And that’s largely because they are getting a level of comfort with these large language models. And that’s also where they really find a lot of value in Elastic, because, you know, the ability that Elastic provides to ground these large language models in the context of their businesses is something that they see a lot of value from in terms of reducing hallucinations and so on. And over time, we believe that that’s going to then make it possible for them to expand to external end-user-facing use cases. And that then again is going to be another expansion of the overall opportunity. So, very excited, and absolutely this is something that we are leaning-in on. And let me turn it to Janesh on your second question.
Janesh Moorjani: Hi, Raimo. So, as I think about the guidance and trying to unpack that, maybe just commenting on the second half first, and then I’ll touch on Q4 as well. You know, overall for the second half, the way we approached it was just recognizing that we’ve seen good, strong consumption patterns here as customers are scaling their usage up to their committed levels. And if I think about the external environment, the macro is generally stable. But as we said, cost consciousness continues to be a theme in the market and is important for customers. So, we’ve benefited from that to a degree as customers have made greater commitments to us. But we’ve also seen, you know, in the past that that can cause consumption to fluctuate if customers drive operational changes.
So, we’ve simply considered that possibility of potential consumption fluctuation in the future as we built our guidance. And just for clarity, we’ve not actually seen any big shift in the external environment, but we just think it’s best to plan prudently. We’re executing really well, we’re excited, we’re confident about the rest of the year. And specific to Q4, I’ll just point out that the only unique thing about Q4 is it’s a slightly shorter quarter for us. Given that 2024 will be a leap year, Q4 will have 90 days instead of 92 days. So, that’s just something that creates a bit of a headwind in Q4.
Raimo Lenschow: Okay. Makes sense. Thank you. Congrats again.
Operator: The next question is from Ittai Kidron with Oppenheimer. Please go ahead.
Harshil Thakkar: Hi guys. This is Harshil on for Ittai. Can you hear me?
Ashutosh Kulkarni: Yes.
Harshil Thakkar: Got it. So, earlier this year, you guys gave us an update on the $2 billion revenue target and how that timeline had been extended a bit with the challenging macro. But now, you know, with the environment seemingly a bit more stable, consumption starting to improve, and the momentum you’re seeing with generative AI, I’m just curious, you know, is there anything you can share on that timeline? And, you know, versus eight months ago, has that maybe moved a bit forward?
Janesh Moorjani: Hi, Harshil, this is Janesh. So, you know, we were through that $2 billion goal sometime back, but the way we think about this fundamentally is that we’ve got a significant opportunity ahead of us, and we are working hard to prosecute that opportunity. You’ve seen tremendous momentum here from the standpoint of the overall business, and particularly in terms of cloud growth as we address that opportunity. And all of that is additionally fueled by the momentum that we are seeing in generative AI. So, we don’t want to get too far ahead and start to predict future revenue growth beyond this year at this stage. But there’s no question in our minds that we are working hard to build a multi-billion dollar Company at scale in the future. And we’ll provide you with appropriate updates as we go on that. But for now, we are focused on executing in this year and feel very good about the back half of the year.
Harshil Thakkar: Got it. That’s helpful. And then just on NRR, is this a 110% level? Is this an area where we should expect it to kind of bottom out? And as we look to fiscal ’25, what levers do you see that could get NRR back up to the historical level?
Janesh Moorjani: Yes, as I mentioned just a couple of minutes ago, because the net expansion rate is a lagging indicator, even as cloud consumption ramps, it just takes time for that to be reflected in the net expansion rate. So, I think it can move a couple of points in either direction in the near term. But over time, what will help drive the net expansion rate is increasing consumption. And, you know, as we move forward, as consumption ramps, that will alleviate some of the downward pressure that we had experienced previously and growth in cloud and our rates of consumption will help overall as we progress into the future.
Harshil Thakkar: Got it. Very helpful. Thanks, guys.
Operator: The next question is from Pinjalim Bora with JPMorgan. Please go ahead.
Pinjalim Bora: Oh, great. Thanks, guys. Congrats on the quarter. Ash, seems like ESRE is opening up a lot of customer conversations. There’s a lot of positivity. How often are these conversations expanding into something more than just AI, say, in security, observability? Do you think the AI as the entry point to drive larger deals across the board is a motion that could accelerate your growth? And then one for Janesh. Any way to understand the cloud consumption trends so far in November in Q3?
Ashutosh Kulkarni: Hi, Pinjalim, thanks for the question. So, you know, the way we see it is that, in the areas of search, there is a clear expansion of the TAM that is likely going to happen just given the momentum that we’re seeing, the resurgence of interest in search and the kinds of use cases that people are both imagining and starting to build, you know, that’s going to be something that we feel in the long term is going to be very material. In the areas of observability and security, the AI assistants that we have launched and the kinds of really compelling capabilities that we’ve delivered, you know, the ability through natural language to auto-generate ESQL commands and then to understand what the queries mean and then have to, you know, have the system automatically execute them through the prompt, just makes the life of a site reliability engineer for observability or a SOC analyst for security so much easier.
