0001707753-25-000040
SEC filingRevenue grew 20% YoY driven by Elastic Cloud and subscriptions, while gross margin expanded 300 bps to 77%.
For the three months ended July 31, 2025 (Q1 FY2026), total revenue increased 20% year-over-year to $415.3 million. Subscription revenue, representing 94% of total revenue, grew 20% to $388.6 million, driven by continued adoption of Elastic Cloud (up 24%) and Other subscriptions (up 16%). Services revenue grew 13% to $26.7 million. Gross profit rose 25% to $318.5 million, with gross margin expanding 300 basis points to 77%. The improvement was primarily due to a 300 bps increase in subscription gross margin to 82%, attributed to lower cloud infrastructure costs. Services gross margin turned negative (-2%) versus 1% a year ago, as cost growth outpaced revenue growth due to investments in the services organization. Operating loss improved from ($33.8 million) to ($9.4 million), reflecting revenue growth and margin expansion. Net loss improved from ($49.2 million) to ($24.6 million). The provision for income taxes increased to $24.6 million from $20.1 million, with a non-meaningful effective tax rate due to valuation allowances.
Subscription revenue growth was broad-based, with Elastic Cloud revenue accelerating 24% year-over-year and contributing 47% of total revenue (up from 45%). Annual Elastic Cloud subscriptions grew 31%, indicating strong commitment from cloud customers. Services revenue grew 13%, but management noted continued investments in services that may pressure near-term margins. Customer metrics underscore momentum: the number of customers with >$100k ACV rose to over 1,550 from 1,370, and the Net Expansion Rate remained strong at 112%, suggesting existing customers are expanding their spend. The company highlights its strategy to convert free users to paid subscribers and drive expansion within the base.
Management did not provide specific numerical guidance for future periods. However, the MD&A outlines strategic priorities: developing new features for the Search AI Platform, growing the developer community, converting free users to paid subscribers, expanding within existing customers, and increasing Elastic Cloud adoption. The company expects Elastic Cloud's share of revenue to continue rising, which may modestly pressure gross margins due to associated hosting costs. Operating expenses are expected to increase in absolute dollars as the company invests in R&D and sales and marketing. Management believes existing cash and marketable securities ($1.494 billion) and operating cash flows will be sufficient for at least the next 12 months.
As of July 31, 2025, Elastic N.V. reported a strong liquidity position with cash and cash equivalents of $662.3 million and marketable securities of $832.0 million, totaling $1.49 billion. This compares to $1.40 billion as of April 30, 2025 ($727.5M cash + $669.7M marketable securities). The company also held $3.7 million in restricted cash. Total assets stood at $2.52 billion, while total liabilities were $1.55 billion. Shareholders' equity increased to $971.4 million from $927.2 million at the end of the prior fiscal year, driven primarily by stock-based compensation and share issuances, partially offset by a net loss and other comprehensive loss.
The Notes disclose $2.9 million in letters of credit outstanding as of July 31, 2025, related to office space leases. The company also has operating lease commitments with future minimum lease payments of $28.6 million on an undiscounted basis, with $7.5 million due in the remainder of fiscal 2026. No material changes to cloud hosting commitments were reported outside the ordinary course of business. The company is involved in a securities class action lawsuit, but no loss estimate has been accrued as the outcome is not yet determinable.
Elastic did not repurchase any shares or pay dividends during the quarter. The company's capital allocation was focused on organic investment and a small acquisition. Capital expenditures were minimal at $0.7 million (0.2% of revenue). The company's $575.0 million aggregate principal amount of 4.125% Senior Notes due 2029 remained outstanding, with a net carrying amount of $570.0 million after unamortized debt issuance costs. No new debt was issued or repaid during the quarter. Stock-based compensation was the primary use of equity capital, totaling $69.9 million for the quarter.
The company operates as a single reportable segment. However, the Notes provide a disaggregation of revenue by type. Elastic Cloud revenue (annual and monthly) was $195.8 million (47% of total), up 24.5% year-over-year. Other subscription revenue was $192.8 million (47% of total), and services revenue was $26.7 million (6% of total). Geographically, the United States contributed $230.3 million (55% of total revenue), with the rest of the world accounting for $185.0 million. No other individual country exceeded 10% of total revenue. Long-lived assets were concentrated in the U.S. ($15.4 million), the Netherlands ($2.7 million), and the U.K. ($2.7 million).