Q3 2025 Earnings Summary
- Braze is well-positioned to capture market share from legacy vendors like Adobe and Salesforce due to platform shifts and focus changes at those companies, leading to enterprise takeover opportunities over the next 12 to 24 months.
- Braze's AI innovations are providing significant competitive differentiation, improving win rates against both large legacy vendors and regional startup competitors, and positioning the company well for future growth.
- Braze's flexible credit model encourages customers to adopt new channels and expand their use cases globally by reducing friction in the sales process, ultimately leading to increased customer satisfaction and long-term revenue growth.
- Braze is experiencing a declining dollar-based net retention rate, with the rate decreasing from 113% in Q3 to an expected 110% by year-end, indicating pressure on expansion among existing customers.
- The company does not anticipate any improvement in the demand environment heading into next year, as macroeconomic conditions remain challenging, which could limit Braze's growth prospects.
- The shift to a flexible credits model may delay or reduce net new bookings, as customers are no longer required to make net incremental commitments when trying new channels, potentially creating a short-term headwind on new bookings growth.
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Capturing market share from legacy marketing cloud vendors (Adobe, Salesforce) | Mentioned in Q4 2024, Q1 2025, Q2 2025: <br> • Discussed displacing legacy marketing clouds, citing advantages in real-time capabilities, AI, and vendor consolidation. | Q3 2025: <br> • Highlighted competitive opportunity due to Adobe/Salesforce platform shifts, enabling new wins. | Recurring topic with continued positive sentiment around market share gains |
AI-driven competitive differentiation | Mentioned in Q4 2024, Q1 2025, Q2 2025: <br> • Emphasized AI’s role in personalization, copy generation, and competitive edge in RFPs. | Q3 2025: <br> • Stated AI innovation improved competitive win rates and long-term positioning. | Recurring topic with strengthening sentiment as AI remains a key differentiator |
Flexible credit model influencing bookings and expansions | Mentioned in Q2 2025: <br> • Introduced to align purchasing with usage; reduced churn risk and enabled faster adoption of new channels. | Q3 2025: <br> • Credited with reducing partial churn and enabling cross-channel adoption, seen as a long-term revenue driver. | Recurring topic with positive sentiment, driving expansion and retention |
Declining net dollar retention and elevated churn | Mentioned in Q4 2024, Q1 2025, Q2 2025: <br> • Cited rolling off stronger quarters, rightsizing of contracts, and SMB churn. | Q3 2025: <br> • Net retention expected to decline to 110% by year-end; elevated churn from rightsizing contracts. | Recurring topic with negative sentiment, reflecting cautious customer behavior |
Persistent macroeconomic headwinds affecting demand | Mentioned in Q4 2024, Q1 2025, Q2 2025: <br> • Highlighted longer deal cycles, budget scrutiny, and price sensitivity. | Q3 2025: <br> • No major improvement expected; customers prioritize cost savings over expansion. | Recurring topic with consistent negative sentiment, hampering bigger replatforming deals |
Expanding large enterprise relationships (8-figure deals) | Mentioned in Q4 2024, Q2 2025: <br> • Expanded to first 8-figure account in Q4; announcements of second and third 8-figure accounts in Q2. | Q3 2025: <br> • No mention. | No current mention but previously a positive growth driver |
Preparing RCS support ahead of iOS 18 | Mentioned in Q2 2025: <br> • Braze highlighted RCS as a richer alternative to SMS, leveraging existing R&D, with flexible credits to ease adoption. | Q3 2025: <br> • No mention. | No current mention after prior excitement |
WhatsApp pricing model changes introducing monetization uncertainty (only mentioned in Q1 2025) | Mentioned in Q1 2025: <br> • Meta’s shift to dynamic pricing introduced uncertainty but remained a low single-digit revenue share. | Q3 2025: <br> • No mention. | No current mention after earlier concerns |
Continued international expansion through new offices and data centers | Mentioned in Q1 2025: <br> • Announced expansions to Sao Paulo, Bucharest, Dubai, Seoul, and new APAC data center. | Q3 2025: <br> • No mention. | No current mention but previously highlighted global reach |
Profitability and gross margin pressures from premium channels | Mentioned in Q4 2024, Q1 2025, Q2 2025: <br> • Noted near-term margin impacts from WhatsApp and premium SMS, but continued cost optimization. | Q3 2025: <br> • Gross margin at ~70.5%, slightly down; premium channels remain a headwind, offset by tech stack efficiencies. | Recurring topic with moderate negative sentiment, improved overall profitability but margin pressure persists |
Strategic initiatives like Braze for Startups and free trials to drive customer acquisition | Mentioned in Q2 2025: <br> • Launched Braze for Startups and 14-day free trials to expand reach and showcase platform capabilities. | Q3 2025: <br> • Early progress noted; free trials used for top-of-funnel awareness and enterprise sandbox. | Recurring topic with positive sentiment, aimed at expanding the customer base |
-
Pressure on Net Retention Rate
Q: What's causing pressure on net dollar retention?
A: Isabelle explained that customers are purchasing closer to their immediate needs, leading to smaller upsells, while some are rightsizing contracts upon renewal due to not fully utilizing previous commitments. These factors combined are putting pressure on the net dollar retention rate. -
Demand Environment Outlook
Q: How do you view the overall spending environment?
A: Bill mentioned that while they see stability and have foresight into next year's budgets, they are not expecting improvement in the demand environment. Businesses are prioritizing cost savings over expansion, and Braze is confident operating within this environment without assuming improvement in their forecasts. -
Bookings and Revenue Growth Guidance
Q: Can you explain the bookings acceleration and revenue guidance?
A: Isabelle noted that the increase in billings was due to a higher volume of annual upfront contracts in Q3 compared to a low point last year. This leads to year-over-year acceleration but isn't necessarily indicative of ongoing business evolution. Guidance reflects this dynamic and maintains a cautious outlook. -
Profitability and Margin Outlook
Q: How should we think about profitability versus growth?
A: Isabelle emphasized that they are balancing growth with profitability, focusing on sustainable investment with high ROI. They plan to expand operating income within the framework laid out at Analyst Day, reinvesting available dollars back into the business while maintaining disciplined financial management. -
Competitive Positioning Against Salesforce and Adobe
Q: How is Braze positioned against competitors like Salesforce and Adobe?
A: Bill stated that Salesforce's focus on agent force has led them to neglect Salesforce Marketing Cloud, opening opportunities for Braze. He believes both Salesforce's and Adobe's legacy products are not suited for modern customer engagement, allowing Braze to step in and build momentum during their transition periods. -
Project Catalyst and AI Initiatives
Q: What's the progress on Project Catalyst and AI offerings?
A: Bill shared that Project Catalyst will be part of Canvas as a paid premium feature, bringing a new era of customer journey design optimized by AI. They are excited about its potential but are focusing first on performance and usability before monetization. -
Go-To-Market Strategy Improvements
Q: How are the new go-to-market initiatives progressing?
A: Bill highlighted that over 450 customers have adopted flexible message credits, improving sales flexibility and speeding up go-to-market processes. They are also strengthening sales leadership with new hires, leading to higher win rates and better onboarding outcomes. -
Partner Ecosystem Development
Q: What's the update on the partner ecosystem and OEM opportunities?
A: Bill mentioned that while their sales strategy remains direct, they continue to invest in aligning with tech partners and expanding reseller relationships. OEM sales are not a significant part of their strategy, but they are leveraging partnerships for better sales alignment and technical integration.