Is ESTC a good stock to buy now? We came across a bullish thesis on Elastic N.V. on The Investing Ledger’s Substack. In this article, we will summarize the bulls’ thesis on ESTC. Elastic N.V.’s share was trading at $52.07 as of February 27th. ESTC’s trailing and forward P/E were 125.08 and 18.80 respectively according to Yahoo Finance.
Elastic N.V., a search artificial intelligence (AI) company, provides software platforms to run in hybrid, public or private clouds, and multi-cloud environments in the United States and internationally. ESTC represents a compelling investment opportunity in the enterprise software space, particularly as the market may be underestimating its value. The company, founded in the Netherlands in 2012, is a leader in managing unstructured data through its Elastic Stack, a widely adopted open-source platform with over 5.5 billion downloads and 120,000 GitHub stars.
Elastic has evolved from log management into a full suite of enterprise solutions across Search, Observability, and Security, positioning itself as a critical infrastructure provider for AI-driven applications. Its tools are increasingly essential for feeding proprietary enterprise data into LLMs, reducing AI hallucinations, and supporting “hybrid search” workflows that combine vector and keyword search in a single platform.
Elastic’s “land and expand” model drives sustainable growth by onboarding customers through self-service cloud subscriptions for SMBs and enterprise sales-led motions, then expanding product adoption. In FY25, total revenue reached $1.48 billion (+17% YoY), with cloud revenue up 26% and subscriptions representing 93–94% of sales.
The enterprise customer base is expanding, with 1,510 clients generating over $100k ACV, and new GenAI-driven cohorts are showing ARR expansion rates of 42%, more than double historical averages. This underpins a medium-term revenue growth target of 20%+, supported by upselling GenAI products and increasing adoption across existing customers.
Financially, Elastic is transitioning from a growth-focused phase to a self-funding stage, achieving non-GAAP operating margins of 16.5% in Q2 FY26 and steadily moving toward the Rule of 40 benchmark. With $1.4 billion in cash, management prioritizes organic investment, strategic M&A, and share repurchases, including acquisitions like Jina AI and Keep Alerting to enhance GenAI and operational capabilities.
Currently trading at a 3.8x EV/NTM Sales and 21.2x EV/NTM FCF—significantly below peers such as Snowflake and Datadog—the market is pricing in only 11–12% annual FCF growth, leaving substantial upside if Elastic executes on its operational initiatives. While slower growth relative to peers and market skepticism remain risks, the combination of a strong product suite, expanding enterprise adoption, disciplined capital allocation, and attractive valuation make Elastic a high-conviction asymmetric investment, particularly as it transitions into a self-funding, profitability-focused stage.
Previously, we covered a bullish thesis on Datadog, Inc. (DDOG) by @bigbullcap in May 2025, highlighting its diversified ARR streams, multi-product engine, and potential upside to 2025 revenue guidance. DDOG’s stock price has depreciated by approximately 2.18% since our coverage. The Investing Ledger shares a similar view but emphasizes Elastic N.V.’s (ESTC) hybrid search leadership, GenAI-driven growth, and shift to self-funding profitability.
Elastic N.V. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held ESTC at the end of the fourth quarter which was 52 in the previous quarter. While we acknowledge the risk and potential of ESTC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ESTC and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
