Braze, Inc. ((BRZE)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Braze, Inc.’s recent earnings call for fiscal Q3 2026 painted a largely positive picture, showcasing significant revenue growth, profitability improvements, and an expanding customer base, all driven by innovative AI solutions. Despite these achievements, the company acknowledged challenges such as decreased gross margins and high switching costs for enterprise customers.
Strong Revenue Growth
Braze reported impressive financial results with $191 million in revenue for Q3 2026, marking a 25.5% increase year-over-year and a 6% rise from the previous quarter. This growth underscores the company’s robust performance and strategic market positioning.
Improved Profitability
The company achieved notable profitability improvements, with non-GAAP operating margins improving by over 400 basis points year-over-year. Additionally, Braze generated $18 million in free cash flow, highlighting its efficient operational management.
Customer Base Expansion
Braze’s customer base saw significant expansion, with the addition of 106 new customers sequentially and 317 year-over-year. This marks the strongest customer addition quarter in three years, bringing the total to 2,528 customers, a 14% increase.
AI-Driven Innovations
The company’s AI capabilities have been pivotal, driving a 12% uplift in app downloads and a 15% increase in conversion to premium memberships for a U.S. e-commerce brand. Braze AI decisioning studio alone contributed $4.8 million in revenue for the quarter.
Successful Black Friday and Cyber Monday
During Cyber Week, Braze excelled by delivering 102.5 billion messages, with a 90% increase in SMS and WhatsApp sends, a 55% increase in content card impressions, and a 32% increase in email messages, showcasing its effective customer engagement strategies.
Decreased Gross Margin
Braze experienced a decrease in non-GAAP gross margin to 69.1% from 70.5% year-over-year. This was primarily due to higher premium messaging volume and increased hosting costs, which the company is actively addressing.
Enterprise Switching Costs
Despite the benefits of Braze’s platform, enterprise customers remain hesitant to switch from legacy systems due to high switching costs. This presents a challenge that Braze continues to navigate.
Forward-Looking Guidance
Looking ahead, Braze remains optimistic about its future, aiming to maintain its leadership in omnichannel customer engagement through ongoing innovation and strategic investments. The company plans to continue leveraging its AI capabilities and expanding its use of premium messaging channels to drive growth.
In conclusion, Braze, Inc.’s earnings call for Q3 2026 highlighted a positive trajectory with strong revenue growth, improved profitability, and a growing customer base, driven by AI innovations. While challenges such as decreased gross margins and high switching costs persist, the company’s forward-looking strategies and investments position it well for continued success.