Good day, and welcome to the last Elastic N.V. Second Quarter Fiscal 2026 Earnings Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Eric Prengel, GVP of Finance. Please go ahead.

Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic N.V.'s second quarter fiscal 2026 financial results. On the call, we have Ashutosh Kulkarni, Chief Executive Officer, and Navam Welihinda, Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued today after the close of market and is posted on our website. Slides that are supplemental to the call can also be found on the Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements which may include predictions, estimates, and our expectations regarding demand for our products and solutions, and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as of the date of this call, and are subject to risks and uncertainties that could cause actual results to differ materially. We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website, and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. The webcast replay of this call will be available on our company website under the Investor Relations link. Our third quarter fiscal 2026 quiet period begins at the close of business on Friday, January 16, 2026. We will be participating in Barclays Global Technology Conference on December 10 and the Needham Growth Conference on January 14. With that, I'll turn it over to Ashutosh Kulkarni.

Thank you, Eric, and thank you everyone for joining us on today's call. Q2 was an outstanding quarter for Elastic N.V., driven by robust growth across the company with AI positively impacting all areas of our business. We beat the high end of our guidance across all metrics, delivering revenue growth of 16% and a non-GAAP operating margin of 16.5%. Our team drove strong execution, achieving sales-led subscription revenue growth of 18% with strength in both Elastic Cloud and our self-managed offerings. We also increased the number of customers spending over $100,000 with us to more than 1,600 at quarter end. The importance of data, especially unstructured data, is growing at an unprecedented rate as enterprises continue to expand their use of AI. The Elastic platform, with its ability to sift through and find relevant insights in terabytes of structured and unstructured data in real-time, is uniquely suited to address the need for context in this age of AI. This ability is driving the acceleration and adoption of the Elastic platform by organizations for their search, AI, observability, and security needs. In Q2, we secured significant customer commitments across all solution areas. We maintained strong momentum in Search and AI while also seeing an uptick in platform consolidation for security and observability, with an increasing number of customers migrating from legacy products to our platform. These factors led to an acceleration in the number of large deals we were able to secure this quarter. In Q2, we signed over 30 commitments valued over $1,000,000 in annual commitment value, with five representing over $10,000,000 in total contract value. Of these five deals, two were greater than $20,000,000, a new record this quarter. In Q1 2025, we strategically realigned our sales team to focus capacity on our highest value opportunities. This quarter…

Thank you, Ashutosh Kulkarni. Good afternoon, everyone. As you may recall, we raised our guidance for the quarter during Analyst Day on October 9, and I'm pleased to report that we exceeded both the top line and profitability of that improved guidance. We saw continued broad-based demand and notable strength in commitments across all geos, supported by healthy consumption trends. As Gen AI adoption and platform consolidation continue to be top priorities for enterprises, we are seeing sustained momentum in demand for our platform, reflected in the continued customer momentum and expansion in our sales pipeline during the quarter. Our total revenue in the second quarter was $423,000,000, representing growth of 16% as reported and 15% on a constant currency basis. Our sales-led subscription revenue in the second quarter was $349,000,000, growing 18% as reported and 17% on a constant currency basis. This strong performance reflects the strategic advantages of the Elasticsearch AI platform in addressing critical consolidation and generative AI use cases. Our current remaining performance obligation, or CRPO, which is a portion of RPO that we expect to recognize as revenue over the next twelve months, remains solid. At the end of Q2, CRPO was approximately $971,000,000 and grew 17% as reported and 15% in constant currency over Q2 of the prior year. Our top-line metrics were driven by strong consumption, deal momentum, and traction with greater than 100 ks ACV customers, all three drivers supported by Gen AI tailwind. First, the primary driver of revenue was healthy consumption across solution areas. We saw steady consumption growth throughout the quarter, fueled by a strong demand environment, driven by solid organic consumption growth from existing customers as well as revenue from new customers. Second, deal momentum during the quarter was significant. As Ashutosh Kulkarni referenced, we saw an uptick…

Thank you. We will now begin the question and answer session. The first question comes from Matthew George Hedberg with RBC Capital Markets. Please go ahead.

Great. Thanks for taking my question, guys. Ashutosh Kulkarni, I want to start with you. I assume you're seeing strong consumption trends from your AI native customer base, but I'm curious if you could talk about the performance of your non-AI native customers. Are they seeing an increase or an acceleration in consumption due to sort of an increased AI focus within that customer base?

Yes, that's a great question. And yes, we are seeing that it's not just the AI native cohort, but we are seeing strong consumption across the board. Even in our traditional businesses, not just in search, but also in observability and security. Part of this is also that we are winning more and more commitments like I talked about in my prepared remarks. This was a remarkable quarter in terms of the number of commitments that we were able to secure, large commitments where customers are consolidating onto our platform for security, for observability. The five deals that we mentioned that were all greater than $10,000,000 in total contract value are all significant. I would expect that as deals like those, as customers start to consume, we are going to start to see the benefit of that in our cloud revenue and our total revenue. Just to bring everybody's attention to the fact that when we think about our business, we think about both cloud and self-managed. That's the reason why sales-led subscription revenue is such an important metric, and it came in at 18% this year. So very happy about it. Continuing to drive the momentum, consumption is strong, commitments are strong, we feel really good about the rest of the year.

That's really good to hear. And then maybe for Navam Welihinda, just a follow-up. All of your reported growth metrics were strong, including both CRPO and RPO, all kind of growing in the mid-teens or better. I'm curious though, billings isn't a key for you guys, but it did lag some of those focus metrics. Wondering if you could talk a little bit about why that was the case? Thanks.

Yes. Thanks for the question, Matt. And I agree with you, Q2 to us was a great quarter. We saw strength across the business, and what matters to us is commitments and consumption. Both commitments and consumption were strong. You noted correctly, CRPO grew 17% in Q2 compared to 16% last year. Also, RPO grew 19%, and that was because of the strength of the multi-year commitments that we laid out. Overall, the commitment side of the business was very, very strong. Now, as it pertains to your specific question on the year-over-year compare, going into the quarter, we expected variability in the second quarter for a few reasons. One of the main reasons is seasonality. You have to keep in mind that last year was anomalous because of a weaker Q1 commitments that we saw. So the billings distribution, the revenue distribution in last year throughout the year was just atypical. You can't over-index on the quarterly seasonality this year. As a matter of fact, when you think about sort of the ACV, which doesn't have the crosscurrents of billings, the ACV growth this year to date is stronger than what it was last year to date. Right? And that's a great sign. Then the second point I want to make was you all know there was a government shutdown that impacted our third month of the quarter, impacted everybody.