Shares of the enterprise search technology firm Elastic N.V. surged more than 16% in late trading today after the company posted a second-quarter earnings beat and offered a strong forecast for the current quarter and full year.

The company reported earnings before certain costs such as stock compensation of 37 cents per share, crushing Wall Street’s consensus estimate of just 24 cents. It also racked up $310.6 million in quarterly sales, up 17% from a year earlier and easily surpassing the analyst target of $304.1 million.

For the quarter, Elastic posted a net loss of $24.8 million, down by almost half from the $47.3 million loss it posted in the same period last year.

The company also reported a total subscription customer count of 20,700, up from 20,500 in the prior quarter and 19,700 one year ago.

Elastic is the developer of the popular open-source Elasticsearch software, offering a fully managed version of that platform that’s simple for companies to run. The Elasticsearch software is used by enterprises to store, search and analyze enormous volumes of both structured and unstructured information in close to real time. It has become essential to many enterprises, and sits at the heart of millions of applications globally that require complex search capabilities.

In more recent years, Elastic has expanded the scope of its business into areas such as threat detection and application observability, with tools that can be used to visualize corporate networks and monitor their performance.

Elastic Chief Executive Ash Kulkarni (pictured) said the company exceeded its own expectations across revenue and adjusted operating margin. “Our thoughtful investments and innovation in AI has continued to drive customer excitement and engagement with Elastic, and this was visible in our business in Q2,” he said.

Elastic has often said it’s poised to benefit from the rising interest in artificial intelligence technologies, especially generative AI. That’s because the large language models that power applications like ChatGPT can benefit from the company’s comprehensive search capabilities to provide more accurate, reliable and up-to-date responses by quickly searching for answers in the latest data.

“Generative AI is driving a resurgence of interest in search as customers use semantic search, vector search and hybrid search to ground large language models with their private business context,” Kulkarni added. “Elasticsearch Relevance Engine provides the most comprehensive and enterprise-ready platform for these use cases.”

The era of AI has led to big demand for powerful enterprise search capabilities and that works out well for Elastic, enabling it to grow its revenue faster than its cost base, said Holger Mueller of Constellation Research Inc. “Because of this, investors see good things, with earnings per share up to just 50% of the losses seen one year earlier,” the analyst added. “If Elastic can keep this up for another full year, the company will finally become profitable, although Kulkarni and his team will need to show the same cost discipline. But it’s looking bright for Elastic, and investors think so too.”

Looking to the third quarter, Elastic says it’s optimistic of delivering earnings of between 30 and 32 cents per share, which would beat analysts’ consensus estimate of 27 cents. In terms of revenue, it’s targeting $319 million to $321 million, which is also ahead of the Street’s target, of just $318.4 million.

For the full fiscal 2024 year, Elastic is targeting earnings of between $1.06 and $1.15 per share, versus the Street’s $1.08 per share estimate. Its full-year revenue forecast of between $1.247 billion and $1.253 billion is more or less in line with the $1.25 billion guidance from analysts.

Photo: Elastic