I know this is going to absolutely floor you… but another stock is spiking off AI hype. (Try to stay calm.) This time, it’s Elastic, the data analytics software company that just soared nearly 14% in a single day and it’s up 58% over the last 6 months.

Elastic’s whole deal is helping businesses search, analyze, and visualize data across cloud, private, and hybrid networks… basically making sense of the mountains of digital junk companies hoard. And because Wall Street has an unhealthy obsession with subscription-based revenue, Elastic’s recurring model has been a big hit. In its latest earnings report, revenue hit $382.1 million, a 17% jump from last year. Earnings per share came in at 63 cents, steamrolling past analysts’ estimates of 47 cents and marking a 75% year-over-year increase. Cloud revenue climbed 26% to $180 million, and Elastic’s deep-pocketed customers (aka those spending more than $100,000 a year) grew by 15% to 1,460.

A major reason for Elastic’s success is AI-powered tools that are slowly becoming an addiction for its biggest customers. Get this… around 18.5% of Elastic’s highest-paying clients are now hooked on its AI products, up from just 10.9% last year. The more they rely on Elastic, the harder it gets to leave… kind of like a Youtube TV subscription you never use but keep paying for because canceling is a hassle. CEO Ash Kulkarni says demand for generative AI applications has been a major driver, with companies consolidating their data onto Elastic’s platform. Once they’re locked in, good luck switching.

Investors also got giddy over Elastic raising its full-year outlook. The company now expects Q4 revenue between $379 million and $381 million, outpacing analyst expectations. Full-year revenue is projected to hit $1.475 billion, a 16% increase from last year, with earnings per share landing between $1.91 and $1.96. Strong growth, improving profitability… sounds like an investor’s dream.

Now, about that sky high valuation. Elastic’s price-to-sales ratio of 7.67 makes it cheaper than Datadog (which is living in the stratosphere at 20.0) but still pricier than New Relic at 5.0. Its price-to-earnings ratio of 211x is, uh, ambitious… but compared to some of the more delusional AI valuations out there, it’s practically cheap. For instance, Snowflake trades at a P/S of 19.4 and even Palantir trades at 17.5. So while Elastic isn’t exactly a dollar-store deal, it’s also not unreasonable.

The good news is that Elastic isn’t setting money on fire in pursuit of growth. It’s actually getting more financially disciplined. Operating margin improved to 12.7%, up from 6.6% a year ago, and free cash flow jumped from $16 million last quarter to $44.5 million. So yeah, they’re making money and keeping some of it… a novel concept in the AI space.

Wall Street is feeling the love. The average price target sits at $135.71, with some firms going as high as $150. Out of 20 analysts covering the stock, 15 call it a buy, five say hold, and not a single one is screaming "sell" (which is rare in itself). Scotiabank, Piper Sandler, and Morgan Stanley have all recently upped their targets, with some hitting $140. No, this isn’t some get-rich-quick AI lottery ticket that’ll 10x overnight, but if you want AI exposure that actually makes money (instead of just lighting it on fire for the sake of “disruption”), Elastic is probably your best bet. Plus, its predictable subscription revenue means you won’t wake up one day to find out it’s a meme stock that ran out of cash.

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Stocks.News has positions in Elastic.