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Backblaze, Inc. (BLZE)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a double beat: revenue $37.2M (+14% YoY) and non-GAAP EPS $0.03 both above consensus; adjusted EBITDA margin hit 23% vs guidance 17–19% and gross margin expanded ~700 bps YoY to 62% .
  • B2 Cloud Storage grew 28% YoY to $20.7M, while Computer Backup was flat YoY at $16.5M; ARR reached $147.2M (+13% YoY) with B2 ARR +26% YoY to $81.8M .
  • Guidance: Q4 revenue $37.3–$37.9M and adj. EBITDA margin 20–22%; FY 2025 revenue narrowed to $145.4–$146.0M and adj. EBITDA margin raised to 18–20% (from 17–19%) .
  • Near-term catalysts: continued AI-driven B2 momentum (seven-figure expansion win), margin discipline, and Q4 target to be adjusted free cash flow positive; watch variability from a large AI customer and timing of larger deals as noted on the call .

What Went Well and What Went Wrong

What Went Well

  • “Third quarter financial results exceeding the high end of our revenue and Adjusted EBITDA guidance and expanding gross margin by ~700 bps YoY to 62%. We remain on track to be free-cash-flow positive in Q4.” – CEO Gleb Budman .
  • B2 Cloud Storage +28% YoY revenue growth to $20.7M; record non-GAAP net income and adjusted EBITDA margin achieved, validating operating leverage and go-to-market execution .
  • Wins include a seven-figure TCV expansion with an AI-powered video surveillance customer and multiple six-figure deals (including Powered By Backblaze white-label); Overdrive recognized for enterprise innovation .

What Went Wrong

  • B2 growth below the 30% target; Q4 outlook moderated to 25–28% due to variability at a large AI customer and longer sales cycles for larger deals .
  • Net Revenue Retention (trailing four-quarter) softened to 106% (B2 110%; CBU 101%) vs prior-year levels as price increase tailwinds lap and mix effects evolve .
  • Announced a 2025 Restructuring Plan (Q4 charges ~$4.4–$6.0M) to fund Phase 2 GTM transformation; includes $0.9–$1.2M office footprint impairment and severance .

Financial Results

Quarterly performance vs prior quarters

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$34.6 $36.3 $37.2
Non-GAAP EPS ($USD)$(0.03) $0.01 $0.03
Gross Margin (%)56% 63% 62%
Adjusted EBITDA Margin (%)18% 18% 23%

Actual vs Wall Street consensus (S&P Global) and next quarter estimates

MetricQ1 2025 Estimate*Q1 2025 ActualQ2 2025 Estimate*Q2 2025 ActualQ3 2025 Estimate*Q3 2025 ActualQ4 2025 Estimate*
Revenue ($USD)$34.22M*$34.61M $35.42M*$36.30M $36.93M*$37.16M $37.59M*
Primary EPS ($USD)$(0.06)*$(0.03) $(0.0525)*$0.01 $(0.0171)*$0.03 $(0.0075)*

Values marked with * retrieved from S&P Global.

  • Q3: revenue beat ($37.16M vs $36.93M*) and non-GAAP EPS beat ($0.03 vs $(0.0171)); Q2: revenue beat ($36.30M vs $35.42M) and EPS beat ($0.01 vs $(0.0525)*); Q1: slight revenue beat and narrower non-GAAP loss than expected .

YoY comparison (Q3)

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$32.6 $37.2
GAAP Net Loss ($USD Millions)$(12.8) $(3.8)
GAAP EPS ($USD)$(0.29) $(0.07)
Non-GAAP EPS ($USD)$(0.10) $0.03
Gross Margin (%)55% 62%
Adjusted EBITDA Margin (%)12% 23%

Segment breakdown

MetricQ1 2025Q2 2025Q3 2025
B2 Cloud Storage Revenue ($USD Millions)$18.0; +23% YoY $19.8; +29% YoY $20.7; +28% YoY
Computer Backup Revenue ($USD Millions)$16.6; +8% YoY $16.5; +4% YoY $16.5; flat YoY

KPIs

KPIQ1 2025Q2 2025Q3 2025
ARR ($USD Millions)$140.8 (+15% YoY) $145.9 (+16% YoY) $147.2 (+13% YoY)
B2 ARR ($USD Millions)$73.8 (+24% YoY) $80.7 (+29% YoY) $81.8 (+26% YoY)
Computer Backup ARR ($USD Millions)$67.0 (+7% YoY) $65.2 (+3% YoY) $65.4 (flat YoY)
Trailing 4-Qtr NRR (Total)113% 109% 106%
Trailing 4-Qtr NRR (B2 / CBU)117% / 108% 112% / 106% 110% / 101%
In-Quarter NRR (Q3 only)——Total 107%; B2 116%; CBU 96%
Gross Customer Retention (Total)90% 90% 91%
Gross Customer Retention (B2 / CBU)89% / 90% 89% / 90% 89% / 90%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2025n/a$37.3–$37.9 New
Adjusted EBITDA Margin (%)Q4 2025n/a20–22 New
Basic Weighted Avg Shares (Millions)Q4 2025n/a58.0–58.2 New
Revenue ($USD Millions)FY 2025$145.0–$147.0 $145.4–$146.0 Narrowed
Adjusted EBITDA Margin (%)FY 202517–19 18–20 Raised
B2 YoY Growth (%)Q4 202530%+ (target) 25–28 Lowered vs target

Context: Q4 revenue range widened slightly to reflect variability in certain large customers; FY adj. EBITDA margin raised on operating leverage; B2 Q4 growth moderated reflecting AI customer usage variability and longer cycles for larger deals .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/technology initiativesLaunched B2 Overdrive; AI data +25x (Q1); first six-figure Overdrive win (early Q3); three of top-10 customers AI in Q2 Seven-figure AI surveillance expansion; multiple six-figure wins; Overdrive highlighted (up to 1 Tbps throughput) Improving (broader adoption)
Go-to-market (GTM) transformationPhase 1: doubled bookings, pipeline, channels; upmarket motion; record TCV displacement from AWS Phase 2 launched to increase execution velocity (RevOps, systems upgrades, advisors), funded by restructuring Investing to accelerate
Large deal timing/variabilityLonger decision cycles noted; some customers moving faster via pay-as-you-go Variability from a large AI customer and random timing delays (committee, compliance); widened Q4 revenue range Mixed/volatile near term
Tariffs/macroTariffs scenario analysis: 10% import tariff ≈ ~1.5% COS over asset life; diversified sourcing No new tariff impact; focus on GTM Phase 2 and AI demand Stable/low impact currently
Product performance/securityNew security features (Anomaly Alerts, RBAC console, bucket logs); ESG study on cost/management efficiency Industry awards (Object Lock; Overdrive); Performance Stats benchmarking vs AWS/Cloudflare/Wasabi Strengthening positioning
Powered By (white-label)Partnerships (e.g., PureNodal) White-label six-figure win; channel partners adopting Powered By; opportunities with ~200 Neo clouds Expanding

Management Commentary

  • “Data is where AI companies win… Backblaze has built one of the largest, fastest, and most cost-effective storage clouds… offering throughput up to 1 terabit per second and priced at about one-fifth that of traditional cloud offerings… free egress and universal data migration.” – CEO Gleb Budman .
  • “We delivered above the high end of guidance for revenue and adjusted EBITDA… on track to be adjusted free cash flow positive in Q4… focused on getting B2 to a rule of 40 and roughly tripling our score this year.” – CFO Marc Suidan .
  • “Phase 2 GTM is about execution velocity… upgrading systems, adding operational GTM talent, and leveraging advisors who have helped Snowflake and Databricks.” – Management on GTM Phase 2 .

Q&A Highlights

  • B2 growth and variability: Q4 B2 outlook 25–28% (vs 30% target) due to a large AI customer trimming and longer cycles for upmarket deals; inbound motion strong, outbound muscle being strengthened in Phase 2 .
  • Deal dynamics: Larger deals face committee and compliance processes; some six-figure Overdrive deals closed in as little as ~3 months; Powered By adoption rising among partners and mid-market high-data users .
  • Investment and restructuring: Sales & marketing as % of revenue to remain stable; restructuring funds systems transformation and one-time severance while refreshing talent within existing OpEx .
  • AI mix: ~a quarter of new business from AI companies; growing AI video workloads; customers value predictable pricing and high performance .
  • Share repurchase/dilution: $1.2M repurchased in Q3 under the $10M authorization; ongoing focus on reducing equity dilution .

Estimates Context

  • Q3 beats: revenue $37.16M vs $36.93M* and EPS $0.03 vs $(0.0171)*; continuing the Q2 pattern of beats on both top and bottom line .
  • Near-term estimate revisions likely up for margins (adj. EBITDA) given FY range raised to 18–20% and Q4 guide at 20–22%; revenue estimates may modestly adjust to the widened Q4 range reflecting large-customer variability .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: The double beat, raised FY margin guidance, and Q4 FCF positivity target are supportive of sentiment; monitor Q4 execution with a widened revenue range due to large-customer variability .
  • AI momentum: B2 growth remains robust at +28% YoY with continued AI-driven wins and Overdrive traction; Powered By expansion broadens channel and mid-market exposure .
  • Margin trajectory: Structural cost actions (useful life study, scale, code efficiency) and GTM discipline underpin sustained gross margin ~60%+ and adj. EBITDA 20%+ target in Q4 .
  • Execution watchpoints: Phase 2 GTM (RevOps, systems, outbound muscle) is key to re-accelerating B2 toward/exceeding 30%; track sales cycle speed and pipeline conversion .
  • Risk factors: Customer usage variability in AI cohorts, Computer Backup secular stability (flat YoY in Q3), and restructuring charges in Q4 (~$4.4–$6.0M) .
  • Strategic positioning: Performance transparency (Performance Stats), awards (Object Lock, Overdrive), and free egress/open cloud stance differentiate vs hyperscalers, aiding competitive displacements and multi-cloud workflows .
  • Medium term: Continued operating leverage, dilution management (repurchases), and potential for larger upmarket wins support the thesis of durable, profitable growth toward a Rule of 40 profile .