Elastic N.V. (ESTC) shares tumbled Friday despite the company delivering a solid earnings beat the night before. Sometimes the market just decides good news isn't quite good enough.

The Numbers That Should Have Made Everyone Happy

Elastic reported second-quarter adjusted earnings of 64 cents per share, comfortably ahead of the 58-cent consensus estimate. Revenue came in at $423.48 million, also topping expectations of $418.15 million. By traditional standards, this qualifies as a win.

The underlying business trends looked healthy too. Elastic Cloud revenue jumped 22% year-over-year, while current remaining performance obligations climbed 17% as customers increased their commitments. The company posted non-GAAP operating income of $70 million with a 16.5% operating margin. Operating cash flow reached $27 million, and the balance sheet showed $1.396 billion in cash, cash equivalents, and marketable securities.

CEO Ash Kulkarni didn't hold back, saying the company "beat the high end of guidance across all metrics." He pointed to broad-based demand and AI-driven growth across the product portfolio. Elastic also rolled out new AI and observability features during the quarter, expanding its customer base and product capabilities.

Forward Guidance Gets Better Too

For the third quarter, Elastic expects adjusted earnings between 63 cents and 65 cents per share, above the 60-cent consensus. Revenue guidance of $437 million to $439 million also topped the $430.34 million analysts were expecting.

The full-year picture improved as well. Elastic raised its FY26 adjusted EPS guidance from a range of $2.29 to $2.35 up to $2.40 to $2.46, beating the $2.36 consensus. Revenue guidance also got a bump, moving from $1.69 billion to $1.70 billion up to $1.71 billion to $1.72 billion, versus the $1.70 billion estimate.

So Why the Selloff?

Wall Street responded to all this positive news by cutting price targets. B of A Securities analyst Koji Ikeda maintained a Neutral rating but dropped his target from $111 to $90. Stifel analyst Brad Reback kept his Buy rating but lowered his target from $134 to $108. Rosenblatt analyst Blair Abernethy held steady with a Buy rating and $130 target.

Wedbush analyst Daniel Ives maintained an Outperform rating but cut his target from $110 to $90, while Morgan Stanley analyst Sanjit Singh kept an Overweight rating but reduced his target from $120 to $110.

At last check, Elastic shares were down 12.86% to $71.53. Sometimes beating expectations just means the bar gets moved higher.