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DATE

Thursday, May 28, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ashutosh Kulkarni
• Chief Financial Officer — Navam Welihinda

TAKEAWAYS

• Total Revenue -- $451 million, up 16% (14% in constant currency).
• Sales-Led Subscription Revenue -- $375 million, grew 19% (16% in constant currency) for the quarter.
• Full-Year Revenue -- Increased 17% with a non-GAAP operating margin of 16.4%.
• Q4 CRPO -- $1.2 billion, up 20% both as reported and in constant currency, accelerating from 15% the prior quarter.
• Q4 RPO -- $1.98 billion, up 28% reported and 27.4% in constant currency, reaching the highest year-over-year growth in four years.
• Non-Current RPO -- Grew 43% year over year, showing increased multi-year contracts.
• Operating Margin -- Non-GAAP was 14.8% for the quarter, up over 120 basis points for the year.
• Adjusted Free Cash Flow Margin -- Approximately 20% for the year.
• Share Repurchases -- $40 million returned in Q4, totaling 4.4 million shares since the program began, with 68% of $500 million authorization used.
• Large Customer Growth -- Over thirty net new $1 million-plus ACV customers added in the year, bringing the total above 240; 30% increase in $5 million-plus ACV customers.
• AI Adoption -- 600+ $100,000-plus ACV customers now use Elastic's AI capabilities; this cohort is growing roughly 5% faster than non-AI customers.
• Annual Cloud Business -- Grew 26%, while monthly cloud business increased 3%, reflecting a focus on sales-led and enterprise segments.
• Fiscal 2027 Guidance -- Total revenue expected at $1.985 billion to $2 billion (14.6% growth midpoint; 14.5% in constant currency); non-GAAP operating margin guided to 19%. (Fiscal year ending April 30, 2027.)
• Fiscal 2027 Sales-Led Subscription Revenue Guidance -- $1.673 billion to $1.688 billion (16.9% growth midpoint; 16.8% in constant currency).
• Q1 Fiscal 2027 Revenue Outlook -- $469 million to $470 million (13.1% year-over-year growth midpoint; 12.8% in constant currency).
• Price Increases -- 3% for cloud and 5% for self-managed offerings implemented for fiscal 2027.
• AI Impact on Growth -- CFO Welihinda said, "the 500 basis points of acceleration from customers using our AI features and AI products continues to be the case."
• Product Innovation -- New metrics engine launched; report of "storage efficiency and query speeds up to 30x faster than Prometheus."
• Public Sector/SIEM as a Service -- CISA partnership saw a deal exceeding $26 million in twelve months, with increased adoption by civilian agencies.
• Midterm Targets -- CFO Welihinda increased the fiscal 2029 non-GAAP operating margin target from above 20% to approximately 25% and reaffirmed midterm sales-led subscription revenue growth target of 20%-plus.

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RISKS

• CFO Welihinda cited "risk adjustment related to consumption, related to FX, related to timing of large deals and mix" in revenue guidance.
• Cloud commitment mix variation impacts in-quarter revenue, as recognized revenue timing differs for cloud versus self-managed contracts.

SUMMARY

Elastic (ESTC +4.39%) reported accelerated customer commitments and strong momentum in sales-led subscription revenue, underpinned by significant multi-year deals and AI adoption among top-tier clients. The company continues to expand its share repurchase program, supporting capital return strategies, while highlighting gains from public sector partnerships and new product launches such as the metrics engine with materially higher performance metrics. Management raised its fiscal 2029 operating margin aspirational goal and reasserted confidence in achieving a midterm revenue growth target, emphasizing that organizational changes are intended to expand sales capacity and sustain innovation. Guidance for fiscal 2027 (ending April 30, 2027) reflects steady margin expansion and revenue acceleration, with the exit growth rate on track to bridge to the long-term goal.

• CFO Welihinda clarified that fiscal 2027 guidance does not assume contributions from unannounced new products or acquisitions.
• CEO Kulkarni stated, "we plan to make no changes this year, just add more sales capacity," when asked about go-to-market strategy adjustments.
• Sales-led subscription revenue is expected to accelerate quarterly throughout fiscal 2027, with Q1 showing the lowest and Q4 the highest growth, as signaled in management's remarks.
• CEO Kulkarni indicated, "AI buyers are, reasonably technical," but reaffirmed Elastic's existing technical sales approach; no major sales or hiring profile changes are planned beyond specialist advisory teams.
• The adoption of Elastic's AI solutions is expanding across search, observability, and security product families, driving higher growth rates among AI-attached enterprise customers.

INDUSTRY GLOSSARY

• CRPO (Current Remaining Performance Obligations): Contracted revenue expected to be recognized over the next twelve months.
• RPO (Remaining Performance Obligations): Total future contracted revenue, both current and non-current, awaiting recognition.
• SIEM (Security Information and Event Management): A software solution aggregating and analyzing security data for threat detection and incident response.
• ACV (Annual Contract Value): The annualized value of a customer contract, used to compare account sizes in subscription models.
• MCP (Model Copilot Platform): An industry-standard interface enabling AI agents to access and retrieve data programmatically for business automation workflows.
• RAG (Retrieval Augmented Generation): An AI technique using external data sources to ground and enhance generative outputs.

Full Conference Call Transcript

Ashutosh Kulkarni: Thank you, Eric, and good afternoon, everyone. Thank you for joining us today to discuss our fourth quarter and fiscal 26 results. Elastic finished the year strong beating our guidance across every key metric. This was our 7th consecutive quarter disciplined field execution and we saw very strong commitments resulting in CRPO growth accelerating to 20%, Organizations are increasingly choosing Elastic for their long term AI transformations and making larger multi year commitments to standardize on our platform for the future. The acceleration in our Q4 RPO growth which reached over 28% validates the growing magnitude momentum of our customer commitments and sets us up well for the future.

In Q4, we achieved 16% total revenue growth and a non GAAP operating margin of 14.8%. Resulting in a full year revenue growth of 17% and a non GAAP operating margin of 16.4%. In Q4, our sales led subscription revenue grew 19%. Driven by continued demand for our platform for AI, search, observability and security. Our highest value customers are leading the shift towards multiyear deals. It was a record Q4 for $1 million deals and in FY 2026 we added more than 30 net new customers to our $1 million-plus ACV cohort. Bringing that total to more than 240. Within that group, our count of customers spending over $5 million with us annually grew 30%.

We ended the year with over 37 customers spending more than $100 thousand in ACV. This is highlighted by several marquee wins in security as we continue displacing legacy vendors. In the public sector, our partnership with the Cybersecurity and Infrastructure Security Agency or CISA, around the Elastic SIEM as a Service is growing. With more civilian agencies switching away from competitive security offerings onto the service powered by Elastic Cloud. This led to our commitments mix in Q4 to shift more towards Elastic Cloud than in prior years. Which impacted our in quarter Q4 revenue. This shift to cloud will be a positive for the future as these agencies ramp their usage toward their commitment levels.

The broader AI cycle is actively driving our growth. Customers rely on us not only as a context platform for AI, but to modernize their operations with our AI-driven SOC and SRE, for security and observability respectively. Our customers using our AI solutions continue to grow. We now have over 600 customers with an ACV of over 100 thousand or greater using our AI capabilities. This includes more than 40 serverless customers who were previously not captured in this count. Cumulatively, AI use cases have now penetrated more than a third of our $100 thousand ACV customer cohort. We see demand ranging from the largest global organizations to AI native companies. We believe the adoption of AI will be universal.

Spanning across organizations of every scale. This represents a fundamental market evolution that provides a consistent tailwind for our growth over the long term. The software stack is being rewritten. Large language models are emerging as the new operating system, and agentic automation is becoming the prerequisite for every mission critical business process. We are capitalizing on this AI-driven disruption through 4 foundational strengths. First, data gravity. As AI scales, LLM must come to the data. Not the other way around. Moving petabytes of proprietary information is a non starter for enterprises due to cost, security, data gravity. We are ensuring that Elasticsearch remains 1 of the most efficient data stores for all unstructured data and more.

Logs, metrics, vectors, text, audio, and video. By delivering massive compression and significant ingest speedups, we provide the price scalability and speed that make us the data store of choice. We recently introduced cross project search, which brings cross cluster search to serverless. In large enterprises, where data is scattered across teams and regions, we eliminate the need for costly centralization by allowing users to query disparate projects where they live. Second, context. An LLM is only as powerful as the context it is given.

We have built and are constantly evolving 1 of the world's best context platforms for AI, We are reducing costs while improving the relevance of AI through hybrid search first party models like our GINA V5 Omni family for multimodal search, and our agent builder now in general availability. This ensures that enterprise AI is grounded in real-time business reality In a recent blog, we compared agent performance using Elastic as a context layer versus an LLM interacting with the data directly. We saw a 70% reduction on tokens used and the ability to answer questions more accurately than with naive RAG alone.

We are widening our competitive moat with third party data connectors that allow our search APIs to pull real-time context from systems like Slack and Google Drive without the need for indexing or crawling. Enabling zero friction retriever across the entire enterprise stack. Third, specialized agents, Traditional observability and security practices are evolving into the Agentic SRE and the Agentic SoC. We were 1 of the first to embed AI and agents into our observability and security products and we have now automated the entire lifecycle from detection to analysis and remediation.

These security and observability agents and skills are designed to be embeddable in any AI tool whether our customers use Anthropic, OpenAI or Gemini, with Elastic serving as the data layer behind the automation. We also launched the industry's first MCP apps, for security and observability, embedding interactive domain specific workflows directly into tools like Claude, Versus Code, and GitHub Copilot. Enabling users to investigate and triage threats wherever they work. Fourth, platform consolidation. As the market matures, organizations are consolidating onto platforms that can leverage AI across multiple domains at a lower total cost. We believe that platforms supporting both security and observability on a single data tier will win the consolidation race.

We are accelerating the consolidation trend with a relaunch of our metrics offering, Prometheus is 1 of the most widely used systems for metrics monitoring especially in cloud native environments, We now offer native support Prometheus time series data in Elasticsearch. This allows engineers to leverage their existing expertise and AI coding tools without learning a new query language. Most importantly, we are delivering this familiar experience with massive performance gains. Providing storage efficiency and query speeds up to 30x faster than Prometheus. Our customer wins in Q4 reinforce these strengths.

Our data gravity advantage is winning consolidation deals in the most data intensive environments, In a 7-figure new logo win, a global provider of financial business information, is leveraging Elasticsearch for its massive repository of over 2 billion documents. We successfully displaced a legacy dual vendor setup by proving that Elastic's hybrid search delivers superior relevancy for their most demanding high volume workloads. Our recent acquisition of Jina AI proved essential during the evaluation providing high quality multilingual support across 30-plus languages, By combining these models, with this BBQ, to manage massive scale efficiently, the customer is reimagining the search experience for their millions of subscribers while preparing for the next wave of AI native products.

Our context engineering leadership is making us the essential retrieval layer for ISVs launching AI experiences for their customers. In a 7-figure expansion, a leading workplace AI software firm has established Elasticsearch as the foundational retrieval engine at the heart of its enterprise offerings. By serving as the essential context layer, for their Agentic pipeline, Elastic enables the delivery of grounded permission aware insights across massive complex data sets. This partnership ensures that their AI services remain performant and secure providing a scalable foundation for the next generation of AI driven products. Our specialized agents are driving the largest platform consolidations we have ever seen.

We secured a key 8-figure win this quarter where we are redefining the modern SOC experience. A Fortune 50 global financial services firm is modernizing their security operations by consolidating their disparate cyber data silos into a unified, AI-driven SIEM. By migrating mission critical workloads from an incumbent to Elastic, the firm is leveraging our platform to dramatically improve data retention and accessibility while optimizing their long term infrastructure costs. Additionally, their cyber incident response teams will be deploying our AI-driven capabilities including attack discovery and AI Assistant, to proactively mitigate threats and realize significant productivity savings.

By leaning into our 4 foundational strengths, we are setting ourselves up to be an enduring part of the infrastructure for the AI driven future. Finally, as a company, we have always focused on building a strong and durable business while continuing to innovate for our customers. As AI transforms how work gets done across every function, we are evolving how we operate internally to accelerate innovation, increase capacity through automation and move faster as a company. As we evolve the organization to better align our teams, with working in an age of AI automation, we expect to simplify how we operate reduce operational complexity and scale even more effectively as our business grows.

As such, we expect to expand our operating margin meaningfully in FY 2027. Navam will address this topic in more detail. Importantly, these changes do not slow down the growth in our sales capacity and our ability to capture the opportunity for growth acceleration ahead of us. While the structure of our organization will evolve, we will expect to grow our total headcount on a net basis this fiscal year. These organizational changes support our continued top line growth momentum and ability to scale effectively as we grow. And we remain on track to deliver our midterm growth targets.

Strong sales performance throughout FY 2026 with accelerating CRPO has set us up to accelerate our quarterly revenue growth trajectory in FY 2027. The continuous innovation across Elastic and the increasing adoption of AI reinforce my confidence in our future. We entered the new fiscal year energized and are ready to drive our momentum forward. I want to thank our customers and partners for their trust. Our shareholders for their partnership, and our employees for their dedication. With that, I will turn the call over to Navam to review our financial results in more detail.

Navam Welihinda: Thank you, Ashutosh. I am also incredibly proud of the team's FY 2026 performance. Not only did we beat our guidance throughout the entire year, but importantly, we laid the foundation for revenue acceleration in FY 27 by growing customer commitments in FY 2026 as evidenced by our growth in both CRPO and RPO over the course of the year. Our sales led subscription revenue continues to be durable. We have consistently delivered strong growth including a 20% growth rate in FY 2026. Our total revenue for the fourth quarter was $451 million growing approximately 16% as reported and 14% on a constant currency basis.

Sales led subscription revenue in the fourth quarter was $375 million representing growth of 19% as reported and 16% on a constant currency. We saw another quarter of strong customer commitments alongside stable consumption a direct outcome of our sales strategy focusing on high potential mid and strategic enterprise customers. Our sales team continues to meet customers where they are in terms of deployment preferences be it self managed or cloud. Each quarter will show some variability in class customer preferences between self managed and cloud, and those variances impact in quarter revenue. This quarter, our sales team delivered a significantly larger mix of cloud commitments compared to historical patterns. Partially driven by The U.S.

Public sector agencies increasingly adopting SIEM as a service. We anticipate U.S. public sector cloud momentum will continue in FY 2020. The variability in cloud commitment mix is important to keep in mind in the context of our revenues reported here in Q4. As you may recall, revenue from cloud commitments ramp over the course of the year whereas self managed commitments have a portion of revenue recognized upfront when the license is delivered, with the remainder recognized ratably over the subscription term. The sustained strength in customer commitments is now visible in our accelerating constant currency CRPO. Q4, we grew CRPO to $1.2 billion which was 20% growth both as reported and on a constant currency basis.

As compared to 15% on a constant currency basis in Q3 FY 26. The acceleration in our CRPO is a direct result of customers increasing their commitments to our search, security and observability solutions. The acceleration of CRPO is also what gives us confidence in our expected revenue acceleration over the next 12 months. As increasing commitment volumes accelerates constant currency CRPO, and then constant currency revenue, In that order. While there continues to be noise and questions in the market regarding AI's impact on software, there is clarity among our customers with respect to Elastic being an essential long term component in their AI infrastructure. This sentiment is reflected in their multi year commitments.

These multiyear commitments are visible in our Q4 remaining performance obligations or RPO. In Q4, our RPO accelerated to $1.98 billion growing 28% as reported and 27.4% in constant currency. This was an exceptional quarter for multi year commitments. Driving our highest year over year growth in total RPO over the last 4 years. If we look at RPO beyond the 12 month horizon, strength of our long term positioning becomes even clearer. Our non current RPO, which represents RPO less our current RPO, the portion of RPO that will be recognized beyond 12 months grew 43% year-over-year in Q4. The non current RPO has been progressively improving over the last year.

This increase underscores a deepening of customer relationships as they increasingly execute contracts with multi year commitments. We secured these multiyear commitments without any material change in our discount practices, underscoring the genuine customer commitment to our products and its associated value. We also saw continued deal momentum with higher value customers. Customers with more than $1 million of ACV grew approximately 14% where we added more than 30 net new customers this year. We are particularly pleased with the growth of our greater than $5 million in ACV customers, which grew 30%. As we continue to see strong expansion among our customer base. Turning to margins and profitability, I will discuss all measures on a non GAAP basis.

Successfully expanded our sales capacity to capture the AI opportunity while simultaneously improving margins across the board. We continue to demonstrate the efficiency of our underlying model by balancing these strategic investments with discipline. During the quarter, we exceeded our guidance and delivered an operating margin of 14.8%. For the full year, we delivered over 120 basis points of operating margin finishing at 16.4%. Note that this quarter, our GAAP net income was impacted by valuation allowance release against the Netherlands, UK and certain U. S. State deferred tax assets. The release created a 1-time benefit of $435 million to our GAAP net income.

This did not impact any of our operating results, non-GAAP diluted earnings per share adjusted free cash flow or cash and cash equivalents. We maintained a strong adjusted free cash flow margin of approximately 20% in FY 2026. Together, our FY 2026 adjusted free cash flow margin and total revenue growth is 37%. And well on the way to reaching our midterm target of Rule of 40. An important milestone that validates our strategy of driving durable growth and compounding value for our shareholders. We also continue to make significant progress on the $500 million share repurchase program that we announced in October.

During the fourth quarter, we returned approximately $40 million to shareholders representing purchases of approximately 650 thousand shares. As of the end of the fiscal year, we have used approximately 68% of our $500 million authorized amount putting us ahead of our goal of using half of the authorized amount in FY 2026. Since the beginning of our repurchase program in October, we have repurchased approximately 4.4 million shares. I discussed at our Financial Analyst Day in October, our current capital allocation strategy is to return 50% of our free cash flow through share repurchases. Unless we have attractive acquisition opportunities that require us to use cash.

Looking ahead to FY 2027, we closed FY 2026 with a foundation that positions us to accelerate revenue growth while expanding profitability throughout FY 2027. Our Q4 CRPO reflects the significant buildup of committed backlog that will fuel our next phase of revenue growth. We expect both revenue and sales led subscription revenue to build momentum throughout the year, with Q1 showing the lowest quarterly growth and Q4 showing the highest quarterly growth. This growth comes from 2 specific drivers. Namely CRPO which turns into recognized revenue through the year as well as increasing ramp sales capacity which drives new commitment.

The high value commitments that we secured in FY 2027 will drive acceleration throughout FY 2020 reflected in our constant currency revenue and sales led subscription revenue guidance. With these assumptions in mind, for the first quarter of FY 27, expect total revenue in the range of $469 million to $470 million representing 13.1% year over year growth at the midpoint or 12.8% year over year constant currency growth at the midpoint. We expect sales led subscription revenue in the range of $392 million to $393 million representing 15.9% growth at the midpoint or 15.6% in constant currency growth at the midpoint. We expect non GAAP operating margin for the first quarter of fiscal 27 to be approximately 14%.

We expect non GAAP diluted earnings per share in the range of $0.57 to $0.59 using between 106 million and 107 million diluted weighted average ordinary shares outstanding. For FY 2027, we expect total revenue in the range of $1.985 billion to $2 billion representing 14.6% year over year growth at the midpoint or 14.5% year over year constant currency growth at the midpoint. We expect sales led subscription revenue in the range of 1.673 billion to 1.688 billion representing 16.9% year over year growth at the midpoint or 16.8% year over year constant currency growth at the midpoint. We expect non GAAP operating margin for fiscal 27 to be approximately 19%.

We expect non GAAP diluted earnings per share in the range of $3.21 to $3.29 using between 107.5 million and 108.5 million diluted weighted average ordinary shares outstanding. Regarding cash flow, we expect to increase our adjusted free cash flow margins to 21.5% in fiscal 27, excluding any acquisitions or any other 1-time charges. Our level of cash generation combined with our planned revenue acceleration keeps us firmly on track to exceed Rule of 40 by FY 29. As Ashutosh mentioned, just as we drive AI innovation for our customers, we are using AI to transform how we work across all functions.

We are beginning to see productivity gains from AI which will evolve the structure of our organization and allow us to expand our operating margins. In FY 27, we are expanding our operating margins approximately 2.5 percentage points. Furthermore, we are raising our medium term FY 29 non GAAP operating margin target from more than 20% to approximately 25%. With associated improvement in our rule of 40. These targets are now well ahead of our prior financial Analyst Day targets. We still expect to grow our headcount on a net basis this year continuing to invest in our growth. We remain on track achieve our medium term sales led subscription revenue growth target of 20%-plus in FY 2029.

In summary, we have seen markedly improved sales execution in FY 2026, And we are seeing more sales capacity come online driving improving commitments and accelerating CRPO. The dynamic of commitments and CRPO improving gives us confidence in our ability to accelerate revenue growth and drive further margin expansion. In the future. Thank you for your continued support for joining us today. With that, I will open it up for Q and A.

Operator: We will now begin the question and answer session. To ask a question, If you are using a speakerphone, please pick up your handset before. Our first question today comes from Rob Owens with Piper Sandler. Please go ahead.

Analyst (Rob Owens): Brent. Good afternoon and thanks for taking my question. With the success you guys are seeing from a booking standpoint, when we look at CRPO and RPO specifically? What do you think is the unlock with customers? Is this just maturation relative to where people are in their AI journey? Do you think that there is something from a product standpoint that is really driven this unlock? And then as a second question, you mentioned the CISA SIM as a service, just to over acronym it a little bit. But where you are seeing success in the federal government, Have you been able to affect that in the commercial markets as well? Thanks.

Ashutosh Kulkarni: Rob, thank you very much for the question. Yes. So let me answer each in turn. So if you think about our platform, the way our customers are leveraging it is in a few different ways. So first is as a data store just to build applications the new AI applications that are being built, we are increasingly being used as a data store. And really what matters there is just the fact that we have an incredibly efficient platform that is driving a lot of momentum for everything that we are doing around AI. We are seeing more and more customers choose us for that reason. Second reason is clearly because we are really strong at context.

Whenever you are building AI applications, you need the right kind of context in real time, all the investments that we have made, in our vector database, in our GINA models, in agent builder, which is now generally available. That is also driving a lot of momentum for us. As AI is becoming more and more widely adopted within organizations. And lastly, it is in the agents that we have built.

The specialized agents for AISRE for observability and AI SOC for security, the skills that we have built that can be invoked from Claude, Code, or GitHub Copilot or wherever you work from, And that is really driving a lot of automation for our customers, and that is driving more and more of these observability and security wins for us that is allowing us to consolidate more workloads onto our platform and get bigger commitments, more longer term commitments because it is making us more entrenched into the overall AI infrastructure stack within our customer base.

The second part of your question about CISA and the SIM as a service to the point that you made, we are seeing tremendous success there. Matter of fact, if you remember a couple of quarters ago, we had announced that deal was basically a $26 million deal commitment over a 12 month period. They have already exceeded that as more and more civilian agencies are coming onto our platform that is all on Elastic Cloud, which is great. As those ramp that is gonna translate into revenue traction, and that is what Navam was mentioning. By the way, we are seeing that same kind of unlock in commercial organizations as well.

Even in my prepared remarks, I talked about the Fortune 50 you know, global bank that has chosen us as their SecOps platform. They did that not only because we have the most efficient platform, and cost and price efficiency becomes really, really important, as you are bringing on more and more data but also because of the AI capabilities that I mentioned, Their incident response team really liked the capabilities like attack discovery and all these AI SOC skills that we have built. So we are seeing that unlock. We are displacing incumbents in more and more places. I feel that we are just getting started.

So this to me is the momentum starting to build, and you are seeing it in CRPO. We expect to see that drive our revenue momentum in the next 12 months.

Analyst (Rob Owens): Brent. Thank you for the color.

Operator: The next question is from Matthew Hedberg with RBC Capital Markets. Please go ahead.

Analyst (Matt Hedberg): Brent, guys. Thanks for taking my questions. It was great to see CRPO growth accelerate. I think it was 500 basis points to 20%. Yes, I was looking at your fiscal 2027 guidance for subscription led sales growth. It looks like about 16.8% on a constant currency basis. That is a slight deceleration versus, I think, the 18% you reported this past year. So I guess my question is how should we think about CRPO growing 20% really as a leading indicator? And could that accelerate your path to the 20% sales subscription growth target you had Yes, absolutely.

Navam Welihinda: I mean, first of all, I think that what you are seeing is that our products are resonating with the customers and that is driving commitments. And that is the underlying cause of the CRPO and also RPO acceleration and all of that turn into revenue into the next year, And second, we are going into the year with more sales capacity than in 2026. So what you are seeing on a sales led subscription comparison is basically a accelerating trajectory for both revenue and sales led revenue from the Q1 guide number progressively upward to the Q4 quarterly revenue growth number as you play that out to reach that annual target number that we gave you.

And to your second question of does that put you in track to the 20% growth target? Absolutely, we feel good about the midterm targets and continuing to accelerate from the fourth quarter exit growth rate to the 20% number that we have that we have laid out as the long term or the mid term target. Sorry.

Analyst (Matt Hedberg): Got it. And maybe just a quick follow-up Are there any significant or meaningful or noteworthy go to market changes that you expect for this year? I know you have had those in the past. Just want to kind of understand that dynamic as we go into the year. Thanks again, guys.

Ashutosh Kulkarni: Yes. No, let me be very clear on this So, The changes that we made about 8 quarters ago have settled in very nicely. Like you have seen through this entire past year, really strong sales execution. it is only getting better. You can see it in our CRPO and RPO numbers. We are very happy with the way our go to market engine is working and the way it is structured. So we plan to make no changes this year, just add more sales capacity. And that is something that we feel really good about, and that is going to be part of what drives our future growth. Ashutosh Kulkarni

Operator: The next question is from Miller Jump with Truist Securities. Please go ahead.

Analyst (William Miller Jump): Hey, great. Thank you for taking the question. I wanted to come back to the internal evolution that you called out and some of the reduced operational complexity. Can you give more detail specifically on what segments are seeing the most productivity gains from AI right now? And where are you going to be leaning in on hiring for that net headcount add?

Ashutosh Kulkarni: Yeah. So what I would say is that when we look at different functions, pretty much every function is taking advantage of AI led automation. And you are seeing this you are hearing about this in the industry. We are building a platform that is helping our customers. Do these kinds of things, and we are doing the same thing internally. Everything from our engineering teams using coding platforms for improving their pace of code development to our marketing teams using AI capabilities for marketing automation Our sales onboarding and enablement our employee onboarding, within finance, we are doing financial analysis, We are leveraging AI across the board.

Now there are various functions such as, in sales, You know, enterprise selling is still a task that requires pretty significant interpersonal interactions. And so in areas like sales and our sales capacity and our sellers, we expect to keep adding headcount meaningfully through this year. But then in other functions, there might be the way we scaled in the past is going to be different from how we scale going forward. And so the number of people that we might need to continue scaling and growing the business might be slightly different than what we might have needed in the past.

So those are the kinds of adjustments I want to be very, very clear when it comes to our selling capacity, we do expect that is an area that is going to continue to grow And net, as I mentioned like Navam mentioned, we expect to be net employee headcount positive as we go through FY 2027.

Analyst (William Miller Jump): Yes. That makes a lot of sense. If I could just squeeze in a follow-up for Navam. The enterprise success sounds really encouraging, but it does look like there was a little bit of churn in the monthly cloud business. Can you just talk about the dynamics you are seeing in enterprise versus SMB? And what are your expectations kind of for the year ahead across those segments?

Navam Welihinda: Yeah. it is sales led subscription revenue and that tends to be the area that we are most focused on and that is where the sales team is focused on. So when you think about the growth and the success and the commitments we are seeing there, you are seeing the results of that in the commitment volume we have built in the CRPO and the RPO numbers. Monthly Elastic Cloud this past quarter grew 3% which is in line with what we have been thinking about and in line with what we have been modeling We have always assumed that this is going to be a flattish business driven by smaller customer and SMB dynamics.

And these are self serve motion SMB customers, which tend to be more less of a focus area for us. So we exclude monthly from our core sales led subscription business The annual cloud business grew very well at 26%. So that is the sort of dynamics you are seeing of roughly a flat monthly cloud business or slightly above last quarter. And nicely growing sales led subscription and annual cloud business.

Analyst (William Miller Jump): Got it. Thanks very much.

Operator: The next question is from Kingsley Crane with Canaccord. Please go ahead.

Analyst: Hi. Thanks for taking the question. This is for me. So I was encouraged by this Omni V5 release. I think, big picture. there is been a lot of talk about multimodal models. Kind of a few quarters ago, some of the Frontier labs pulled back from focusing on multimodal. So I am curious what kind of demand signals for omni you are seeing in your customers right now? And then when an existing text customer swaps in Omni and starts vectorizing, video, audio, how could that affect usage on the platform? Thanks.

Ashutosh Kulkarni: Yeah. Thanks for the question. So we are very excited about the omni models. So keep in mind that these are embedding models and our embedding and re ranking models, that is where we focus. Opposed to language models for generation. But in these models, as you can imagine, there is so much information out there that is multimodal in nature. You have PDFs, that have graphs and charts in them. You have audio and video where you might, in video, there might be images that you want to extract from it. there is a lot that effectively is multimodal just by nature. This effectively opens the aperture for us.

It increases the total TAM of the opportunities where we can go taking that data, vectorizing it, and then allowing people to do all kinds of search and analysis against it. So it is not necessarily that it drives that it consumes more, compute. These are very efficient models. But it just allows us to bring more workloads into the picture for customers to use the Elastic platform for. So that is part of what is driving that excitement for us.

Operator: The next question is from Brian Essex with JPMorgan. Please go ahead.

Analyst (Brian Essex): This is Alex on for Brian. Thanks for taking my question. I wanted to ask about around the FY 2029 framework that you laid out and reaffirmed. In terms of exiting FY 2027 around 17%, how do we think about the bridge from there to 20% plus growth in 2029? And how do we think about where we should be exited-- we are exiting 2027 and into 2028?

Navam Welihinda: Yeah. So we have laid out the guidance number on a constant basis, which I would encourage you to take a look at. So when you think about where the Q1 guidance number is for FY 2027, where the full year guidance is, mathematically it is a step-up-- it is an implied step up, which we also talked about during our prepared remarks. From Q1 to Q4. So you see an accelerating growth trajectory both for sales led subscription revenue and total revenue, with Q1 being the lowest growth number and Q4 being the highest growth number from a constant currency perspective.

So that Q4 number is going to be higher than the average growth or the full year growth that we have guided to. And that is the exit value that you go into FY 2028 with. And the confidence we have going into 2027 again is around the commitments that we have that turn into revenue and that is the coverage of revenue that we already have through CRPO. And we are entering the year with frankly adequately large number of ramped reps who have been ramping across 2026 and they are going to continue to add commitments in the same way that they added commitments in FY 2026.

So both those dynamics are going to continue towards 2026 through 2027 building the constant currency growth rate from Q1 to Q4. And that dynamic continues into next year as well, right? We are continuing to add sellers and we will continue to add commitments and that is the buildup to the 20% plus sales led subscription revenue mid term target that we have laid out. And all the activity in 2026 is just validating that progression through 2026 into 2027 and to the midterm. So we feel good about the setup in 2027. And look forward to updating you as go along.

Analyst (Brian Essex): Okay. That sounds right. Really appreciate the color there. And then just a quick follow-up on the AI attached side, especially around the 100k-plus customers. How does the spend profile look on the AI attached customers relative to non AI customers? And which of the AI products are you seeing the most traction or adoption, especially over the past let's say, year to date as AI models have really accelerated in their ability to act identically.

Ashutosh Kulkarni: Yeah. So this is actually maybe let me answer that 1. So, as I mentioned in our prepared remarks, we now have, in our 100k ACV customer cohort, 600 customers that are using us for AI use cases. And, you know, and that is a really nice acceleration that we have seen there. That also includes about 40 customers from serverless that we are counting now Our serverless continues to grow in traction. And we are seeing customers come on to that and use us for AI use cases as well. And we are seeing AI being used across the board as we get used as a vector database.

We are seeing AI getting used with Elastic being used as a context platform for building agents. Using agent builder and so on. As well as our AI SRE and AI SOC capabilities in our observability and security platform. So we are seeing benefit across all 3 solutions. When it comes to AI, And that cohort, the AI users within our 100k cohort, that cohort continues to grow at a faster clip expand at a faster clip than other cohorts, like we had mentioned in our financial Analyst Day, that cohort is growing at roughly 5%, a little over 5% faster than the rest of the cohorts. And that trend is continuing.

So as more, of the 100k cohort adopts us for AI, we expect that is going to be a continuing and increasing tailwind for our business overall.

Operator: The next question is from Koji Ikeda with Bank of America Securities. Please go ahead.

Analyst: Hi, this is George McGreen on for Koji Ikeda. I appreciate you taking our question. I wanted to ask, really great to see, the acceleration in constant RPO growth and RPO growth as well. Could you kind of maybe, qualitatively kind of give some color on between search, observability, and security, what is seeing the most uptick And then as it relates to RPO growth, in conversations with customers, how are they kind of sounding now about viewing Elastic more strategically and in a longer term roadmap for their own use cases. Thank you.

Ashutosh Kulkarni: Yes. Thanks for the question. And just in terms of the solution mix, we saw growth across all 3 solutions Our search and AI continues to be a very strong grower, In Q4, security was outstanding in terms of growth. So both of those are leading the charge. But we are seeing growth across all 3 segments. When it comes to the pattern that we see with customers, look, we have evolved our security and observability solution over the last several years to a point where we are considered to be a strong leader in the categories that we play in. In observability, we lead with log analytics, and then we expand from there.

We just recently announced our metrics, our new metrics offering. Which I am very, very excited about. it is 1 of the most efficient metrics, platforms out there. So in the coming year, I expect that will also contribute. But we are in observability seeing strength in security. We are displacing incumbents in so many places. I talked about the SIEM as a service. Which is seeing a lot of success in government. I gave the example of the Fortune 50 bank.

As we are maturing and getting stronger and being seen as 1 of the best leaders out there, because of the efficiency of our offering, because of our AI functionality, that is very differentiated, we are seeing our customers making bigger bets We are seeing them make longer term bets. And that is something that basically is a signal to us that they see us as somebody, as a partner that they are going to depend on for many years to come. And that is the foundation of our continued growth. So very excited about that, and it is across the board. it is across all regions. Which is also what is very satisfying.

Operator: The next question is from Howard Ma with Guggenheim Securities. Please go ahead.

Analyst (Howard Ma): Hey, thanks for taking the question. This is Joe DeBarto on for Howard. So just in terms of the sales led fiscal 27 guide, is it fair to assume that within that constant currency number about 500 basis points is from AI contribution, which would be in line with your long term guidance. And just how can that number drive upside throughout the year?

Navam Welihinda: Yes. So the 500 basis points of acceleration from customers using our AI features and AI products continues to be the case. Both in 2026 and 2027. So what is happening is more of our customers are using our AI features. that is driving that tailwind to be across a broader set of customers. So I would not say that it is just, the guidance number minus 500. it is just a growing proportion of our customers are now consuming at a faster rate because of the AI features that we are we are what they are using on our platform. So that is the way I would think about it.

We are seeing a very nice steady uptick of 100 thousand customers that are using our AI features. We have been disclosing that every quarter and that is been progressively moving up. that is going according to how we would expect and driving more acceleration across the entirety of our of our customer base over time.

Analyst (Howard Ma): Got it. Thanks for that color. And just a quick follow-up, if I may. Are you guys factoring in any meaningful contribution from new products and features in fiscal 27? And just in particular, how big of an expansion opportunity is your revamped metrics engine among existing customers? Thanks.

Ashutosh Kulkarni: Yes. So I will talk about the metrics piece, and then I will ask Navam to weigh in on how the guide has been constructed. But on the metrics piece, look, way I think about it is if I just look at the technology that we have built, the metrics back end store that we have built, it is highly, highly optimized for time series data. For metrics. And as we have benchmarked it against the leaders out there, we find that our solution can not only stand up to but outperform just about anybody in terms of efficiency, in terms of ingest performance and inquiry performance. So I am really excited about the opportunity there.

As you know, our go to market motion has always been a land and expand motion. So it is highly likely that we are gonna start by expanding metrics uses in our existing log analytics That will probably be the fastest route to market for us. But over time, as you can imagine, we would anticipate that we will start to lead with metrics as well. So it is a big opportunity. Infrastructure monitoring and metrics is a meaningful and large part of the overall observability market that we have not had much of a presence in So it is time expensive for us and something that excites me.

Navam Welihinda: Yeah. On the guidance side, it is it is the organic growth given the product set that we have. To sell to our customers. it is not assuming any new products. it is not assuming any acquisitions. So that is the way I would think about the guide. And it is just looking at what we already have to sell to our customers.

Operator: The next question is from Raimo Lenschow with Barclays. Please go ahead.

Analyst (Raimo Lenschow): Yes, this is Damien Coggan on for Raimo. Navam, can you help us understand how much of the back half acceleration driven by execution of increased ramp sales capacity? And how much of it is driven by CRPO or expected near term closed deals? Trying to understand the conservatism embedded in the guide And then maybe how much might require, solid execution from ramped sales reps.

Navam Welihinda: Yeah. I will start with the guidance side first and then go to the next question. Philosophically, I am giving you focused on giving you a credible projection. Based on what I am seeing today. With the appropriate risk adjustment added to it. And there is the risk adjustment related to consumption, related to FX, related to timing of large deals and mix and all of those are embedded in there. As we provide the guide. As I have said before, I feel good about the setup for 2027 given the commitment improvements we have seen in 2026.

So how you should think about it is we have a CRPO number which is going to be recognized over the next 12 months and that is the coverage of the revenue that you have from existing commitments that are just going to be recognized The cloud commitments in Q4 for example will be more tail end weighted and self managed will be more ratable upfront. So, back half acceleration, as I said, is a combination of 2 things. it is your existing commitments ramping and consuming against the commitment volume that they have already committed to. And second is the increasing number of reps that are becoming ramped are contributing.

So, that is and the coverage amount on the sales led subscription side is approximately 70%. So the sales capacity increase going into the year is 1 of the highest we have had compared to historical periods. From a growth perspective. But sales execution is tail end weighted because the largest quarters are in Q4. So it is a combination of both coming from both the existing commitments that we have had the commitments we are going to get in the next few quarters.

Analyst (Raimo Lenschow): Brent. If I could just squeeze in 1 more, just thinking about last year's pricing adjustment, are there any anticipated pricing or packaging changes that might be embedded in this year's guide?

Navam Welihinda: Yes. So a price increase perspective, we have always been adding new features and improving performance of our platform given the changes we have made in FY 2026, we felt confident to relook at our prices again. So we did a 3% increase for cloud and a 5% increase for self managed. And we make these decisions based on the new features and capabilities we add and the product is also becoming more efficient, allowing customers to reduce cost as well to make Elastic a more efficient place to put in their data. So that is sort of the puts and takes of pricing for usage based models like ours.

What matters most and we have said this before is the net consumption trend over a period of time In any given quarter, we expect to see the benefit of more consumption pricing and that is offset by optimization and efficiencies that are customers do on a quarterly basis. And because of the new product features that we have added to our platform in the past year, So the price increases that we do not necessarily change revenue in a perfectly correlated way in the same way that a seat based pricing model works, for example? So the underlying usage model, the underlying usage trend remains strong. And we have guided Q1 appropriately given that usage trend.

Since this price raise is smaller than what it was last year, we do not expect it to be meaningful on a year over year basis when you think about comparisons.

Analyst (Raimo Lenschow): Brent. Thanks, guys.

Operator: The next question is from Mike Sikos with Needham and Company. Please go ahead.

Analyst (Matthew Calitri): Analyst (Matt Calitri): Hey, guys. This is Matt Calitri on for Mike Cikos over at Needham. What assumptions are you baking into the fiscal 27 guide around U. S. Federal contribution? And is there any way to think about the expected impact from the CISA contract or the FedRAMP Authorization?

Navam Welihinda: Yeah, I will start with the U.S. Public sector and the federal business. It remains a strong business. And we continue to expect that business to be strong in 2027 as well. In the way it was performing in 2026. So nothing specifically different about the relative performance of public sector in 2027 that was assumed in the business. But we are very pleased with the way SIEM as a service platform has been adopted through civilian agencies And as Ashutosh mentioned, against that total commitment number, we are continuing to see more and more agencies added and consuming against those commitments. We are very pleased about that performance.

Analyst (Matthew Calitri): Very helpful. Thank you. And then curious as to what you are seeing regarding cohort expansion rates like, are newer customers growing as quickly as customers that you landed say, 6 to 8 years ago did over their first 2 years? Are older cohorts of customers continuing to expand? Anything you can give on the dynamics of just different areas of customer, so to speak?

Navam Welihinda: Yes. So the base cohorts continue to be expanding very nicely because, as Ashutosh mentioned, normal trajectory is it is a land, upsell, cross-sell motion. So that upsell, cross-sell continues to run as a machine internally with our sales team. And you are seeing those cohorts expand year over year as commitments increase and then more features and products are added and more commitments happen, And then you also add your second or third solutions with against the initial solution that you adopted. So that machine is driving nicely on the core land-and-expand motion. what is increasing is obviously the tailwind related to AI.

So insofar as a customer is using AI or is using more of our AI features, you see that additional benefit of faster growth with those customers. And we detailed some of that during our financial Analyst Day.

Analyst (Matthew Calitri): Awesome. Thank you.

Operator: The next question is from Sanjit Singh with Morgan Stanley. Please go ahead.

Analyst (Sanjit Singh): Hey, this is Jaimin on for Sanjit. Thank you for taking the question. Could you just comment on how you view the Splunk displacement opportunity today and to what extent that could be an upside catalyst for this year relative to the guidance?

Ashutosh Kulkarni: Yes, let me answer that. So the opportunity to displace incumbents, there are several of them that we are seeing our sales teams displace. There are these are big markets. When you look at the overall SecOps SIM area, these are large markets and there are lots of interesting things happening because of the pace of attacks increasing significantly and the sophistication increasing significantly customers are looking for modern platforms that leverage AI effectively sitting on a data store that is efficient, So all the data that needs to be brought in and analyzed can be done at a reasonable cost And we are exactly that answer.

So we are seeing you know, a lot of success in displacing these incumbents. And you are seeing those in our CRPO numbers. And like, Navam and I have said, you know, I expect to see those show up in our revenue acceleration over the next 12 months. And even beyond that, because the market share that these incumbents have is still meaningful, And I believe that this is going to be an opportunity that allows us to continue to grow over several years.

Analyst (Sanjit Singh): Brent. Thank you so much.

Operator: The next question is from Gabriela Borges with Goldman Sachs. Please go ahead.

Analyst: Hey, guys. Thanks for taking the question. Ashutosh, maybe just on MCP, you have leaned into making Elastic easy for agents to reach through standards like MCP, you launched MCP apps recently. So, as more agents pull data that way, like, how big of a distribution and growth factor do you think that can become? And does and does being that agent accessible retrieval layer turn into a durable advantage over time? Or do you see this as sort of table stakes moving forward?

Ashutosh Kulkarni: I think it is going to be a durable advantage especially because we are able to not just provide access to data, but we are able to provide smart access to data. And what I mean by that is when you bring data into Elastic, we build very smart indices that allow you to understand exactly what you need and get that information from within our systems very, very quickly.

We are adding capabilities that allow you to do that in a distributed federated manner, so you do not have to move your data into a central location So there is a lot of smarts and sophistication that we are adding We recently published a blog that showed how you can reduce the token usage cost by 70% by precomputing some of the context that you need for retrieval as opposed to using sort of naive retrieval augmented generation or RAG techniques.

And that is exactly why the advantage that we have, I believe, is so durable and is only going to continue to grow because data volumes are growing, as more agents are being built, the need for not just speed, but cost management is going to be incredibly important. And to do this in a way that is predictable, that is cheap, that gives you sort of answers that are accurate, is going to be the need. And that is exactly what we do very well.

Analyst: I really appreciate it, all the color there. Navam, I know in the past you have disclosed the AI customers are growing several points faster. And I presume a lot of that initial momentum likely came from the search side. But curious whether you are starting to see that AI growth really broaden out with some of the newer AI features you have brought to market on the security and observability side? Thanks.

Navam Welihinda: Yeah. I would say that a lot of the initial growth is specifically that 5% growth momentum that we referred to during financial Analyst Day including what is continuing on right now. Comes from mostly search But as you mentioned, there is newer AI products that have been penetrating, that have been going across security and also observability. So you are seeing the benefits of that across the board. But I would say the predominant numerically what we have disclosed predominantly the search side, but we are beginning to see momentum in security, particularly the selections are because of the AI feature set that we have in the product.

Operator: The next question will be from Robert Galvin with Stifel. Please go ahead.

Analyst: Hi, thanks for taking the question. I had a follow-up on the go to market strategy for FY 2027. A key theme we have been hearing from some other infrastructure peers is that AI selling motion tends to skew much more technical. As AI use cases and pipelines build at Elastic, are you seeing a similar need for more technical sales teams And if so, do you have the right team in place, or do you need to change your sales or hiring profile in FY 27? Thanks.

Ashutosh Kulkarni: that is a great question. So, AI buyers are, reasonably technical. But here's the thing, Elastic, our platform has always been a technical sale. We sell to development teams that are trying to build all kinds of search applications. We sell to infrastructure engineering teams that are building observability solutions. We sell to security operations and security specialists in the CISO office that are building SecOps solutions.

So we have had a DNA ever since the foundation of the company not just to build a platform that is really optimized for these kinds of use cases, for use by technical developers but also a go to market motion and a selling motion that knows how to target these buyers and sell effectively to them. So the AI motion is very natural for our teams We do have a small specialist team that has been focusing on how to really help our customers get these AI applications off the ground But it is a relatively small team. And it sort of acts as a set of advisers across our broader field.

And we are seeing a lot of success with it, as you can see from the commitments. Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Ashutosh Kulkarni for any closing remarks.

Ashutosh Kulkarni: Thank you all for joining us today. We are entering FY 2027 energized and ready to drive our momentum forward. The continuous innovation across our platform and the increasing adoption of AI gives us great confidence in our future. Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.