Six months after Elastic (ESTC) picked a fight that resulted in a promise from Amazon (AMZN) to launch a competing data search product, a small but potentially telling crack has emerged in the health of Elastic’s business. Elastic, which enables companies to search structured and unstructured data for actionable insights, uses its Net Expansion Rate to gauge how much more it’s selling to existing customers.

If Elastic’s Net Expansion Rate were to decline, it would indicate customers are either not renewing their subscriptions or renewing for less money.

In its FY 2019 10-K, Elastic provided its Net Expansion Rate for the prior 2.5 years:

“Our Net Expansion Rate was over 130% at the end of each of our last ten fiscal quarters.”

In its FY 2020 10-K, Elastic reported similar results:

“Our Net Expansion Rate continued to be over 130% for each quarter during fiscal 2020.”

In its FY 2021 10-K, Elastic reported a its Net Expansion Rate had declined:

“...our Net Expansion Rate declined to below 130% at the end of fiscal 2021 as a result of the COVID-19 pandemic, which caused customers to expand their spending with us at a slower rate than before the COVID-19 pandemic.”

Since then, enterprise spending has rebounded but Elastic’s Net Expansion Rate has not. In its latest 10-Q— which covers the three months since the company’s last annual report— Elastic disclosed little if any improvement:

“Our Net Expansion Rate was slightly below 130%...”

We suspect the deceleration is worse than Elastic is reporting. The company changed how it calculates Net Expansion Rate in the latest quarter. It now includes certain customers and platform usage it excluded in its previous calculation. Elastic says the change on prior reporting periods is immaterial but does not quantify the impact. It’s safe to say Elastic did not invent a new calculation method to harm a preferred growth metric. It’s why we suspect Elastic’s Net Expansion Rate has decelerated more than the new calculation lets on.

Elastic’s growth story isn’t over though. Sales in the quarter grew 49.8%. Elastic also reported 16,000 customers, up 4,000 from the year before. If however renewal trends for existing customers continue to worsen, investors should not be surprised as the deceleration in trend began shortly after Elastic found itself in Amazon’s crosshairs.