Backblaze, Inc. Q3 Earnings Call Insights

Backblaze, Inc. ((BLZE)) has held its Q3 earnings call. Read on for the main highlights of the call.

Backblaze, Inc. recently held its earnings call, revealing a mixed sentiment. The company celebrated strong revenue growth and industry accolades, particularly in the AI sector. However, it faced challenges with B2 growth not meeting ambitious targets, customer variability, and stagnant growth in the Computer Backup segment. Despite these hurdles, the financial performance showed notable year-over-year improvements, but the company must address these challenges to sustain its growth momentum.

Revenue and Growth Exceed Expectations

Backblaze reported total revenue of $37.2 million for Q3 2025, surpassing the high end of its guidance and marking a 14% year-over-year growth. The B2 Cloud Storage segment was a standout performer, growing 28% year-over-year, although it fell slightly short of the company’s initial 30% growth target.

Industry Recognition for Technology Innovation

The company received significant industry recognition for its technology innovations, particularly in cloud security. This included an award for B2 Overdrive, highlighting Backblaze’s commitment to advancing its technological capabilities.

Success with AI Customers

Backblaze successfully signed multiple six-figure and seven-figure deals with AI startups. Notable deals included a six-figure agreement with a startup focused on vision language models and a seven-figure contract with a surveillance company, showcasing the company’s strong foothold in the AI sector.

Increasing Gross Margins

The company’s gross margin improved significantly to 62%, up from 55% a year ago. The adjusted gross margin also saw an increase, reaching 79% compared to 78% last year, reflecting Backblaze’s improved cost efficiency.

Improved Financial Performance

Backblaze’s financial performance showed marked improvement, with an adjusted EBITDA margin of 23%, nearly double from the previous year. The company reported a non-GAAP net income of $1.9 million, a turnaround from a loss of $4.1 million last year.

Strong Customer Base

The company continues to attract a diverse customer base, including AI startups, with 100,000 customers utilizing its platform. This diverse customer base is a testament to Backblaze’s broad appeal and market reach.

B2 Growth Below Target

Despite a 28% year-over-year growth in B2, the segment fell short of the 30% target set at the beginning of the year. This shortfall highlights the challenges Backblaze faces in meeting its ambitious growth objectives.

Challenges with Large Customer Variability

Revenue variability was a challenge, particularly due to a large AI customer reducing its usage more than expected. This variability impacted B2 growth expectations and underscores the need for Backblaze to manage customer relationships effectively.

Flat Growth in Computer Backup

The Computer Backup segment experienced flat revenue growth year-over-year, reflecting the final impact of a price increase implemented in 2023. This stagnation indicates a need for strategic initiatives to reinvigorate growth in this segment.

Net Revenue Retention Decline

Backblaze’s net revenue retention (NRR) for Q3 was 106%, down from 109% in the previous quarter. However, B2’s in-quarter NRR improved to 116% from 109% in Q2, suggesting potential for recovery in customer retention metrics.

Forward-Looking Guidance

Looking ahead, Backblaze anticipates continued revenue growth, with expectations for Q4 revenue between $37.3 million and $37.9 million. The company aims for B2 growth between 25% and 28% year-over-year. Backblaze is also on track to achieve positive adjusted free cash flow in Q4 2025, with a focus on enhancing its Phase 2 go-to-market strategy to drive growth while maintaining stable sales and marketing expenses.

In conclusion, Backblaze’s earnings call reflected a positive yet cautious sentiment. The company celebrated significant achievements in revenue growth and industry recognition, particularly in the AI sector. However, challenges such as B2 growth shortfalls and customer variability remain. Backblaze’s forward-looking guidance suggests a strategic focus on sustaining growth and improving financial performance, positioning the company for continued success in the competitive cloud storage market.