Is Elastic's Future Growth Too Clouded? This Analyst Dives Into The Revenue Mix Shift

Needham analyst Mike Cikos initiated coverage on Elastic N.V. ESTC with a Hold rating.

The analyst views the consensus estimate for cloud revenue growth as too aggressive, mainly for H2 FY25, and thinks if it comes below expectations, it can lead to the company's total revenue missing the guidance.

The analyst expects a reduction in the anticipated growth of cloud business, which can act as a headwind to share price appreciation.

Cikos believes a slower-than-anticipated shift toward cloud revenue can benefit ESTC's gross margin due to its narrower margin relative to self-managed deployments.

Overall, the analyst expects investors to view near-term margin upside as 'rented' as a medium to longer-term revenue mix shift toward cloud business is 'at the heart of the company's growth story.'

Cikos estimates revenue and EPS of $1,247.9 million and $1.05 in FY24 and $1,457.7 million and $1.39 in FY25. 

Price Action: ESTC shares are trading lower by 2.11% at $80.27 on the last check Thursday.