Braze Beat Expectations—Now 2 SaaS Peers Are in Focus

Key Points

• Braze reported 26% year-over-year revenue growth to $227 million and 112% large-customer net retention, prompting analysts to rate shares favorably despite a 27% YTD decline.
• Klaviyo, a Braze competitor serving e-commerce clients, posted 26% revenue growth and raised guidance, yet its shares have fallen 51% YTD amid near-term margin pressure.
• Similarweb, a smaller digital intelligence platform, grew revenue 9% YOY to $77 million and has seen shares rise 11% YTD, benefiting from AI growth and improved retention.

Customer engagement software can help businesses gather and track critical data to strengthen client relationships, potentially driving higher revenue and better retention. At a time when customers are increasingly picky about how they spend their money, the customer engagement platform space may be consolidating around a handful of names that have been particularly successful and are growing quickly.

The latest firm in this industry to make headlines for its notable performance is Braze Inc. NASDAQ: BRZE, which reported strong fiscal Q2 results earlier in September. Braze's performance last quarter came on the heels of similar earnings wins from firms like Snowflake Inc. NYSE: SNOW, signaling that enterprise software firms may be on a hot streak thanks to accelerating demand.

Two other companies in similarly data-focused spaces—Klaviyo Inc. NYSE: KVYO and Similarweb Ltd. NYSE: SMWB—may be worth watching because they share some of the two firms above's qualities.

Braze Builds Its Large-Customer Base

Braze's latest earnings results demonstrate growth across multiple categories and are an important sign for the software-as-a-service (SaaS) industry. Its mobile-first customer engagement platform has built a solid base of more than 1,000 large enterprise customers, many of whom are expanding their engagement with the company's tools, thereby generating crucial recurring income.

At 26% year over year (YOY) revenue growth, Braze reported $227 million in sales for the latest quarter. The more important figure, however, may be its 112% in large-customer net retention. This foundation gives the company plenty of room to continue growing its free cash flow, which was already a record $22 million last quarter.

About a third of large Braze customers use its paid BrazeAI tools, a reflection of the company's increasingly strong positioning with its emerging AI offerings.

This has helped the company to raise forward guidance for revenue, operating income, and margin. On this last point, however, there may be near-term struggles; management expects the current quarter to pressure operating margin due to unique one-time costs.

No matter, though, as this has not prevented analysts from viewing BRZE shares very favorably. Only two out of the 22 analysts rating the stock call it anything other than a Buy. Shares are down 27% year to date (YTD) but could rise by about 53%, according to consensus price estimates.

A Complementary Offering to Braze Facing Many of the Same Challenges and Opportunities

Klaviyo is a competitor to Braze as a customer engagement platform provider, but it targets a different customer base and offers a unique set of features and tools. Klaviyo's marketing services are catered toward e-commerce companies rather than Braze's enterprise clientele. The result is that the two firms can both thrive under similar conditions and don't necessarily hinder one another's performance.

With this in mind, it's no surprise that KVYO shares have also struggled so far this year, dropping by an even wider 51% YTD.

This is despite the fact that the company also reported many strengths in its latest earnings, including 26% YOY top-line growth driven by its text, WhatsApp, analytics, and other programs. The firm also raised full-year guidance, anticipating broad gains across multiple sections of its business.

Like Braze, Klaviyo has seen early success with its AI products, with Customer Agent adoption surging by 40% on a sequential basis and generating noteworthy return on investment for customers. At the same time, margins are under pressure in the near term, which may be part of the reason for the recent share sell-off. Regardless, KVYO stock enjoys a similar level of enthusiasm from analysts to BRZE.

Similarweb's Unique Angle May Set Its Share Price Performance Apart

The SaaS landscape is large and only getting bigger, and Similarweb offers a different angle from either of the firms above.

As a digital intelligence platform, it provides crucial data and analytics services for companies looking to better understand their customers and competitors—meaning that it doesn't engage directly with customers in the same way as Braze, for instance. This makes Similarweb a compelling complement to both of the firms above while also serving yet another unique customer base.

Similarweb has experienced a very different trajectory this year, with shares climbing 11% YTD. The latest quarterly report shows that revenue and profitability are improving, although the company is operating at a much smaller scale in these areas than the firms above. Sales climbed by 9% YOY but reached just $77 million, for instance. Still, it also enjoys many of the same tailwinds, including a growing AI business, major improvements to recurring revenue and customer retention, and improved guidance.