ESTC

Elastic runs the search, observability and security platform built on the Elasticsearch engine, and FY2026 shows a SaaS business hitting an inflection. Revenue grew 17.3% to $1.74B at a 76.1% gross margin, and the company generated $327M of operating cash flow (+22.8%) on negligible capex ($5.09M) — the hallmark of a capital-light software model throwing off real free cash. It is well positioned in two of the hottest software themes, observability and the search/retrieval layer underpinning enterprise generative-AI applications, and it reinvested $452M (+23.6%) into R&D to defend that position.

A note on earnings quality: the $368M net income (EPS $3.43) is not clean operating profit — GAAP operating income was still slightly negative at -$33.5M (operating margin -1.9%), so the bottom-line surge reflects below-the-line items (likely a large tax benefit) rather than operating breakeven. That makes the 17.2x P/E flattering; the better lenses are the strong cash flow, the 76% gross margin, and the improving operating trajectory (operating loss narrowed 39%). Stock-based compensation is the main reason GAAP operating profitability lags, typical for the sector.