What Happened: Shares of search software company Elastic (NYSE:ESTC) jumped 8.26% in the morning session after the company reported an impressive "beat and raise" quarter. Key operating metrics, including billings, revenue and non-GAAP operating profit, exceeded Wall Street's expectations. Next quarter's guidance was largely ahead, and the full year outlook was raised as well. On the other hand, its net revenue retention fell.
During the quarter, Elastic introduced Elastic AI Assistant, which helps cyber security and DevOps analysts investigate threats and resolve technical issues to keep their systems running efficiently. It also improved the performance of its Elasticsearch platform, which allows faster search aggregations, cross-cluster search, and dense vector search acceleration for semantic search.
Zooming out, this was still a solid quarter, showing that the company is staying on track.
Is now the time to buy Elastic? Find out by reading the original article on StockStory.
What is the market telling us: Elastic's shares are very volatile and over the last year have had 30 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 24 days ago, when the company dropped 5.56% on the news that competitor, Datadog (NASDAQ:DDOG), reported second quarter results in which its full-year revenue guidance was lowered and missed analysts' expectations, which is never a good sign. In addition next quarter's revenue guidance also missed Wall Street's expectations. Taking the outlook one step further, some are noting that it implies Datadog will exit the year growing less than 20% on the topline, a major deceleration from recent growth. To add color to the worrisome developments, Datadog management noted that Q2 usage growth was slower than Q1 and previous quarters; the slowdown in usage came with its larger spend and cloud native customers.
Elastic is up 50.8% since the beginning of the year, but at $75.51 per share it is still trading 16.9% below its 52-week high of $90.81 from September 2022. Investors who bought $1,000 worth of Elastic's shares at the IPO in October 2018 would now be looking at an investment worth $1,080.