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Elastic
raised its expectations for revenue and profit, a nod to the benefits that the data analytics company is reaping from generative artificial intelligence.
On Friday, the stock soared 32%, to $106.07. If shares close at current levels, the jump would be the largest single-day percent increase and highest close since January 2022.
After Thursday’s market close, Elastic said it expects per-share earnings of $1.06 to $1.15 for the fiscal year ending in April. This estimate was higher than management’s previous call of $1.01 to $1.11 a share and beat the consensus of $1.08 from analysts tracking the stock, according to
FactSet.
Total revenue is expected to be $1.247 billion to $1.253 billion, higher than management’s previous estimate. The estimate by analysts was $1.248 billion.
Elastic helps customers build search applications. The company saw customers ramp up their consumption in the latest quarter, said Janesh Moorjani, chief operating officer. The generative AI-powered tool
Elasticsearch
Relevance Engine (ESRE), introduced in May, drove customers to upgrade.
Elastic AI Assistant, an ESRE application, is only offered in the Enterprise tier, the company’s costliest plan starting at $175 a month.
For many analysts, the stock is a buy because of the financial gains from AI. As of Friday, more than 60% of those who track the stock had a Buy call.
Wells Fargo analyst Andy Nowinski upgraded the stock to Overweight from Hold and raised the target for stock price to $115 from $70. He said Elastic is “well-positioned” to handle the demands stemming from GenAI workloads.
Truist analyst Joel Fishbein and his team kept their Buy rating and raised the price target to $100 from $85. He said ESRE could be responsible for the company beating expectations for sales or earnings in fiscal 2025.
Elastic’s CEO Ashutosh Kulkarni emphasized that expenditures on generative AI solutions have yet to become a major catalyst for revenue. And customers, in general, continue to prioritize managing their costs in an uncertain environment, Kulkarni noted.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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