Shares of cloud-based enterprise data search company Elastic (ESTC 2.52%) skyrocketed to 52-week highs after the company posted financial results for its fiscal second quarter of 2024. As of 10:50 a.m. ET, Elastic stock was up a stellar 32%.
What was so great about Q2 for Elastic?
In Q2, Elastic generated revenue of $311 million, which was up 17% year over year. To be fair, this was ahead of management's revenue guidance of $303 million to $305 million. But the outperformance was small and it may seem surprising to some that Wall Street is celebrating Q2 results with this level of excitement.
Elastic credits generative artificial intelligence (AI) for its upbeat Q2 financial results. And this might explain the market's overwhelmingly positive reaction. Many investors are familiar with generative AI programs like ChatGPT, which is really a different approach to internet search.
Whereas traditional search engines point users toward appropriate websites where they can find what they're searching for, generative AI looks for the information and synthesizes it for users.
Elastic allows its enterprise customers to search business data. But its embrace of generative AI in search is driving "customer excitement and engagement," according to CEO Ash Kulkarni.
Elastic raises its outlook
Elastic raised its full-year fiscal 2024 revenue guidance in light of Q2 financial results. The company now expects to generate revenue of $1.247 billion to $1.253 billion compared with its previous guidance range of $1.242 billion to $1.25 billion.
The revenue guidance raise isn't much -- both previously and now, Elastic's guidance rounds to 17% year-over-year growth. That said, this isn't an easy time to be in the enterprise software business because many companies are cutting back. But Elastic is maintaining strong growth and appears to be leaning into the right trends with AI.
Therefore, Elastic is still a stock that investors should pay attention to from here.
