Summary of Backblaze Q3 2025 Earnings Call

1Key Financial Results and Metrics

Total Revenue: $37.2 million, exceeding the high end of guidance ($37.1 million), representing a 14% year-over-year growth.

B2 Cloud Storage Revenue: Grew 28% year-over-year, up from 19% organic growth in the same period last year.

Adjusted EBITDA Margin: 23%, nearly double the 12% from the previous year.

Net Loss: $3.8 million, significantly improved from a loss of $12.8 million a year ago.

Non-GAAP Net Income: $1.9 million, compared to a loss of $4.1 million last year.

Net Revenue Retention (NRR): 106% for the trailing four quarters, with in-quarter NRR for B2 at 116%.

Gross Margin: 62%, up from 55% a year ago.

Adjusted Free Cash Flow: Negative $3.5 million, an improvement of $0.5 million year-over-year.

2Strategic Updates and Business Highlights

Backblaze is undergoing a Phase 2 go-to-market transformation aimed at accelerating sales velocity and enhancing self-serve and direct sales motions.

The company is focusing on AI workloads, with significant customer traction in this area, including a notable 6-figure deal with an AI start-up and a 7-figure expansion from an existing AI customer.

Backblaze's B2 Overdrive product is gaining traction, with multiple 6-figure deals closed, indicating strong product-market fit.

The company has been recognized for its technology innovation and cloud security, enhancing its market reputation.

3Forward Guidance and Outlook

For Q4, Backblaze expects revenue in the range of $37.3 million to $37.9 million, with B2 growth projected between 25% and 28% year-over-year.

The company aims to achieve positive adjusted free cash flow in Q4 and is focused on reaching a Rule of 40 profile, targeting a significant improvement from a score of 9 at the beginning of the year.

4Bad News, Challenges, or Points of Concern

The B2 growth target of 30% for Q4 has been adjusted downward due to variability in customer data storage needs, particularly from a large AI customer that trimmed its usage more than expected.

The company has noted that larger deals are taking longer to close than anticipated, which could impact growth momentum.

Computer Backup revenue: remained flat year-over-year, reflecting the final effects of a price increase implemented in 2023, indicating potential challenges in that segment.

5Notable Q&A Insights

Management acknowledged that while they are moving upmarket successfully, the complexity of larger deals requires more time and coordination among multiple stakeholders.

The Phase 2 transformation is expected to enhance operational efficiency and sales effectiveness, particularly in targeting ideal customer profiles.

There is a strong focus on improving self-serve motions to better cater to data-heavy AI use cases, with a notable increase in self-serve account creation.

The company is actively working on restructuring to fund the next phase of its go-to-market strategy, emphasizing a talent refresh and operational improvements rather than cost-cutting. Overall, Backblaze demonstrated strong financial performance in Q3 2025, with a clear focus on leveraging AI opportunities while addressing challenges in sales execution and customer variability. The outlook remains positive, with strategic initiatives aimed at driving future growth.