Enterprise search provider Elastic NV saw its stock lose more than 4% in after-hours trading today despite posting strong quarterly financial results that beat expectations and raising its full-year guidance.

The company reported a fiscal third-quarter loss before certain costs such as stock compensation of 4 cents per share on revenue of $157.1 million, up 39% from the same period one year ago.

Elastic had previously forecast a bigger loss of between 14 to 16 cents per share, while Wall Street had modeled a 15-cent loss on revenue of $146.7 million.

Elastic co-founder and Chief Executive Shay Banon (pictured) said in a statement that the company had an “excellent” quarter, showing strong execution once again. “We believe continued innovation across our three solutions is critical to global enterprises as they look to build resilience and adapt to the distributed environment of 2021.”

The company sells a family of tools built around the popular Elasticsearch open-source search engine that’s used by enterprises to store, search and analyze massive volumes of both structured and unstructured data quickly, in nearly real time. It’s generally used as the underlying engine for applications that have complex search features and requirements.

Elastic highlighted strong growth in its software-as-a-service revenue, which rose 79% to $44.9 million. It added that subscription revenue now constitutes 94% of its total sales.

In addition, Elastic said its total number of subscribers has grown to more than 13,800, with 670 of those having an annual contract value of greater than $100,000, up from 650 in the previous quarter.

Banon told Barron’s in an interview that his company was clearly benefiting from users shifting to the cloud-based and SaaS versions of its software.

He revealed that the COVID-19 pandemic has caused both tailwinds and headwinds for its business, saying that while it saw strength in areas such as online retail, it also saw tougher conditions in industries such as airline travel.

“We haven’t seen a huge tailwind like Zoom,” he said. Still, he added that the growing enterprise IT focus on cloud migration and digital transformation was working to Elastic’s advantage.

Analyst Holger Mueller of Constellation Research Inc. said Elastic has successfully added new revenue streams to its existing search enterprise in the shape of new security and observability offerings that have helped boost its bottom line.

“This is an important development, strengthening the resilience of Elastic as a technology vendor overall,” Mueller said. “Now it’s up to Elastic’s management to grow its diversified portfolio or add new offerings in the calendar year.”

For its fiscal fourth quarter, Elastic said it expects to see a loss of 15 to 18 cents per share on revenue of $158 million to $159 million. That’s ahead of Wall Street’s forecast of a 22-cent loss on revenue of $152 million.

The confident forecast means Elastic has also raised its full-year forecast. Now, it expects total revenue of $589 million to $590 million for the year, ahead of its earlier forecast of $568 million to $572 million.

Photo: Elastic