Shares of Elastic N.V. (ESTC) plunged 14% in pre-market trading on Friday, following the company's fiscal second-quarter earnings report released after Thursday's market close. The sharp decline comes despite Elastic beating analyst expectations and raising its full-year guidance, as investors and analysts express concerns about decelerating growth in key areas.
For the quarter ended October 31, Elastic reported adjusted earnings of $0.64 per share, surpassing the consensus estimate of $0.58. Revenue came in at $423.5 million, up 16% year-over-year and ahead of Wall Street's expectation of $418.4 million. However, the company's cloud revenue growth, a crucial metric for investors, slowed to 22% from 24.5% in the previous quarter.
Despite raising its fiscal 2026 outlook, with projected non-GAAP earnings per share of $2.40 to $2.46 on revenue between $1.715 billion and $1.721 billion, the market's negative reaction suggests deeper concerns about Elastic's future growth trajectory. Several analysts have cut their price targets following the earnings release, including Barclays reducing its target to $107 from $125 and D.A. Davidson lowering its target to $80 from $100.
"F2Q results left investors scratching their heads on what has already been a controversial stock," wrote analysts at Guggenheim Securities in a research note. The mixed results and decelerating growth in certain areas appear to have overshadowed the company's overall solid performance, leading to the significant pre-market sell-off as investors reassess their expectations for Elastic's future performance in an increasingly competitive market landscape.
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