ESTC - Elastic: No AI Tailwinds Yet

2024-06-03 11:51:44 ET

Summary

• Elastic's Q4 FY2024 results were solid, with growth driven by larger customers. Generative AI is still not a significant revenue contributor though.
• Elastic seems fairly optimistic relative to most SaaS peers, but guidance suggests stabilization rather than reacceleration.
• I continue to think that Elastic's upside is fairly capped from current levels unless its growth increases substantially.
• Given the apparent deterioration in the macro environment, and the fact that generative AI is not expected to contribute to revenue in the short run, I don't expect Elastic's growth to improve significantly.

Elastic's ( ESTC ) Q4 FY2024 results were solid, with revenue growth continuing to edge higher, driven by growth amongst larger customers. There are high expectations around generative AI and Elastic's vector database product, but this is not a significant revenue contributor yet. The company's operating profit margin has also fallen off in recent quarters as it begins to invest in growth again....

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