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Braze, Inc. (BRZE)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue of $152.1M, up 22.7% year-over-year, with non-GAAP diluted EPS of $0.02; the company exceeded its own Q3 guidance ranges for revenue ($147.5–$148.5M), non-GAAP operating loss (guided $(3.5)–$(4.5)M; actual $(2.2)M), and delivered a positive non-GAAP net income despite prior guidance for a loss .
  • Q4 FY25 guidance calls for revenue of $155.0–$156.0M, non-GAAP operating income of $2.0–$3.0M, and non-GAAP diluted EPS of $0.05–$0.06; FY25 guidance was raised across revenue, non-GAAP operating loss, non-GAAP net income, and EPS .
  • Remaining performance obligations reached $716.8M (+28% YoY), with current RPO at $458.2M; large customer cohort (ARR ≥$500K) rose to 234 (+24% YoY). Dollar-based net retention trended lower (all customers: 113%; large: 116%), reflecting ongoing upsell caution and rightsizing at renewals .
  • Catalysts: Strong beat vs company guidance, continued enterprise displacement of legacy marketing clouds, record holiday messaging volumes (50B messages, 100% uptime), and Project Catalyst (BrazeAI agent) moving toward beta and monetization; management reiterated confidence in reaching positive non-GAAP OpInc and FCF starting Q4 .

What Went Well and What Went Wrong

What Went Well

  • Beat vs company guidance: Revenue $152.1M vs $147.5–$148.5M, non-GAAP operating loss improved to $(2.2)M vs guided $(3.5)–$(4.5)M, and non-GAAP net income turned positive ($2.5M) vs guided loss; “We are confidently on track to meet our profitability targets for the fiscal fourth quarter and full fiscal year 2025” — CEO Bill Magnuson .
  • Enterprise momentum and scale: Large customers (ARR ≥$500K) reached 234 (+24% YoY); passed ~$600M committed ARR, underscoring ROI-based wins and enterprise consolidation .
  • Platform and AI advances: Announced Project Catalyst (BrazeAI agent) to deliver one-to-one optimized experiences; “Project Catalyst will absolutely be a part of Canvas… this will be a paid and premium feature,” setting up incremental monetization via credits or SKU pricing .

What Went Wrong

  • Retention pressure: Dollar-based net retention fell to 113% (all customers) and 116% (large), with management citing buyers committing closer to near-term needs and rightsizing at renewal; FY year-end NRR expected around ~110% .
  • Profitability and cash flow: GAAP operating loss of $32.6M; free cash flow of $(14.2)M in the quarter, with management noting event costs (Forge) and quarterly payment timing volatility .
  • Margins modestly compressed: Non-GAAP gross margin at 70.5% (down ~90bps YoY) driven by premium messaging mix, partially offset by tech stack cost optimization; long-term non-GAAP GM target raised to 69–74% at Investor Day .

Financial Results

Summary Performance vs Prior Quarters

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$135.5 $145.5 $152.1
GAAP EPS ($)$(0.35) $(0.23) $(0.27)
Non-GAAP Diluted EPS ($)$(0.05) $0.09 $0.02
GAAP Gross Margin (%)67.1% 70.2% 69.8%
Non-GAAP Gross Margin (%)67.9% 70.9% 70.5%
Non-GAAP Operating Margin (%)(7.4)% 2.9% (1.4)%
RPO ($USD Millions)$657.3 $689.6 $716.8
Current RPO ($USD Millions)$419.8 $438.3 $458.2

Segment Revenue Breakdown

Segment ($USD Millions)Q1 2025Q2 2025Q3 2025
Subscription Revenue$130.1 $140.0 $146.3
Professional Services and Other$5.4 $5.5 $5.8

KPIs

KPIQ1 2025Q2 2025Q3 2025
Dollar-Based Net Retention (All Customers)117% 114% 113%
Dollar-Based Net Retention (≥$500K ARR)119% 117% 116%
Total Customers2,102 2,163 2,211
Customers ≥$500K ARR212 222 234
Cash, Cash Equivalents, Restricted Cash, Marketable Securities ($USD Millions)$487.7 $504.5 $493.1

Actual vs Company Q3 Guidance

MetricCompany Guidance (Q3 FY25)Actual (Q3 FY25)Result
Revenue ($USD Millions)$147.5–$148.5 $152.1 Beat
Non-GAAP Operating Income (Loss) ($USD Millions)$(3.5)–$(4.5) $(2.2) Better than guided loss
Non-GAAP Net Income (Loss) ($USD Millions)$(0.5)–$(1.5) $2.5 Surprise positive
Non-GAAP Diluted EPS ($)$0.00–$(0.01) $0.02 Beat

Note: S&P Global consensus estimates were unavailable due to request limits; comparisons vs Street are therefore not provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$582.5–$585.5 $588.0–$589.0 Raised
Non-GAAP Operating Income (Loss) ($USD Millions)FY 2025$(7.5)–$(8.5) $(5.0)–$(6.0) Raised (less negative)
Non-GAAP Net Income ($USD Millions)FY 2025$6.5–$7.5 $11.0–$12.0 Raised
Non-GAAP Diluted EPS ($)FY 2025$0.06–$0.07 $0.10–$0.11 Raised
Diluted Weighted Avg Shares (Millions)FY 2025~108.0 ~107.0 Lower
Revenue ($USD Millions)Q4 FY 2025N/A$155.0–$156.0 Initiated
Non-GAAP Operating Income ($USD Millions)Q4 FY 2025N/A$2.0–$3.0 Initiated
Non-GAAP Net Income ($USD Millions)Q4 FY 2025N/A$5.0–$6.0 Initiated
Non-GAAP Diluted EPS ($)Q4 FY 2025N/A$0.05–$0.06 Initiated
Diluted Weighted Avg Shares (Millions)Q4 FY 2025N/A~107.5 Initiated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 FY25)Trend
AI/Technology InitiativesIntroduced Braze Data Platform; launched Free Trial and Startups program (Q2) . Solid product differentiation focus (Q1) .Announced Project Catalyst (BrazeAI agent) for 1:1 optimization; part of Canvas; paid premium feature; beta planned H1 FY26 .Advancing toward monetizable AI agent embedded in Canvas.
Messaging Channels ExpansionOngoing premium messaging; platform channel breadth emphasized (Q2) .Expanded LINE (GA), RCS Business (beta), new WhatsApp features; flexible credits enable cross-channel upsell/adoption .Broader global reach; pricing flexibility supports experimentation and expansion.
Macro/Demand Environment“Uneven macro” backdrop noted (Q1) .Stable demand; no meaningful improvement; continued vendor consolidation and legacy replacements .Stable but not expansionary; setup for multi-year legacy takeaways.
Go-to-Market EfficiencyLaunch of Free Trial and Startups; global expansion to Brazil, Romania, UAE, Korea; Indonesia data center plan (Q1) .Flexible credits now purchased by >450 customers; improved win rates; new America’s sales leader; agency ecosystem activation .Efficiency and partner-led motion improving cycle time and adoption.
Retention/NRRNRR sequentially trending down (Q1: 117%; Q2: 114%) .NRR all customers 113%; large 116%; FY around ~110% due to buyers near-term commit and renewal rightsizing .Stabilizing but pressured; focus on upsell motion and reducing partial churn.
Regional MixGlobal exposure emphasized; intl. mix rising (Q2) .Intl. revenue ~45% (consistent QoQ; +1ppt YoY) .Steady diversification, aiding growth resilience.

Management Commentary

  • “We generated $152.1 million of revenue, up 23% year-over-year… we passed $600 million of committed annual recurring revenue… we achieved positive non-GAAP net income and expect to maintain positive quarterly net income moving forward.” — Bill Magnuson, CEO .
  • “Project Catalyst… will be a part of Canvas… bringing a new era of customer journey design… this will be a paid and premium feature,” with pricing via flexible credit model or a net new SKU .
  • “Over the 4-day [Black Friday–Cyber Monday] weekend, Braze delivered over 50 billion messages, up 35% year-over-year with 100% uptime,” alongside rising cross-channel Canvas usage and premium messaging .
  • “Non-GAAP gross margin of 70.5%… decline YoY primarily driven by expansion of premium messaging channels, partially offset by continued cost optimization,” with long-term non-GAAP GM target raised to 69%–74% .
  • “We remain on track to deliver positive non-GAAP operating income and free cash flow beginning in Q4 of this year.” — CFO Isabelle Winkles .

Q&A Highlights

  • Project Catalyst positioning and monetization: Embedded in Canvas; premium feature with pricing via flexible credits or new SKU; focused on optimization at one-to-one scale with generative and reasoning capabilities .
  • Net retention trajectory: In-period stability but continued pressure; year-end NRR around ~110% guided; rightsizing at renewal and buyers committing closer to known needs are key drivers .
  • Go-to-market upgrades: >450 customers on flexible credits, enabling faster cross-channel adoption (LINE, RCS, WhatsApp) without new orders; strengthened sales leadership and agency partner ecosystem driving higher win rates and better onboarding outcomes .
  • Billings/linearities: Reacceleration influenced by annual upfront contract mix dynamics YoY; typical seasonality with ~1/3 net new ACV in Q4 and ~50% booked in last month .
  • Demand environment: Stable, not expansionary; robust pipeline for legacy replacements and enterprise takeaways as incumbents pivot product stacks (Salesforce/Adobe), creating multi-year share gain opportunities .

Estimates Context

  • S&P Global consensus estimates for Q3 FY25 were unavailable due to request limits at the time of retrieval; as a result, comparisons to Street estimates are not provided. We instead benchmarked actuals vs company-issued Q3 guidance ranges from the Q2 release .

Key Takeaways for Investors

  • Execution beat: Strong upside vs company Q3 guidance across revenue, non-GAAP op metrics, and EPS; the trajectory supports positive non-GAAP operating income and free cash flow from Q4 onward .
  • Enterprise displacement cycle: Growing large-customer count and category recognition (Gartner Leader) underpin continued wins versus legacy suites; incumbents’ focus shifts create window for share gains .
  • AI monetization: Project Catalyst’s integration with Canvas and premium pricing model (credits/SKU) set up incremental monetization as generative/agentic AI moves from pilots to scaled adoption in 2025–2026 .
  • Mix headwinds manageable: Premium messaging compresses gross margin modestly, but tech stack efficiencies and raised long-term GM target (69–74%) indicate margin resilience .
  • Retention watchpoint: NRR pressure likely persists near term (FY ~110%); focus on flexible credits, cross-channel adoption, and partner-enabled onboarding to strengthen upsells and reduce partial churn .
  • Cash and reinvestment: Quarterly FCF volatility expected; cash/marketable securities at ~$493M provide ample capacity for disciplined reinvestment in product, ecosystem, and global expansion .
  • Tactical setup: Near-term trading catalyzed by Q4 profitability inflection, AI agent updates, and continued enterprise takeaways; medium-term thesis hinges on AI-driven engagement leadership, partner ecosystem scale, and multi-channel orchestration differentiation .