Elastic stock surged more than 15% in Friday trading following a strong fiscal second quarter earnings report. The enterprise data software company – which was a popular AI stock pick last year – eased some investor concerns following a weaker show three months earlier.
Elastic said late Thursday that it earned an adjusted 59 cents per share on sales of $365 million for the October-ended quarter. Both numbers easily topped the 38 cents per-share earnings and sales of $352 million analysts were forecasting, according to consensus numbers tallied by FactSet.
Elastic's sales increased 18% year-over-year while adjusted earnings increased 60%. Elastic Cloud revenue, a closely watched metric, grew 25% to $169 million.
Elastic provides the leading search software for enterprises, along with a broader suite of data software tools that run on cloud providers such as Microsoft Azure, Amazon Web Services and Google Cloud. As enterprises focused on generative AI, Elastic is pitching its search software as a crucial tool for companies to find the right information to feed into generative AI algorithms.
"Elastic delivered a strong second quarter supported by solid sales execution, exceeding our guidance across all revenue and profitability metrics," Chief Executive Ash Kulkarni said in a news release. "In Q2 we saw strong customer commitments with key wins across all our solution areas, with continued momentum in GenAI and platform consolidation."
On the stock market today, Elastic stock rallied more than 16% to 109.78 in recent morning trades.
Elastic's 'Bounce Back' Quarter
Elastic Cloud revenue, a closely watched metric, grew 25% to $169 million.
For the current quarter, Elastic guided for sales of $368 million at the midpoint of its range, just ahead of estimates for $366 million in sales for the January-ending quarter, according to FactSet.
Elastic also raised its guidance for fiscal year revenue to $1.454 billion at the midpoint of its range, representing 15% year-over-year growth for the April-ending period. That's up from the 14% growth Elastic projected in its previous quarterly results in late August.
Shares sank 28% following Elastic's fiscal Q1 report on Aug. 29, which included a weaker-than-expected sales forecast. At the time, the company blamed "segmentation changes" to its strategy for the slower start.
To analysts, the new quarterly results Thursday offered a relief.
"Growth rates were solid, but what is more important here is that results look like they stabilized compared to the low expectations investors had after the weaker Q1 comments that were triggered from the (go-to-market) changes at the beginning of the year," Barclays analyst Raimo Lenschow wrote late Thursday.
Lenschow reiterated a positive overweight rating and upped his price target for Elastic stock to 138, from 105.
Analysts with Stifel, meanwhile, said the results represented a "bounce back quarter" for Elastic. They reiterated a buy rating and upped their price target for ESTC stock to 132, from 98, in a client note.
"We believe the improving (go-to-market) execution, strong consumption trends, the large/growing GenAI opportunity and ongoing operational efficiency, positions Elastic for relative out performance in coming-quarters," Stifel analyst Brad Reback wrote Thursday.
Elastic Stock: Technical Ratings
The earnings reaction is adding on to a strong week for Elastic stock. Shares gained 6.4% in Thursday trading. Elastic was among data software stocks to rally following strong results from Snowflake late Wednesday. The stock is ahead 27% this week.
But overall it has been a turbulent year for Elastic, which is down 4% year-to-date. That's after a strong 2023 in which its shares more than doubled in value.
Still, in a positive indicator, Elastic's gains Friday pushed shares above the stock's long-term 200 day moving average for the first time since late August. Shares hit their highest point since mid-July before pulling back slightly.
Other data software stocks pushed higher Friday as well. Shares of data software company MongoDB is up 3% in recent action, while data streaming stock Confluent is up 3.5% in recent action.
Coming into the report, Elastic stock had an IBD Composite Rating of 58 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks typically have a Composite Rating of 90 or better.
