Scotiabank Raises Elastic's Price Target to $121, Keeps Outperform Rating

Scotiabank raised Elastic's price target to $121 from $95 and maintained an Outperform rating. The company reported strong Q1 results, beating expectations on both the top and bottom line. The analyst notes that the beat and raise across the top and bottom line make for a compelling case to own the shares.

Elastic N.V. (ESTC) reported strong first-quarter (Q1) 2026 results, exceeding analyst expectations on both the top and bottom lines. The company's adjusted earnings per share (EPS) of 60 cents per share beat the consensus estimate of 42 cents per share, while quarterly sales of $415.29 million surpassed the analyst consensus estimate of $397.20 million. Elastic also raised its full-year 2026 adjusted EPS guidance to $2.29-$2.35 and increased its sales guidance to $1.68 billion-$1.69 billion [1].

Chief Executive Officer Ash Kulkarni attributed the company's performance to strong demand for its differentiated technology and solid execution by the sales team. The company's AI-driven search and observability tools have positioned it to capitalize on the growing AI and cloud infrastructure markets [2].

Analysts have responded positively to Elastic's Q1 results. Scotiabank raised its price target for Elastic shares to $121 from $95 and maintained an Outperform rating, citing the beat and raise across the top and bottom line as a compelling case to own the shares [3]. Other analysts have also raised their price targets, with Baird analyst Shrenik Kothari raising his target to $120, Stifel analyst Brad Reback raising his target to $134, and Piper Sandler analyst Rob Owens raising his target to $125 [1].

Elastic's Q1 revenue growth was driven by a 24% year-over-year surge in Elastic Cloud revenue to $196 million, underscoring the company's shift from on-premise to cloud-based solutions [2]. The launch of the Elastic AI SOC Engine (EASE) and enhanced vector search capabilities has further differentiated its offerings, enabling clients to extract actionable insights from AI-generated data [6].

However, Elastic faces challenges, including narrowing margins, competitive pressures, and a 14% 2026 revenue guidance below historical growth rates [2]. The company's GAAP net loss of $108.1 million in fiscal 2025 highlights ongoing reinvestment in growth areas like AI infrastructure [1].

Elastic's strategic focus on AI-native solutions positions it to tap into the $793B SaaS and $363B Cloud AI markets by 2029-30 [2]. The company's partnerships with Dell and its focus on enterprise AI adoption suggest a niche where it can maintain relevance [6].

Elastic's recent stock surge—spiking 17% in premarket trading and 5.4% after hours following Q1 2026 results—has captured investor attention. The company's 20% year-over-year revenue growth to $415 million and 22% increase in sales-led subscription revenue signal a structural shift as generative AI (GenAI) reshapes demand for real-time data analytics [4]. The global Generative AI in Data Analytics Market, valued at $8.18 million in 2025, is projected to explode to $538.49 million by 2034, growing at a 59.22% CAGR [2].

Elastic's innovations, such as Better Binary Quantization (BBQ) and AutoOps, directly address the scalability challenges of GenAI. These tools enable enterprises to deploy large language models (LLMs) and Retrieval [4].

Despite the "GenAI paradox" (80% of companies report no AI ROI), Elastic's vertical AI integrations in healthcare/finance and agentic AI potential position it to convert adoption into sustained profitability [4].

Elastic's Q1 revenue beat and margin improvements are undeniably positive, but they must be viewed through the lens of a maturing SaaS market. The company's reinvestment in AI and cloud infrastructure is a calculated risk: it could either solidify its position as a leader in AI-driven data management or expose vulnerabilities in a crowded field. For long-term investor confidence, Elastic must demonstrate that its strategic bets translate into sustainable margin expansion and market share gains.

References:

[1] https://www.benzinga.com/analyst-stock-ratings/price-target/25/08/47411867/elastic-analysts-raise-their-forecasts-after-upbeat-q1-results

[2] https://www.ainvest.com/news/elastic-q1-revenue-beat-turning-point-growth-profitability-2508/

[3] https://www.ainvest.com/news/elastic-ai-driven-surge-case-study-generative-ai-infrastructure-revolution-2508/

[4] https://www.ainvest.com/news/elastic-ai-driven-surge-case-study-generative-ai-infrastructure-revolution-2508/

[5] https://www.mordorintelligence.com/industry-reports/cloud-ai-market

[6] https://ir.elastic.co/news/news-details/2025/Elastic-Reports-First-Quarter-Fiscal-2026-Financial-Results/