Backblaze NASDAQ: BLZE reported what executives described as a “strong quarter” for its first quarter of fiscal 2026, citing revenue and profitability that exceeded the company’s guidance alongside accelerating momentum in its B2 Cloud Storage business and growing demand tied to artificial intelligence workloads.
Q1 results topped guidance as B2 drove growth
Co-founder and CEO Gleb Budman said the company ended the quarter with $38.7 million in revenue, up 12% year-over-year, and noted that B2 grew 24%. CFO Marc Suidan said Backblaze exceeded the high end of its guidance for both revenue and adjusted EBITDA, calling the outperformance “broad-based across both B2 Cloud Storage and Computer Backup.”
Suidan said B2 Cloud Storage revenue was $22.4 million, up 24% year-over-year, while B2 ARR grew 28% year-over-year. He attributed the quarter’s revenue beat to higher customer data consumption on the B2 platform and computer backup results that were “slightly more favorable” than the company’s forecasted decline.
On profitability, Suidan reported Q1 gross margin of 61% versus 56% in the prior year, which he said reflected cost management and the extension of the useful life of fixed assets. Total operating expenses were $29 million, roughly flat sequentially, and adjusted EBITDA was $10 million (a 26% margin), up from $6 million (an 18% margin) a year ago. Adjusted free cash flow was negative $1.8 million, which Suidan said reflected earlier payments in the quarter.
AI-related demand and larger deals featured prominently
Budman said AI is making storage “increasingly important” and described rising traction with AI customers. He said more than one-third of all new bookings came from AI and that the number of AI customers using the platform grew 76% year-over-year. He also said Backblaze more than doubled its average sales deal size and delivered 72% year-over-year growth in its $50,000+ ARR cohort as it continues moving upmarket.
Budman outlined demand from two AI segments: companies building AI infrastructure and companies embedding AI into products and workflows. He cited a training data provider that selected B2 to store large volumes of video data, describing a deal that closed “in just 11 days” at nearly $1 million of ARR. He also pointed to an AI-powered video creation company that chose B2 for training data storage, with an initial deployment representing nearly $500,000 of ARR and “a clear path” to expand over time.
In the Q&A, Budman told Needham’s Mike Cikos the company is seeing AI companies grow “about three times faster than our average customer,” attributing that to their inherent data growth. He also said some AI wins are coming through outbound go-to-market efforts while others are arriving through referrals from existing AI customers who cite the combination of performance and price.
Neocloud opportunity: storage tiering and “data lake” positioning
Budman emphasized a “major replatforming” in which workloads are increasingly being built not only on hyperscalers but also on “Neoclouds.” He cited Synergy Research Group estimates that the Neocloud market was $25 billion in 2025 and could grow to about $400 billion by 2031. Budman argued Neoclouds are seeking a cost-efficient hard-drive-based tier to complement flash storage, noting that flash is “about 10 times more expensive per terabyte than hard drives.”
Backblaze estimates its opportunity to support Neoclouds at $14 billion by 2030, Budman said, and is aligning internal resources behind that market. He told B. Riley’s Eric Potvin there are “about 200 Neoclouds” and said Backblaze is engaged with “most of the top Neoclouds,” characterizing its role as providing the “data lake layer” that sits behind lower-latency flash storage near GPUs.
In response to William Blair’s Jason Ader, Budman said Backblaze has signed “six, seven, and eight-figure deals” with Neoclouds and said the counterparties are companies “you would recognize.” He added that the signed arrangements are “initial deals” and suggested he sees a path for smaller deals to scale into larger ones as deployments ramp.
When asked about the risk of Neoclouds eventually building their own lower-cost storage tiers, Budman argued that replicating Backblaze’s capabilities would require “scale and expertise and a focus over a long period of time,” while Neoclouds have other priorities and can achieve “time to value” faster by partnering.
Go-to-market transformation: systems, awareness, and leadership hires
Budman said Backblaze has been transforming its go-to-market organization over the past year with a focus on increasing awareness, improving pipeline consistency, and expanding revenue within the installed base. He highlighted traction for the Backblaze Flamethrower startup program, saying the company welcomed “approximately 100 companies in under 3 months,” and cited participation in startup-focused programs including a16z’s founder resources.
Budman also said the company completed its “core go-to-market systems upgrade,” and noted that pipeline sourced from existing customers “has nearly doubled year-over-year.” He announced the hiring of Anuj Kumar as Chief Revenue Officer, citing Kumar’s go-to-market experience at NetApp, VMware, Red Hat, and SUSE.
On metrics, Suidan said Backblaze updated its methodologies for ARR and RPO during the quarter, describing them as changes to improve comparability and align with peers. He said ARR increased by more than $5 million sequentially to $158 million, and that Backblaze ended the quarter with 187 customers contributing over $50,000 in ARR, up 51% year-over-year. Under the updated methodology, RPO increased by $6 million sequentially and by $31 million from the prior period.
Suidan also said B2 net revenue retention was 110%, up from 105% a year ago, reflecting continued expansion. In the Q&A, he told Cikos that organic consumption growth tends to be “incredibly stable and predictable,” while expansion can fluctuate and is “the biggest driver” of NRR variability.
Pricing changes, raised guidance, and cash flow outlook
Management introduced updated B2 pricing and packaging effective May 1. Suidan said the update reflects platform performance investments, an effort to simplify pricing by removing API transaction fees, and higher hardware and data center costs. He said the change is expected to be “accretive to revenue and margins.”
For guidance, Suidan forecast Q2 revenue of $39.8 million to $40.2 million and adjusted EBITDA margin of 21% to 23%, with the sequential margin step-down tied to the “timing of investments.” For the full year, Backblaze raised revenue guidance to $161.5 million to $163.5 million, which Suidan said is $5 million above the prior midpoint, with about half of the increase attributed to Q1 strength and about half to the pricing and packaging update. He also raised full-year adjusted EBITDA margin guidance by 400 basis points to 23% to 25%.
On capital needs, Suidan said Backblaze has “more than $100 million” in capital leasing capacity with about half utilized and does not anticipate raising additional capital through follow-on equity offerings under its current plan. He also said the company plans to focus on reducing dilution through a “modest stock buyback” and RSU settlements.
Despite pulling forward some 2027 CapEx into 2026 due to demand signals, management maintained expectations for full-year adjusted free cash flow to be positive, with improvement weighted to the second half. In the Q&A, Suidan said Q2 should be “somewhere around neutral,” and the second half should be positive, resulting in the full year being “neutral or” modestly positive.
About Backblaze NASDAQ: BLZE
Backblaze, Inc, a storage cloud platform, provides businesses and consumers cloud services to store, use, and protect data in the United States and internationally. The company offers cloud services through a web-scale software infrastructure built on commodity hardware. It also provides Backblaze B2 Cloud Storage, which enables customers to store data, developers to build applications, and partners to expand their use cases. This service is offered as a consumption-based Infrastructure-as-a-Service (IaaS) and serves use cases, such as public, hybrid, and multi-cloud data storage; application development and DevOps; content delivery and edge computing; security and ransomware protection; media management; backup, archive, and tape replacement; repository for analytics, artificial intelligence and machine learning; and Internet of Things.
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