Elastic N.V. (NYSE:ESTC) Q3 2023 Earnings Call Transcript

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Ash Kulkarni: Thanks, Kash. Maybe I’ll address some of the questions in sort of reverse order. So in terms of the trends in the market, in terms of the choice that customers are making, larger customers are making on one cloud provider versus another, we really haven’t seen any change per se. Like so I think some of the color commentary I gave on some of the large customers, the — some of the large deals that we did this quarter, several of them were through our cloud marketplace partners. I talked about the fact that our revenue through our business to the cloud marketplaces has doubled. And we did some — we had some very large multimillion dollar customers. That sort of gives you a sense that there is a lot that we are doing with large customers in the enterprise and commercial segments on these — through these cloud marketplaces, and we are seeing good traction there.

In terms of — you asked the question on optimization of consumption. That — like I mentioned in my prepared remarks, we are seeing that not just in SMB, but we are also seeing that in other segments and larger customers as well. And it’s effectively like the kinds of things that I talked about earlier and the question that I believe Ittai asked on the kinds of ways in which people are optimizing. And our focus has been very simple, right? We — as customers are looking to optimize, we have the capabilities that allow them to effectively do more with our technology, do it in a cost-effective way. And frankly, given the current environment, like I feel that what I’m seeing is that our ability to position ourselves as a partner that provides tremendous value for a particular price tends to be very, very advantageous.

Like that’s one of the things that’s — apart from just the innovativeness of our solutions, that’s the other factor that’s helping us in terms of making sure that we are able to drive good customer commitments. And in terms of the top of the funnel, we haven’t seen anything different other than in SMB, like I talked about there. There’s been — and I talked about that even in the past. Like that’s definitely been significantly constrained. So we — even in terms of where we are focusing, we are getting a lot of success with enterprise and commercial accounts, SMB continues to be constrained. But beyond that, I don’t think that’s — I could specifically call out any different patterns in the large customers across cloud providers, et cetera.

Operator: Our next question comes from Matt Hedberg with RBC Capital Markets.

Anushtha Mittal: This is Anushtha on for Matt Hedberg. Maybe just to start with macro. If you could just talk about the linearity in the quarter, how did the macro environment change in Q3 versus Q2? And what have you seen so far out in Q4?

Janesh Moorjani : Yes, happy. I’ll happily take that. So linearity in terms of our sales activity was actually quite good across the months, and linearity in any quarter can always be affected by the timing of specific deals. And we saw good linearity and deal velocity earlier in the quarter. So that was something that worked quite nicely for us. Also, Q3 has the holiday season, so it’s always unique relative to the other quarters in a year. And in terms of what that translated to in terms of consumptions, I think outcomes can just vary for different customers across different months. But across the full quarter, we did see the consumption trends that we called out earlier. There can be a little bit of noise in the monthly data around that. But overall, as I said, we’re anticipating that the trends we saw in Q3 will continue into Q4, which is the foundation for the outlook that we provided.

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