Update shared on 20 Dec 2025
Fair value Decreased 1.59%Analysts have modestly trimmed their fair value estimate for Elastic to approximately $104.54 from about $106.22. This reflects lowered price targets across the Street as mixed Q2 execution, softer cloud momentum, and broader multiple compression temper enthusiasm around otherwise solid large deal activity, GenAI progress, and raised long term guidance.
Analyst Commentary
Street commentary following the quarter underscores a split view on Elastic's risk reward, with valuation and near term execution concerns offset by growing confidence in its longer term growth algorithm and GenAI positioning.
Bullish Takeaways
- Bullish analysts highlight raised FY26 revenue and long term growth guidance as supportive of a premium multiple over time, even after near term target cuts.
- Several firms with Buy or Overweight ratings point to strong large deal momentum and a healthier late stage pipeline, which they see as underpinning management's year end growth targets.
- Progress in cloud based deals and expanding GenAI use cases is viewed as an incremental growth driver, with some expecting AI related consumption to add several points to medium term revenue growth.
- Medium term targets of 20 percent plus growth, driven by subscription and GenAI tailwinds, are seen as better than previously expected and supportive of upside if execution normalizes.
Bearish Takeaways
- Bearish analysts emphasize the below trend revenue beat and deceleration in net new cloud revenue, which they argue justify lower price targets and a more balanced risk reward.
- Several Neutral ratings reflect concern that Elastic needed a cleaner, higher quality quarter in the current macro backdrop, with mixed Q2 execution limiting near term multiple expansion.
- Some see the stock as fairly valued relative to its growth profile, noting that current levels already discount GenAI optionality and that broader peer multiple compression is a headwind.
- Visibility into a reacceleration in cloud and sustained consumption growth remains a key debate, with cautious voices waiting for more consistent execution before taking a more constructive view on valuation.
What's in the News
- Elastic and ECS secured a $26 million base year contract, with renewal options up to a total of $130 million, to partner with CISA on a unified SIEM as a Service platform for U.S. federal civilian agencies, standardizing cybersecurity monitoring across FCEB agencies.
- The company completed a $114.15 million share repurchase tranche, buying back 1,351,652 shares, as part of a broader $500 million, open ended buyback program authorized by the Board.
- Elastic issued fiscal 2026 guidance calling for 16 percent year over year revenue growth at the midpoint, to a range of $1.715 billion to $1.721 billion, with Q3 revenue projected to grow 15 percent year over year.
- Elastic expanded its GenAI and observability portfolio with new offerings including DiskBBQ for disk efficient vector search, Elastic Inference Service for GPU accelerated inference, Agent Builder for custom AI agents on enterprise data, and Streams for AI powered log analysis.
- The company deepened its observability and OpenTelemetry strategy by adding a managed OTLP endpoint, new EDOT SDK capabilities and PHP support, and integration with Amazon Bedrock AgentCore to simplify large scale telemetry and AI agent monitoring.
Valuation Changes
- Fair Value Estimate reduced modestly to approximately $104.54 from about $106.22, reflecting a small downward adjustment in intrinsic value.
- Discount Rate edged down slightly to roughly 8.15 percent from about 8.19 percent, implying a marginally lower required return.
- Revenue Growth essentially unchanged at around 15.43 percent, indicating no material shift in long term top line expectations.
- Net Profit Margin effectively flat at about 5.20 percent, suggesting stable long term profitability assumptions.
- Future P/E lowered moderately to roughly 110.9x from about 114.9x, signaling a somewhat less aggressive multiple on forward earnings.
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