Backblaze Earnings Call: Strong Growth Amid Challenges

Backblaze, Inc. ((BLZE)) has held its Q2 earnings call. Read on for the main highlights of the call.

Backblaze, Inc. recently held its earnings call, revealing a generally positive sentiment with strong financial performance and growth, particularly in the B2 Cloud Storage segment and the AI market. The successful launch of B2 Overdrive and go-to-market transformation efforts were highlighted as notable achievements, despite some challenges such as the decline in Computer Backup revenue and net revenue retention (NRR). Overall, the positives significantly outweighed the negatives, painting an optimistic picture for the company’s future.

Record Revenue and Growth

Backblaze reported a total revenue of $36.3 million, marking a 16% increase year-over-year. The B2 Cloud Storage segment showed impressive growth, with revenue reaching $19.8 million, a 29% year-over-year increase. This substantial growth underscores the company’s successful expansion efforts and market penetration.

Improved Financial Metrics

The company achieved a significant milestone by doubling its adjusted EBITDA margin to 18% year-over-year. Backblaze remains on track to become adjusted free cash flow positive by the fourth quarter of 2025, reflecting strong operational improvements and financial discipline.

AI Market Opportunity

Backblaze is capitalizing on the AI market, with the number of AI customers growing by 70% and the data stored by these customers increasing 40 times year-over-year. AI companies now represent three of the top ten customers, highlighting the strategic importance of this sector for Backblaze’s growth.

Successful Launch of B2 Overdrive

The launch of B2 Overdrive has been met with quick adoption, signing the first six-figure customer within two months. This rapid uptake indicates a strong product-market fit and positions Backblaze well for continued success in this area.

Go-to-Market Transformation Success

Backblaze’s go-to-market transformation efforts have borne fruit, with a 30% year-over-year increase in the number of customers generating over $50,000 in annual recurring revenue (ARR). The growth in the pipeline and six-figure opportunities further underscores the effectiveness of these strategic initiatives.

Balance Sheet Improvements

The company has made significant strides in improving its balance sheet, reducing cash usage, recapitalizing through a secondary offering, and establishing a new line of credit. These actions provide Backblaze with greater financial flexibility moving forward.

Decline in Computer Backup Revenue

Despite overall growth, the Computer Backup segment showed only a 4% year-over-year increase and is expected to decline in the low to mid-single digits on a quarterly basis in the second half of 2025. This area remains a challenge for Backblaze as it focuses on other growth segments.

Net Revenue Retention Decline

Backblaze reported a decline in overall net revenue retention (NRR) to 109%, down from 114% the previous year. For the B2 Cloud Storage segment, NRR decreased from 126% to 112%. This decline highlights a challenge in maintaining customer retention and revenue growth.

Forward-Looking Guidance

Looking ahead, Backblaze raised its annual revenue guidance to a range of $145 million to $147 million, reflecting confidence in sustained growth. The company continues to focus on accelerating B2 growth and achieving adjusted free cash flow positivity by the fourth quarter of 2025. With improvements in gross margin and a strong customer retention rate, Backblaze is well-positioned for future success.

In summary, Backblaze’s earnings call highlighted a strong financial performance with significant growth in key areas such as B2 Cloud Storage and the AI market. Despite some challenges in the Computer Backup segment and net revenue retention, the company’s strategic initiatives and financial improvements paint an optimistic outlook for the future.