Elastic (NYSE:ESTC) reported stronger-than-expected fourth-quarter fiscal 2026 results, with executives pointing to accelerating customer commitments, rising artificial intelligence-related adoption and larger multi-year deals as key drivers of momentum heading into fiscal 2027.
Chief Executive Officer Ashutosh Kulkarni said the company “finished the year strong, beating our guidance across every key metric,” marking what he described as the seventh consecutive quarter of disciplined field execution. He said current remaining performance obligations, or CRPO, accelerated to 20% growth, while remaining performance obligations, or RPO, grew more than 28% in the quarter.
Revenue Rises 16% as Subscription Growth Remains Durable
For the fourth quarter, Elastic reported total revenue of $451 million, up approximately 16% as reported and 14% on a constant-currency basis. Sales-led subscription revenue was $375 million, representing growth of 19% as reported and 16% in constant currency.
For the full fiscal year, the company reported 17% revenue growth and a non-GAAP operating margin of 16.4%. Fourth-quarter non-GAAP operating margin was 14.8%.
Chief Financial Officer Navam Welihinda said the company’s sales-led subscription revenue grew 20% for fiscal 2026, supported by “strong customer commitments alongside stable consumption patterns.” He said Elastic’s sales strategy is focused on high-potential mid-market and strategic enterprise customers.
Elastic said it saw a record fourth quarter for deals with more than $1 million in annual contract value. During fiscal 2026, the company added more than 30 net new customers to its cohort of customers with more than $1 million in ACV, bringing that group to more than 240. Customers spending more than $5 million annually grew 30%, and the company ended the year with more than 1,720 customers spending over $100,000 in ACV.
AI Adoption Drives Larger Commitments
Executives repeatedly emphasized AI as a central driver of demand across Elastic’s platform. Kulkarni said the company now has more than 600 customers with ACV of at least $100,000 using its AI capabilities, including more than 40 serverless customers that were previously not included in that count. He said AI use cases have penetrated more than one-third of Elastic’s $100,000-plus ACV customer cohort.
Kulkarni described four areas where Elastic believes it is positioned for AI-related demand: data gravity, context, specialized agents and platform consolidation. He said customers are using Elasticsearch as a data store for AI applications, as a context platform for retrieval and as part of AI-driven security and observability workflows.
The company highlighted several customer examples, including a seven-figure new logo win with a global provider of financial business information that is using Elasticsearch across a repository of more than 2 billion documents. Elastic also cited a seven-figure expansion with a workplace AI software firm and an eight-figure win with a Fortune 50 global financial services firm consolidating cyber data silos into an AI-driven SIEM.
In response to an analyst question, Kulkarni said Elastic is seeing momentum from customers using its platform as a data store, its vector database and Jina models for context, and AI-driven security and observability agents. He said these capabilities are helping Elastic win larger, longer-term commitments because they make the platform more entrenched in customer AI infrastructure.
Public Sector Cloud Mix Affects In-Quarter Revenue
Elastic executives said a larger mix of cloud commitments in the quarter affected reported fourth-quarter revenue timing. Welihinda explained that cloud commitments typically ramp over the course of the year, while self-managed commitments include a portion of revenue recognized upfront when the license is delivered.
Kulkarni said the company’s partnership with the Cybersecurity and Infrastructure Security Agency around Elastic SIEM as a Service is expanding, with more civilian agencies moving away from competing security offerings onto the Elastic Cloud-powered service. He said the commitments mix in the quarter shifted more toward Elastic Cloud than in prior years, which affected in-quarter revenue but is expected to be positive as agencies ramp usage toward commitment levels.
Welihinda said the company anticipates U.S. public sector cloud momentum will continue in fiscal 2027. He added that Elastic’s public sector business remains strong and that the company is pleased with adoption of SIEM as a Service by civilian agencies.
RPO and CRPO Signal Backlog Strength
Welihinda said CRPO reached $1.2 billion in the fourth quarter, growing 20% as reported and in constant currency, up from 15% constant-currency growth in the prior quarter. RPO reached $1.98 billion, growing 28% as reported and 27.4% in constant currency.
He said non-current RPO, representing obligations to be recognized beyond 12 months, increased 43% year over year, underscoring a shift toward multi-year commitments. Welihinda said Elastic secured those commitments without a material change in discounting practices.
“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,” Welihinda said.
Fiscal 2027 Guidance Calls for Revenue Growth and Margin Expansion
Elastic guided for first-quarter fiscal 2027 total revenue of $469 million to $470 million, representing 13.1% year-over-year growth at the midpoint, or 12.8% growth in constant currency. The company expects first-quarter sales-led subscription revenue of $392 million to $393 million, representing 15.9% growth at the midpoint, or 15.6% in constant currency.
For fiscal 2027, Elastic expects:
- Total revenue of $1.985 billion to $2 billion, representing 14.6% growth at the midpoint.
- Sales-led subscription revenue of $1.673 billion to $1.688 billion, representing 16.9% growth at the midpoint.
- Non-GAAP operating margin of approximately 19%.
- Non-GAAP diluted earnings per share of $3.21 to $3.29.
- Adjusted free cash flow margin of 21.5%, excluding acquisitions or one-time charges.
Welihinda said revenue and sales-led subscription revenue are expected to build momentum during fiscal 2027, with the first quarter representing the lowest quarterly growth and the fourth quarter the highest. He cited CRPO converting into revenue and increasing ramped sales capacity as the two main drivers.
Elastic also raised its medium-term fiscal 2029 non-GAAP operating margin target to approximately 25%, up from a previous target of more than 20%. Welihinda said the company remains on track to exceed the Rule of 40 by fiscal 2029 and to reach its medium-term target of more than 20% sales-led subscription revenue growth.
Executives said Elastic expects to expand operating margins as it uses AI internally to improve productivity, while still growing total headcount on a net basis in fiscal 2027. Kulkarni said sales capacity will continue to increase and that the company does not plan meaningful go-to-market changes after changes made roughly eight quarters ago have “settled in very nicely.”
Elastic also said it continued share repurchases during the quarter, buying approximately 650,000 shares for about $40 million. Since the repurchase program began in October, the company has repurchased approximately 4.4 million shares and used about 68% of its $500 million authorization.
About Elastic (NYSE:ESTC)
Elastic N.V. operates as a search and analytics company, offering a suite of open source and subscription-based solutions for search, observability and security use cases. Its flagship product, Elasticsearch, enables fast and scalable full-text search and analytics across large volumes of structured and unstructured data. Complementary tools such as Kibana provide visualization capabilities, while Beats and Logstash serve as lightweight data shippers and data processing pipelines, respectively.
The company was founded in 2012 by Shay Banon, who serves as chief technology officer, and Steven Schuurman.
