Elastic N.V. (NYSE:ESTC) shares dropped more than 12% intra-day on Friday even after the company reported fiscal second-quarter 2026 results that surpassed analyst expectations, as investors focused on concerns surrounding the firm's longer-term growth trajectory.

The Search AI company reported adjusted earnings of $0.64 per share for the quarter ended October 31, beating the consensus estimate of $0.58. Revenue rose 16% year over year to $423 million, or 15% in constant currency, exceeding expectations of $418.23 million. Elastic Cloud revenue — a major component of the company's growth strategy — increased 22% year over year to $206 million.

While management described the quarter as “outstanding” and raised its full-year forecast, the stock moved sharply lower following the release. The company increased its fiscal 2026 revenue outlook by $18 million, guiding to $1.715-$1.721 billion, compared to prior consensus expectations of $1.706 billion.

For the third quarter, Elastic projected revenue of $437-$439 million, above the $429.9 million consensus, and adjusted earnings of $0.63-$0.65 per share, ahead of analyst expectations of $0.60.