Elastic N.V. (NYSE:ESTC) delivered a quarter that should have won over Wall Street. An earnings beat, growing enterprise adoption of its AI-powered search and cloud platform, and guidance pointing to continued revenue growth through fiscal 2027.

The AI-fueled beat led shares spiking more than 15% in after-hours trading, but DA Davidson chose to remain Neutral on the stock. On August 28, the firm raised its price target on Elastic NV (NYSE:ESTC) shares to $100 from $80 while maintaining a Neutral rating.

The Numbers behind the Beat

For first quarter of fiscal 2027 ending July 31, 2026, the Search AI Company announced total revenues of $478 million, an increase of 15% year-over-year. Total subscription revenue also rose by the same percentage year-over-year to $449 million. Sales-led subscription revenue was $399 million, an increase of 18% year-over-year.

Sales-led subscription revenue is a reflection of Elastic’s progress with its larger customers, a segment management is explicitly focused on to improve for achieving its long-term financial and product milestones. The company also reported adding more than 80 customers with annual contract value above $100,000, bringing the total to over 1,800.

Firm Da Davidson particularly mentioned the company’s improving demand for Elastic’s Security solution backed by a heightened threat landscape.

Looking ahead, it forecast fiscal 2027 revenue of $1.998 billion to $2.010 billion, with an expected non-GAAP operating margin of estimated 19.4%. Elastic also repurchased about $40 million of shares during the quarter. This brought total buybacks under its $500 million program to $380 million.

Why DA Davidson is Neutral

Even though the numbers and shares surge point to growing optimism toward Elastic, DA Davidson has chosen to remain Neutral on Elastic on one key execution risk: consistency.

The firm acknowledged that Elastic has started to prove its AI story, but the accelerating quarter proceeds the prior year that came with execution disappointments. Plus, the improving demand environment also leaves less room for execution mistakes. The real test, therefore, is whether the company can continue its sales growth, security momentum, and guidance increase beyond the current quarter.

Overall, bears believe the recent business acceleration may be a temporary spike rather than a lasting trend. This, they believe, may leave the stock overpriced following its massive rally.

Analysis and Bottom-line

Elastic’s rally came after Q2 filings from Insider Monkey’s hedge fund data base, which shows hedge funds cutting back holdings from 50 in Q1 to 42 in Q2 2026. As of mid-August, the stock reported moderate level of bearish skepticism, with short interest of 6.34 million shares sold short, a representation of 6.98% of the public float.