Elastic (ESTC) CEO on How the Company Uses A.I.

Summary

In a recent interview, Ashutosh Kulkarni, CEO of Elastic Data Analytics, discusses the company's growth and innovative approach to AI and large language models (LLMs). He emphasizes the importance of maintaining privacy by keeping proprietary data secure while leveraging AI to extract insights from unstructured data. Kulkarni highlights the significance of their retrieval augmented generation model, which enhances the accuracy of AI-generated responses without exposing sensitive information. With a focus on organic growth and potential acquisitions, he shares optimism about Elastic's future in the AI landscape, underscoring their strategic plans for expansion and profitability.

Takeaways

• 🚀 Elastic Data Analytics is positioned as a search AI company, helping businesses extract insights from messy and unstructured data.
• 📈 The company reported a 20% growth in Q4 and a 32% growth in its cloud business, reflecting consistent performance.
• 🔍 Their platform allows businesses to use their private data securely, enhancing AI applications without compromising proprietary information.
• 🛡️ Retrieval augmented generation is a key mechanism that provides context to large language models while maintaining data privacy.
• 🤖 Large language models are trained on publicly available data, making it essential for businesses to protect their proprietary information.
• 👥 Elastic has a strong internal talent pool in machine learning and continues to hire experts in the field to enhance its capabilities.
• 💼 The company has over $1 billion in cash, which may be used for acquisitions or to support organic growth.
• 🌱 Elastic aims to build a generational company, focusing on long-term growth and profitability while capturing market share.
• 📊 Operating margins have improved, with non-GAAP operating margins projected to increase from 11% to over 12% in the current year.
• 🔮 The CEO emphasizes the massive opportunity within the AI space and the importance of leveraging business strengths for future success.

Q & A

What is the core business model of Elastic Data Analytics?

Elastic Data Analytics positions itself as a search AI company, focusing on helping businesses extract insights from unstructured and semi-structured data.

How does Elastic integrate AI into its search tools?

Elastic utilizes a mechanism called retrieval augmented generation to provide private data context to large language models, allowing businesses to build generative AI applications securely.

What recent growth metrics did Elastic report for Q4 of fiscal 2024?

In Q4 of fiscal 2024, Elastic reported a 20% growth for the quarter, with its cloud business experiencing a growth of 32%.

What concerns might clients have regarding data privacy when using AI models?

Clients are concerned about the potential risk of handing over proprietary data to large language models, which have only been trained on publicly available information.

How does Elastic ensure data security for its clients?

Elastic allows clients to keep their private data within their environment, ensuring that privacy controls are defined by the clients themselves.

What is the significance of the term 'retrieval augmented generation' in Elastic's services?

Retrieval augmented generation refers to Elastic's method of providing real-time context from private data to large language models, allowing for precise and relevant answers without compromising data privacy.

How does Elastic plan to build its workforce to support AI integration?

Elastic aims to grow its workforce by hiring new talent with machine learning expertise and leveraging existing talent within the company, along with considering technology tuck-in acquisitions.

What strategies does Elastic have for utilizing its significant cash reserves?

Elastic plans to use its cash reserves for both organic growth and potential acquisitions to capture more market share and support long-term growth.

What are the expected operating margins for Elastic in the current fiscal year?

Elastic anticipates its non-GAAP operating margin to exceed 12% in the current fiscal year.

Why is Elastic's search platform considered essential for businesses?

The search platform is crucial for businesses because it connects their proprietary data with large language models, enabling them to extract valuable insights without exposing sensitive information.