Episode Details

Elastic (ESTC) Q1 FY2027 — Q1 FY2027 (three months to 31 July 2026): revenue $478.1M, +15.1% YoY; adjusted operating profit $77.3M at a 16.2% margin; adjusted EPS $0.70 against a $0.584 estimate. The REPORTED operating result was a $23.6M loss, wider than the $9.4M loss a year earlier. Shares closed +19.3% at $99.91, a new 12-month high. Elastic added $1.7 billion of market value in one session, then raised its guidance for the remaining nine months of fiscal 2027 by $2.9 million. The full-year revenue guide moved $11.5M at the midpoint - but the July quarter alone landed $8.1M above the TOP of its own guide, so nearly the whole raise is the quarter flowing through, and the implied adjusted EPS for the rest of the year actually fell four cents. THE CALL: BEARISH (3/5, THE WHOLE VALUATION SPREAD IS ONE ACCOUNTING LINE) — base-case value ~$79.79 vs ~$99.91 today. KEY METRICS: - CALL: BEARISH 3/5, fair value $79.79 vs the $99.91 close of 28 August (-20.1%). One DCF on the company's own FY27 guidance, run three times, changing only how much of ~$310M of annual stock compensation is charged: bear $56.86 (charged in full), base $81.54 (half), bull $104.15 (not charged). Weighted 30/45/25. - THE RAISE: FY27 revenue guide $1.985B-$2.000B up to $1.998B-$2.010B. Q1 beat the top of its own guide by $8.1M, so the implied guide for the remaining nine months rose only $2.9M, and implied adjusted EPS for those months FELL $0.04. - MARGIN: GAAP gross margin 74.5% from 76.7% (-2.2 pts); non-GAAP 76.6% from 78.7%. Subscription cost of revenue +32.4% against subscription revenue +15.5%. The operating-margin improvement is funded by a 7% workforce reduction announced 24 June 2026. - THE BULL CASE IS REAL: cRPO $1.153B +21%, RPO $1.854B +27% against +15.1% in revenue. Over 1,800 customers above $100K ACV (from 1,720 in April) - the company's highest first-quarter net additions ever. Net cash $889.8M. - STOCK PAY: FY2026 free cash flow $322.0M against $298.4M of stock compensation - 93%. 2.79M shares went out gross last year; buying those back at $99.91 costs $279M, about 73% of this year's cash flow. - MULTIPLES on the FILED 105.12M share count: market value $10.50B, enterprise value $9.61B = 4.8x guided FY27 revenue, 22.3x guided adjusted free cash flow, 30.0x guided adjusted EPS. Rule of 40 = 34.6. - STREET: four targets dated 28 August 2026 - Guggenheim $120, Stifel $107, UBS $105, Cantor Fitzgerald (Neutral) $100. Median $106. We are 24.7% below it. Morgan Stanley's $66 Equalweight of 21 July has not been refreshed. What to watch: UP: subscription cost of revenue growing SLOWER than subscription revenue for two consecutive quarters; the monthly self-serve cloud line returning to double-digit growth from +1%; gross share issuance under 2M a year. DOWN: gross margin falling another two points; cRPO growth converging back to the revenue line; the FY27 adjusted operating margin guide of 19.4% being cut. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.