BLZE — Backblaze, Inc.

Summary of Backblaze (BLZE) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Revenue: $37.8 million, in line with guidance.
• Adjusted EBITDA Margin: 28%, doubled year-over-year.
• Adjusted Free Cash Flow: Positive $4 million, marking the first time Backblaze achieved adjusted free cash flow profitability as a public company.
• Full Year Revenue Growth: 14% year-over-year; B2 Cloud Storage segment grew 26%.
• Net Revenue Retention (NRR): 111%, down from 116% in the previous quarter, reflecting variability from a large customer.
• RPO (Remaining Performance Obligations): Increased 60% year-over-year to $66 million.

2. Strategic Updates and Business Highlights

• Go-to-Market Transformation: Backblaze is focusing on increasing awareness, driving pipeline consistency, and expanding revenue within the existing customer base.
• Customer Growth: 168 customers generating over $50,000 in ARR, a 35% increase year-over-year, with the cohort's ARR growing 73% to $26 million.
• Launch of B2 Neo: A high-performance white label storage offering aimed at neoclouds, developed in collaboration with customers.
• Flamethrower Program: A new initiative targeting high-growth startups, showing strong early engagement.
• Leadership Enhancements: New hires in engineering, product, and customer success to support growth initiatives.

3. Forward Guidance and Outlook

• Q1 2026 Revenue Guidance: Expected to be between $37.6 million and $38 million.
• Full Year 2026 Revenue Guidance: Projected between $156.5 million and $158.5 million, with adjusted EBITDA margins expected to be 19% to 21%.
• B2 Revenue Growth: Anticipated to be around 20% for the full year, with quarterly growth in Q2 and Q3 expected to be between 12% and 19% due to a difficult comparison from a large customer in 2025.

4. Bad News, Challenges, or Points of Concern

• Declining Customer Base in Computer Backup: Expected to decline 5% year-over-year, with current Q1 showing a decline of about 3%.
• Gross Margin Pressure: Anticipated headwinds from rising data center costs and the need for accelerated CapEx, which could impact gross margins by a few hundred basis points.
• Sales Cycle Variability: Larger deals, particularly in the neocloud segment, are taking longer to close, creating uncertainty in revenue timing.
• NRR Fluctuations: Potential for NRR to dip closer to 100% in Q2 and Q3 due to the impact of the large customer.

5. Notable Q&A Insights

• Customer Demand Patterns: Gleb Budman noted that the demand for neoclouds is driven by the need for storage solutions to complement GPU offerings, with many neoclouds initially focusing on GPUs without adequate storage solutions.
• Competitive Landscape: The large neocloud deal was won due to Backblaze's established reputation and technical capabilities, with the company positioned as a trusted storage provider.
• Investment in CapEx: Higher CapEx is expected in 2026, primarily to support the infrastructure needed for new customer demands.
• Longer Sales Cycles: Larger deals are taking longer to close, but many are moving quickly, with some deals closing in under 90 days.
• AI Market Opportunity: Backblaze is positioning itself as a key player in the AI infrastructure space, with significant growth in AI customer segments.

Overall, Backblaze reported solid financial results and strategic advancements, particularly in the AI and neocloud markets, while also acknowledging challenges in customer retention and gross margin pressures.