Why Elastic’s Stock Plunged Nearly 13% After-Hours

• The topline grew 16% YoY, slower than the 20% rate reported for the first quarter.
• CEO Ash Kulkarni called the quarter “outstanding.”
• Elastic’s stock has underperformed the broader market and the tech sector this year, having dropped 17%.

Elastic N.V. (ESTC) shares slumped nearly 13% in Thursday’s extended session on top of the 7% drop in the regular session, as investors did not take kindly to the growth slowdown across key metrics. The quarterly results, however, exceeded expectations, and the company also raised its full-year outlook. 

If the after-hours losses carry through into Friday’s session, the stock is on track to have its worst day since late August 20, 2024, according to Koyfin.

Elastic’s stock has underperformed the broader market and the tech sector this year, having dropped 17%.

Elastic’s Q2 Snapshot

The artificial intelligence (AI)-enabled search company reported fiscal year 2026 second-quarter adjusted earnings per share (EPS) of $0.64, higher than the $0.59 reported a year ago and the Fiscal.ai-compiled consensus estimate of $0.58.

Quarterly revenue climbed 16% year over year (YoY) to $423 million versus the mean analysts’ estimate of $418.12 million. The topline grew at a slower pace than the 20% rate reported for the first quarter. Subscription revenue ($398 million) also grew more slowly.

Elastic’s cloud revenue came in at $206, rising 22% YoY versus the 20% growth in Q1, while the current remaining performance obligations (cRPO) at the end of the quarter stood at $971 million, up 17% YoY, versus the 18% growth in Q1. cRPO is the unbilled revenue from signed contracts that will likely be recognized as revenue over the next 12 months.

CEO Ash Kulkarni called the quarter “outstanding.” “We beat the high end of our guidance across all metrics. Our strength was driven by robust growth across the company with AI positively impacting all areas of our business.”

Among customer metrics, total customer count with annual contract value (ACV) greater than  $100,000 rose YoY and sequentially to 1,600. Net expansion rate held steady at 112%.

Elastic’s Outlook

For the third quarter, Elastic expects adjusted earnings of $0.63-$0.65 and revenue of $437 million to $439 million. The outlook was better than the consensus estimates of $0.60 and $429.94, respectively.

The company raised the full-year guidance, with the new ranges as follows:

-Adj. EPS: $2.40-$2.46 (up from previous range of $2.29-$2.35)

-Revenue:  $1.715B-$1.721B(up from prior outlook of $1.679B-$1.689B)

The consensus estimates call for adjusted EPS of $2.35 and revenue of $1.706 billion for the year.

What Retail Feels About Elastic Stock

On Stocktwits, retail sentiment toward Elastic stock improved to ‘extremely bullish’ as of late Thursday from the ‘bullish’ mood seen a day ago. The retail chatter on the stream increased to ‘extremely high’ levels. The message volume over the 24 hours leading up to late Thursday spiked by over 800%.

A bullish watcher stated the forward price-earnings (P/E) multiple for the company growing revenue at a 15%+ pace is 26, indicating that the valuation is attractive.

Another user said the results are solid and expected that the stock will bounce back on Friday morning.

But a skeptic said the company downplayed the billings growth which lagged.

According to Koyfin, the average price target for Elastic’s stock is $118.48, implying about 45% upside potential.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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