Wedbush cuts Elastic NV price target to $110, maintains Outperform

Elastic NV (ESTC) reported strong Q4 results, exceeding revenue and earnings expectations, with total revenue reaching $388.4 million and adjusted EPS at $0.47. Despite the beat, fiscal year 2026 revenue guidance of $1.655-$1.670 billion fell short of the $1.69 billion consensus, leading to a stock price decline and subsequent price target reductions from Wedbush, Cantor Fitzgerald, and Stifel. While cloud revenue growth was slightly below expectations, the company saw increased adoption of its GenAI applications and expansion in its customer base, and analysts are closely monitoring the impact of GenAI on Elastic's financial performance.

Analysis

Elastic NV (ESTC) delivered strong fourth-quarter fiscal year 2025 results, with total revenues of $388.4 million surpassing both Street estimates of $380.4 million and its own guidance range of $379.0 million to $381.0 million. Adjusted earnings per share also exceeded expectations at $0.47, against a consensus of $0.37. This performance reflects a 17% year-over-year revenue growth over the last twelve months to $1.48 billion and an increase in customers spending over $100k in annual contract value to 1,510. However, the company's fiscal year 2026 revenue guidance of $1.655 billion to $1.670 billion fell short of Wall Street's $1.69 billion estimate, leading to a 12% drop in its stock price in after-hours trading and subsequent price target reductions from analysts, including Wedbush (to $110 from $135) and Cantor Fitzgerald (to $92 from $109). While Elastic's cloud revenue grew 23% year-over-year to $181.5 million, it was slightly below expectations, attributed to challenges within the US public sector and a slower sequential cloud growth rate. Despite these headwinds, GenAI application development showed continued strength with 2,000 customers using Elastic Cloud for GenAI use cases. Gross margins (77.0%) and non-GAAP operating margins (15.0%) both outperformed forecasts, supported by prudent capital spending and a strong balance sheet. The company plans to incrementally add security sales specialists to expand its market share in the security space, a strategy analysts will monitor alongside the impact of GenAI on financial performance and challenges such as longer sales cycles in the U.S. Federal segment noted by Cantor Fitzgerald.

Key Decisions for Investors

• Investors should closely monitor Elastic's ability to accelerate cloud revenue growth and navigate challenges in the U.S. public sector, as these factors are critical for future stock performance given the cautious FY26 guidance.
• The increasing adoption of GenAI capabilities is a significant potential growth driver; however, its tangible impact on revenue and profitability needs to be carefully assessed in subsequent financial reports.
• Considering the stock's pullback and mixed analyst revisions, investors should weigh the company's strong current operational execution and GenAI prospects against the lowered near-term growth outlook and specific segmental headwinds before making investment decisions.