Backblaze Q4 Earnings Call Highlights

Key Points

• Profitability and cash milestone: Q4 adjusted EBITDA margin rose to 28% (roughly double year-ago levels) and Backblaze reported positive adjusted free cash flow of $4 million — the first time it has done so as a public company — leaving it with $51 million in cash and management saying it does not expect to need outside capital.
• AI/NeoCloud strategy and large deals: Backblaze launched B2 Neo, a white‑label storage product for NeoCloud GPU-as-a-service providers, and has signed multiple NeoCloud customers including a clarified three‑year deal of >$15 million; remaining performance obligations rose 60% YoY to $66 million, though meaningful revenue from the largest NeoCloud deal is expected mainly in 2027.
• Outlook and go-to-market push: Management is “de‑risking” guidance (FY2026 revenue $156.5M–$158.5M, adjusted EBITDA margin 19%–21%, FCF roughly neutral) while pushing upmarket—168 customers now each >$50k ARR (up 35% YoY)—and rolling out initiatives (e.g., “Flamethrower,” pipeline upgrades, and account expansion) to drive steadier growth and retention.

Backblaze NASDAQ: BLZE executives said the company closed out 2025 with fourth-quarter results that came in line with revenue guidance while posting a sharp improvement in profitability and cash generation, highlighting operating leverage as the business scales. Management also emphasized progress in its go-to-market transformation and detailed a strategy to pursue what it described as a large, emerging opportunity tied to AI infrastructure, particularly among “NeoCloud” GPU-as-a-service providers.

Q4 profitability inflection and cash flow milestone

Co-founder and CEO Gleb Budman said the company ended 2025 with “solid fourth quarter results,” noting adjusted EBITDA margin reached 28%, which he said doubled from the prior year. He also said Backblaze delivered Adjusted Free Cash Flow profitability for the first time as a public company.

CFO Marc Suidan reported total revenue of $37.8 million for the quarter, in line with guidance, while adjusted EBITDA exceeded the high end of the company’s prior outlook by about 600 basis points. Adjusted Free Cash Flow was positive $4 million in Q4, an 11% margin, outperforming the company’s expectation to be roughly neutral for the quarter. Backblaze ended the quarter with $51 million in cash and marketable securities, and Suidan said the company expects to fund growth through operating cash flows and capital leases and “do not anticipate a need to raise additional capital.”

Suidan said the Q4 adjusted EBITDA outperformance was driven primarily by non-recurring items including variable compensation alignment and office restructuring savings, while adding that adjusted EBITDA would still have exceeded the high end of guidance even excluding those one-time items.

Growth metrics: B2 performance, retention, and margins

For the full year 2025, Budman said total company revenue grew 14% year-over-year, with B2 Cloud Storage growing 26%. For Q4, Suidan said B2 revenue grew 24% year-over-year, which he characterized as modestly below the range the company outlined previously. He attributed the shortfall to deal timing, saying the company had expected “quite a few deals to close in November” that arrived late in the quarter and therefore did not benefit Q4 results.

Backblaze reported B2 net revenue retention (NRR) of 111% in Q4, down from 116% in the prior quarter. Suidan said the sequential decline reflected variability from a large customer referenced in prior calls and that, excluding that customer, underlying retention and expansion trends remained stable.

On profitability, Suidan said Q4 gross margin was 62%, flat sequentially and up from 55% a year earlier. Adjusted gross margin was 80% versus 78% last year. He said margins held steady despite higher data center costs due to continued infrastructure efficiency and disciplined operating model management, but he warned the company anticipates some gross margin pressure from increased costs. In response, Backblaze is launching a gross margin optimization initiative focused on “structural improvements across pricing, packaging, and infrastructure.”

Go-to-market transformation and upmarket push

Budman reiterated the company’s goal of moving upmarket and pointed to growth in larger customers. He said Backblaze ended the year with 168 customers generating more than $50,000 in ARR each, up 35% year-over-year, and said ARR for that cohort rose 73% year-over-year to $26 million.

Budman outlined three initiatives tied to the company’s go-to-market efforts:

• Increasing awareness: Launch of “Flamethrower,” a startup program aimed at engaging high-growth companies early.
• Driving pipeline consistency: Upgrades to top-of-funnel systems and scaling demand generation programs to increase sales velocity.
• Expanding revenue within the installed base: New processes to identify and capture additional share of wallet across more than 119,000 B2 customers.

Budman said the company has hired leaders to support these initiatives, including personnel to drive Flamethrower, business systems work, and customer success. He added Backblaze was in the final stages of hiring a sales development leader and a revenue operations leader, and that Elias Mendoza joined as Strategic Transformation Leader. Budman also said the company formed a go-to-market advisory committee with operators who have scaled businesses at companies including Okta, Snowflake, ZoomInfo, and Carta.

AI and NeoCloud strategy: B2 Neo and a large multi-year contract

Management repeatedly highlighted AI as a key long-term opportunity, positioning Backblaze as storage infrastructure for both the “supply side” (NeoClouds and AI tooling platforms) and “demand side” (AI developers and AI-native companies generating large datasets). Budman said the company has signed multiple NeoCloud customers with six- and seven-figure deals, including its first eight-figure total contract value (TCV) agreement and a deal “over $15 million.” During Q&A, executives clarified that the “$15 million+” deal is a three-year contract and that the NeoCloud customer is a publicly traded company.

Suidan also said Backblaze closed its largest contract in company history with “over $50 million” in total contract value, but later in the call management clarified the figure for the discussed NeoCloud deal was “$15+ million” after an analyst referenced $50 million. Suidan said the large contract contributed to remaining performance obligations (RPO) rising 60% year-over-year to $66 million.

While the deal was highlighted as a validation of product-market fit at scale, Suidan said Backblaze does not expect meaningful revenue from the large NeoCloud contract in 2026 as it completes development work. He said the company expects the customer to contribute more than 300 basis points to B2 revenue growth in 2027. Management described the ramp as requiring integration work by both parties, as the customer plans to switch from an existing storage offering.

Backblaze also launched B2 Neo, which Budman described as a high-performance white-label storage offering built specifically for NeoClouds. He contrasted it with B2’s typical end-customer motion, explaining that B2 Neo is designed for NeoClouds to embed and manage storage on behalf of their customers via APIs, including features such as API integration and single sign-on.

Suidan said pursuing a white-label, large-scale solution typically yields slightly lower gross margins but also lower operating expenses because it requires less sales and marketing spend, which he said nets to a similar overall economic model. He added the company expects to accelerate certain capital expenditures to ensure capacity for large deals, which could pressure gross margins by a few hundred basis points in 2026 alongside broader increases in data center and equipment costs.

2026 outlook: de-risked guidance and mixed quarterly dynamics

Backblaze said it is “de-risking” its outlook by excluding large “swing deals” and modeling variable-usage customers based on contractual minimum commitments rather than potential upside consumption. Suidan said this approach is intended to anchor guidance to the most predictable parts of the business while preserving upside as timing and usage visibility improve.

For Q1 2026, the company guided revenue to $37.6 million to $38.0 million and adjusted EBITDA margin to 18% to 20%. For full-year 2026, it guided revenue of $156.5 million to $158.5 million and adjusted EBITDA margin of 19% to 21%. Backblaze expects Adjusted Free Cash Flow to be “roughly neutral” for the year, with normal quarterly variability.

Suidan said B2 year-over-year growth is expected to be 12% to 19% in Q2 and Q3 due to difficult comparisons from a large variable customer in 2025, and approximately 20% for the full year. He also indicated NRR could dip closer to 100% for one or two quarters under the company’s conservative assumptions, before finishing the year near current levels—around 110%, plus or minus 300 basis points.

On the Computer Backup segment, management said it expects the business to decline about 5% year-over-year in 2026, with a roughly 3% decline in Q1 that worsens through the year. Budman said the company has programs aimed at stabilizing Computer Backup to flat or modest growth over time, but said it is too early to have confidence those efforts will achieve that outcome.

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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