of enterprises, financial services companies, telcos, government agencies, automotive companies, etc. We are seeing broad adoption. People are not just playing around. It's not just pilots, but it's production use cases that we are seeing. We feel really good about the stickiness of our usage. Our overall AI functionality is so broad. It's not just about vector search. It's a lot more than that. That's really what creates that stickiness, our ability to ensure accurate relevance. Very helpful, Ash. Navam, quick follow-up. How are you thinking about NRR dynamics broadly since you guys called out the sales-led subscription? How is that trending from an NRR perspective? You can share an update.

In terms of those use cases, what we're seeing is broadly across all industries, not just in AI-native companies that are also customers of ours, but broadly across all kinds of enterprises, financial services companies, telcos, government agencies, automotive companies, etc. We are seeing broad adoption. People are not just playing around. It's not just pilots, but it's production use cases that we are seeing. We feel really good about the stickiness of our usage. Our overall AI functionality is so broad. It's not just about vector search. It's a lot more than that. That's really what creates that stickiness, our ability to ensure accurate relevance.

Speaker #4: But broadly across all kinds of enterprises—financial services companies, telcos, government agencies, automotive companies, etc.—we are seeing broad adoption. People are not just playing around.

Speaker #4: It's not just pilots, but it's production use cases that we are seeing. So we feel really good about the stickiness of our usage. And our overall AI functionality is so broad.

Speaker #4: It's not just about vector search. It's a lot more than that. And that's really what creates that stickiness—our ability to ensure accurate relevance.

Shrenik Kothari: Very helpful, Ash. Navam, quick follow-up. How are you thinking about NRR dynamics broadly since you guys called out the sales-led subscription? How is that trending from an NRR perspective? You can share an update.

Speaker #9: Very helpful, Ash. And Navam, quick follow-up on how you are thinking about NRR dynamics broadly since you guys called out the sales-led subscription. How is that trending from an NRR perspective?

Speaker #9: You can share an update, and I know it's early days, but I'm just curious: if the renewals closed in the quarter, what could have been the NRR versus the previous period?

Ashutosh Kulkarni: I know it's early days, but just curious, if the renewals closed in the quarter, what could have been the NRR versus now? Yeah. The net expansion rate played out roughly where we expected it to be. It's at 112%, which is stable. That's buttressed by stable gross retention rates as well. You may remember we described the underlying trends behind the NRR, which is cohort expansion of each of our individual cohorts. We gave you some details during Financial Analyst Day. All those trends remain very strong. Driven by many other things, including the cohort expansion, we're seeing very good net expansion rates today. Great. Thanks. The next question comes from Itay Kidron with Oppenheimer. Please go ahead. Thanks. Ash, the large deal volume is impressive.

I know it's early days, but just curious, if the renewals closed in the quarter, what could have been the NRR versus now?

Speaker #9: now? Yeah.

Navam Welihinda: Yeah. The net expansion rate played out roughly where we expected it to be. It's at 112%, which is stable. That's buttressed by stable gross retention rates as well. You may remember we described the underlying trends behind the NRR, which is cohort expansion of each of our individual cohorts. We gave you some details during Financial Analyst Day. All those trends remain very strong. Driven by many other things, including the cohort expansion, we're seeing very good net expansion rates today.

Speaker #4: The net expansion rate played out roughly where we expected it to be. It's at 112%, which is stable. And that's buttressed by stable growth retention rates as well.

Speaker #4: And you may remember we described the underlying trends behind the NRR, which is cohort expansion of each of our individual cohorts. We gave you some details during Financial Analyst Day.

Speaker #4: All those trends remain very strong. Driven by many other factors, including the cohort expansion, we're seeing very good net expansion rates.

Speaker #4: today. Great.

Shrenik Kothari: Great. Thanks.

Operator: The next question comes from Itay Kidron with Oppenheimer. Please go ahead.

Speaker #5: The next question comes from Itay Qidron with Oppenheimer. Please go ahead.

Ittai Kidron: Thanks. Ash, the large deal volume is impressive.

Speaker #10: Thanks. Ash, the large deal volume is impressive. Is there a way for you to break down the 30 million and 31 million dollar deals into how many of them were renewals versus actually new customers?

Ashutosh Kulkarni: Is there a way for you to break down the $31 million deals into how many of them were renewals versus actually new customers? Also, in that 30, how do I think about potential deals that were pushed out from Q1 into Q2 or perhaps pulled in from Q3 into Q2? How do I think about that? Let me answer the second one first. Just in terms of deals moving between quarters, there's always some deals that slip a quarter, some that get pulled in naturally. Now I'm talking outside of any of the government shutdown dynamics, but some of that movement happens naturally anyways. That's typically just a few deals, typically, that that happens with. This quarter, Q2, was not different from prior quarters. It played out normally, just as we would have expected. There was nothing special there.

Is there a way for you to break down the $31 million deals into how many of them were renewals versus actually new customers? Also, in that 30, how do I think about potential deals that were pushed out from Q1 into Q2 or perhaps pulled in from Q3 into Q2? How do I think about that?

Speaker #10: And also, in that 30, how do I think about potential deals that were pushed out from one queue into two queues, or perhaps pulled in from three queues into two queues?

Speaker #10: How do I think about that?

Ash Kulkarni: Let me answer the second one first. Just in terms of deals moving between quarters, there's always some deals that slip a quarter, some that get pulled in naturally. Now I'm talking outside of any of the government shutdown dynamics, but some of that movement happens naturally anyways. That's typically just a few deals, typically, that that happens with. This quarter, Q2, was not different from prior quarters. It played out normally, just as we would have expected. There was nothing special there.

Speaker #4: Let me answer the second one first. Just in terms of deals moving between quarters, there's always some deals that slip a quarter, and some that get pulled in naturally.

Speaker #4: This is now I'm talking outside of any of the government shutdown dynamics, but some of that movement happens naturally anyways. That's typically just a few deals that happen with.

Speaker #4: This quarter, Q2, was not different from prior quarters. It played out normally, just as we would have expected. So there was nothing special there.

Speaker #4: In terms of the large deals, I don't have the breakdown for the full 30-plus deals. What I will tell you is that when we look at the five deals that are greater than $10 million in total contract value, two of them were security deals.

Ashutosh Kulkarni: In terms of the large deals, I don't have the breakdown for the full 30-plus deals. What I will tell you is that when we look at the five deals that are greater than $10 million in total contract value, two of them were security deals, two of them were observability deals, and one of them was an AI deal. One of those, one of the largest deals that we signed, was actually a new logo for us. We do see a good mix of expansion on existing logos, where we are cross-selling a new solution or something along those lines. There are ones where there are completely new logos. I talked about in my prepared remarks, one of the world's largest chemical manufacturers. That was a completely new logo for us, and it was a deal over $20 million. Very good.

In terms of the large deals, I don't have the breakdown for the full 30-plus deals. What I will tell you is that when we look at the five deals that are greater than $10 million in total contract value, two of them were security deals, two of them were observability deals, and one of them was an AI deal. One of those, one of the largest deals that we signed, was actually a new logo for us. We do see a good mix of expansion on existing logos, where we are cross-selling a new solution or something along those lines. There are ones where there are completely new logos. I talked about in my prepared remarks, one of the world's largest chemical manufacturers. That was a completely new logo for us, and it was a deal over $20 million.

Speaker #4: Two of them were observability deals, and one of them was an AI deal. One of the largest deals that we signed was actually a new logo for us.

Speaker #4: So, we do see a good mix of expansion on existing logos, where we are cross-selling a new solution or something along those lines. And then there are ones where there are completely new logos.

Speaker #4: So I talked about in my prepared remarks one of the world's largest chemical manufacturers that was a completely new logo for us. And it was a deal over $20 million.

Ittai Kidron: Very good.

Speaker #10: Very good. And maybe as a follow-up, Navam, on your sales-led guidance, I know you look at sales-led as a group, whether it be self-managed or cloud, as both of them are important drivers for you.

Ashutosh Kulkarni: Maybe as a follow-up, Navam, on your sales-led guidance, I know you look at sales-led as a group, whether it be self-managed or cloud, as both of them as important drivers for you. I think the challenge that investors have is that when you don't give more specific breakdowns on your expectations from cloud to self-managed, it's hard to gauge where you internally outperform versus underperform. Investors, no matter what, they're going to be very focused on cloud. Is there any color that you can give us? First of all, on Q2 that you just reported, did you outperform on cloud or self-managed or underperform in any of them relative to your internal targets? That's question number one.

Maybe as a follow-up, Navam, on your sales-led guidance, I know you look at sales-led as a group, whether it be self-managed or cloud, as both of them as important drivers for you. I think the challenge that investors have is that when you don't give more specific breakdowns on your expectations from cloud to self-managed, it's hard to gauge where you internally outperform versus underperform. Investors, no matter what, they're going to be very focused on cloud. Is there any color that you can give us? First of all, on Q2 that you just reported, did you outperform on cloud or self-managed or underperform in any of them relative to your internal targets? That's question number one.

Speaker #10: I think the challenge that investors have is that when you don't give more specific breakdowns on your expectations from cloud to self-managed, it's hard to gauge where you internally outperform versus underperform.

Speaker #10: And investors, no matter what, they're going to be very focused on cloud. So is there any color that you can give us? First of all, on Q2 that you just reported, did you outperform on cloud or self-managed, or underperform in any of them relative to your internal targets?

Speaker #10: That's question number one. And question number two, can you give us any sort of a little bit more granular perspective on how to think about the breakdown of your sales-led guide for the third.

Ashutosh Kulkarni: Question number two, can you give us any, some sort of a little bit more granular perspective on how to think about the breakdown of your sales-led guide for the third quarter? Sure thing. Itay, there is no internal breakdown of cloud versus self-managed for our sales team. We give them a quota, and they go and hit that quota regardless of whether it's cloud or self-managed. We're giving you a metric in exactly the way we think about the metric, right? We don't think about a cloud number. We don't think about a self-managed number. We don't think about migrations from self-managed to cloud. One is not an old platform, and the other is a new platform. This is all one platform that we sell, our one sales motion that we sell our customers to.

Question number two, can you give us any, some sort of a little bit more granular perspective on how to think about the breakdown of your sales-led guide for the third quarter?

Speaker #10: quarter? Sure

Navam Welihinda: Sure thing. Itay, there is no internal breakdown of cloud versus self-managed for our sales team. We give them a quota, and they go and hit that quota regardless of whether it's cloud or self-managed. We're giving you a metric in exactly the way we think about the metric, right? We don't think about a cloud number. We don't think about a self-managed number. We don't think about migrations from self-managed to cloud. One is not an old platform, and the other is a new platform. This is all one platform that we sell, our one sales motion that we sell our customers to.

Speaker #4: So, Itay, there is no internal breakdown of cloud versus self-managed for our sales team. We give them a quota, and they go and hit that quota regardless of whether it's cloud or self-managed.

Speaker #4: So, we're giving you a metric in exactly the way we think about the metric, right? We don't think about a cloud number. We don't think about a self-managed number.

Speaker #4: We don't think about migrations from self-managed to cloud. One is not an old platform, and the other is a new platform. This is all one platform that we sell, our one sales motion that we sell to our customers.

Speaker #4: And there are plenty of AI workloads, modern AI workloads that are self-managed. So frankly, we meet our customers where they are, and we are fine with either.

Ashutosh Kulkarni: There are plenty of AI workloads, modern AI workloads that are self-managed. Frankly, we meet our customers where they are, and we are fine with either. This is basically us informing the street on how we internally think about our metrics. I think that's important to talk about. The sales-led guidance that I gave you in the third quarter was primarily related to the strength we're seeing in the two things that I talked about: the commitments momentum, and we talked about the large deal momentum that we're seeing, which is also a factor in the commitments we're seeing, and the consumption momentum. Both those things are the factors that lead to a strong Q3 number and also, frankly, a very strong full-year number that we increased twice in a row now since the end of Q1. Appreciate it.

There are plenty of AI workloads, modern AI workloads that are self-managed. Frankly, we meet our customers where they are, and we are fine with either. This is basically us informing the street on how we internally think about our metrics. I think that's important to talk about. The sales-led guidance that I gave you in the third quarter was primarily related to the strength we're seeing in the two things that I talked about: the commitments momentum, and we talked about the large deal momentum that we're seeing, which is also a factor in the commitments we're seeing, and the consumption momentum. Both those things are the factors that lead to a strong Q3 number and also, frankly, a very strong full-year number that we increased twice in a row now since the end of Q1.

Speaker #4: So, this is basically us informing the street on how we internally think about our metrics. I think that's important to talk about. The sales-led guidance that I gave you in the third quarter was primarily related to the strength we're seeing in the two things that I talked about.

Speaker #4: The commitments momentum, and we talked about the large deal momentum that we're seeing, which is also a factor in the commitments we're seeing. And the consumption momentum.

Speaker #4: Both those things are the factors that lead to a strong Q3 number and also, frankly, a very strong full-year number that we increased twice in a row now since the end of Q1.

Ittai Kidron: Appreciate it.

Speaker #10: it.

Speaker #5: The last

Ashutosh Kulkarni: The last question comes from Jacob Roberts with William Blair. Please go ahead. Yeah. Thanks for taking the question. You referenced the CISA deal during the quarter, but can you talk about how the rest of the federal business came together? You mentioned there was some impact to term license in the quarter from the shutdown. Would you expect that to catch back up pretty quickly during the third quarter in any way to kind of size that impact that it was to Q2? Let me maybe start with that. The best way to think about our overall performance in the US public sector was great, absolutely. We were very happy with the performance. The team, obviously, we had one less month in the quarter when the teams were able to close meaningful business, but they were able to work around it.

Operator: The last question comes from Jacob Roberts with William Blair. Please go ahead.

Speaker #5: Question comes from Jacob Roberts with William Blair. Please go ahead.

Jacob Roberts: Yeah. Thanks for taking the question. You referenced the CISA deal during the quarter, but can you talk about how the rest of the federal business came together? You mentioned there was some impact to term license in the quarter from the shutdown. Would you expect that to catch back up pretty quickly during the third quarter in any way to kind of size that impact that it was to Q2?

Speaker #4: Yeah. Thanks for taking the question. You referenced the CISA deal during the quarter, but can you talk about how the rest of the federal business came together?

Speaker #4: And then you mentioned there were some impacts to term licenses in the quarter from the shutdown. Would you expect that to catch back up pretty quickly during the third quarter?

Speaker #4: And any way to kind of size that impact, that it was Q2? Yeah. So let me maybe start with that. The best way to think about our overall performance in the U.S. public sector was great.

Ash Kulkarni: Let me maybe start with that. The best way to think about our overall performance in the US public sector was great, absolutely. We were very happy with the performance. The team, obviously, we had one less month in the quarter when the teams were able to close meaningful business, but they were able to work around it.

Speaker #4: Absolutely, we were very happy with the performance of the team. Obviously, we had one less month in the quarter when the teams were able to close meaningful business.

Speaker #4: But they were able to work around it. Demand remains very, very strong, and the execution of the team was excellent. The CISA deal came in the month of September before the shutdown happened.

Ashutosh Kulkarni: Demand remains very, very strong, and the execution of the team was excellent. The CISA deal came in in the month of September before the shutdown happened. All of that worked out very, very nicely. In terms of the renewals that slipped from Q2 to Q3, the best way to think about it is those were renewals where the customers are still using our product. We did not take the approach of shutting them down. We just let them continue using it because we knew that when the government reopens, they will process those orders. That's the right way to think about it. Those renewals will come through in Q3. It's not business that's at risk. It's just something that slipped because the government was shut down. Very helpful. Thanks for taking the question.

Demand remains very, very strong, and the execution of the team was excellent. The CISA deal came in in the month of September before the shutdown happened. All of that worked out very, very nicely. In terms of the renewals that slipped from Q2 to Q3, the best way to think about it is those were renewals where the customers are still using our product. We did not take the approach of shutting them down. We just let them continue using it because we knew that when the government reopens, they will process those orders. That's the right way to think about it. Those renewals will come through in Q3. It's not business that's at risk. It's just something that slipped because the government was shut down.

Speaker #4: So all of that worked out very, very nicely. In terms of the renewals that slipped from Q2 to Q3, the best way to think about it is those were renewals where the customers are still using our product.

Speaker #4: So we did not take the approach of shutting them down. We just let them continue using it because we know that when we knew that when the government reopens, that they will process those orders.

Speaker #4: So, that's the right way to think about it. Those renewals will come through in Q3, so it's not business that's at risk.

Speaker #4: It's just something that slipped because the government was shut.

Speaker #4: down. Very helpful.

Jacob Roberts: Very helpful. Thanks for taking the question.

Speaker #1: Thanks for taking the question.

Speaker #5: And this concludes our question-and-answer session. I would like to turn the conference back over to Ashutosh Kulkarni for any closing remarks. Please go ahead.

Ashutosh Kulkarni: This concludes our question and answer session. I would like to turn the conference back over to Ashutosh Kulkarni for any closing remarks. Please go ahead. Thank you all for joining us today. We here at Elastic are very proud of our strong results and are very excited about the opportunity ahead. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Ashutosh Kulkarni for any closing remarks. Please go ahead.

Speaker #5: ahead. Thank you

Ash Kulkarni: Thank you all for joining us today. We here at Elastic are very proud of our strong results and are very excited about the opportunity ahead. Thank you.

Speaker #4: Thank you all for joining us today. We at Elastic are very proud of our strong results and are very excited about the opportunity ahead.

Speaker #4: Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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