Key Takeaways:
- AI-Driven Growth: 18% sales-led subscription revenue growth driven by GenAI adoption across search, security, and observability.
- Price Projection: Based on current execution, ESTC stock could reach $85 by April 2028.
- Potential Gains: This target implies a total return of 30% from the current price of $65.
- Annual Return: Investors could see roughly 12.5% growth over the next 2.2 years.
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Elastic N.V. (ESTC) delivered a standout second quarter with revenue growing 16% to $423 million while expanding operating margins to 16.5%.
The company closed more than 30 deals exceeding $1 million in annual contract value, including five exceeding $10 million in total contract value.
CEO Ash Kulkarni is driving aggressive expansion centered on AI infrastructure and platform consolidation.
- Sales-led subscription revenue surged 18%, reaching $349 million as enterprises increasingly adopt Elastic for generative AI applications.
- The company now serves over 2,450 customers using Elastic Cloud for GenAI use cases, with 370 of these spending more than $100,000 annually.
- Elastic secured two landmark security deals, each exceeding $20 million, including a major win with CISA, the U.S. federal cybersecurity agency.
- The company’s AI capabilities in search, observability, and security are driving unprecedented demand as organizations grapple with rapidly growing volumes of unstructured data.
Despite this momentum, Elastic stock trades at $65, offering significant upside for investors who recognize the company’s position in the AI infrastructure market.
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What the Model Says for Elastic Stock
We analyzed Elastic’s transformation into a dominant platform for AI-powered search, security, and observability, with unmatched data engineering capabilities.
- The company is expanding beyond traditional search into next-generation AI applications.
- Recent innovations like Agent Builder, Streams, and the Jina AI acquisition strengthen Elastic’s position as enterprises build AI agents and semantic search applications.
- With AI infrastructure investments accelerating globally, Elastic is capturing market share as systems require more sophisticated context engineering and vector search capabilities.
The company maintains strong competitive advantages with diversified exposure. This diversified exposure provides resilience while AI buildout creates sustained demand for Elastic’s platform across search, security, and observability workloads.
Using a forecast of 14.4% annual revenue growth and 17.6% operating margins, our model projects the stock will rise to $85 within 2.2 years. This assumes a 24.1x price-to-earnings multiple.
That represents compression from Elastic’s one-year P/E average of 39.6x. The lower multiple acknowledges integration complexity and the transition from proof-of-concept GenAI projects to production deployments at scale.
The real value lies in sustaining GenAI adoption momentum while expanding platform consolidation wins in security and observability, all while maintaining industry-leading profitability.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for ESTC stock:
1. Revenue Growth: 14.4%
Elastic’s growth centers on expanding its AI infrastructure and consolidating its platform.
- The company achieved 17% growth over the past year, driven by strong demand for GenAI use cases.
- Management highlighted that 23% of customers spending over $100,000 annually now use Elastic for GenAI applications, up from 17% a year ago.
- These AI-focused customers are growing faster than the broader customer base.
- Platform consolidation is accelerating as enterprises replace fragmented security and observability tools.
- Elastic won major deals displacing incumbents, including one of the world’s largest chemical manufacturers choosing Elastic Security over multiple competitors.
- The CISA win demonstrates Elastic’s ability to serve mission-critical government workloads.
2. Operating margins: 17.6%
Elastic is sustaining record profitability while scaling operations.
The company delivered 16.5% operating margin in Q2, demonstrating strong execution across 16% revenue growth.
Management expects full-year operating margins around 16.25%, with continued expansion as the business scales.
Elastic’s consumption-based model drives efficiency. Platform innovations like Logsdb and searchable snapshots reduce customer storage costs, making the platform more attractive for consolidation while maintaining healthy margins.
3. Exit P/E Multiple: 24.1x
The market values Elastic at 25.8x earnings. We assume the P/E will compress slightly to 24.1x over our forecast period.
Near-term execution risk exists as customers transition GenAI projects from pilot to production. The company must demonstrate that AI workloads scale into meaningful revenue while maintaining consumption growth across traditional search, security, and observability use cases.
As GenAI deployments mature and platform consolidation continues, Elastic should command a premium multiple. The company’s unique position in context engineering and vector search provides differentiation as enterprises build AI agents and semantic search applications.
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What Happens If Things Go Better or Worse?
Data infrastructure companies face technology transitions and competitive pressure. Here’s how Elastic stock might perform under different scenarios through April 2028:
- Low Case: If revenue growth slows to 11.5% and net income margins compress to 14.6%, investors still see a 28% total return (6% annually).
- Mid Case: With 12.8% growth and 15.6% margins, we expect a total return of 64.6% (12.5% annually).
- High Case: If AI infrastructure accelerates and Elastic maintains 16.5% margins while growing at 14.1%, total returns could reach 106.2% (18.6% annually).
See what analysts think about ESTC stock right now (Free with TIKR) >>>
The range reflects execution on GenAI monetization, successful platform consolidation, and margin expansion as consumption scales across cloud and self-managed deployments.
How Much Upside Does Elastic Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
