Backblaze NASDAQ: BLZE is seeing stronger demand for its B2 cloud storage business as artificial intelligence-related workloads increase the need for high-performance data storage, CFO Marc Suidan said during a fireside chat at the Needham Technology, Media & Consumer Conference.
In a discussion moderated by Needham & Company Senior Analyst Mike Cikos, Suidan said Backblaze has about $150 million in annual recurring revenue. He said roughly 60% of that comes from the company’s cloud storage business, which is growing at about 24% year over year, while the remaining 40% comes from its legacy computer backup business, which is “flattish” to slightly declining.
Suidan said Backblaze’s mission is to make it easy for companies and developers to store data so they can innovate, particularly in an “AI-enabled world.” He pointed to broad demand for storage capacity, noting that memory and hard-drive suppliers are facing strong demand. He said 35% of Backblaze’s bookings wins in the first quarter were AI-related companies, up from 25% last year.
AI Demand Drives B2 Growth
Cikos highlighted that Backblaze’s B2 Cloud revenue grew 24%, with ARR up 28%, and asked what is driving that demand. Suidan cited both market demand and go-to-market execution. He said AI companies are coming to Backblaze through word of mouth, its reputation among CTOs and developers, and online content the company publishes around hard-drive statistics, performance and network activity.
Suidan said Backblaze sees a range of AI customers, from product-led growth users and startups to larger organizations. He said the company is doing open-source integration work to make it easier for developers to connect with Backblaze.
For AI startups, Suidan said the sales motion can be faster than for large enterprises because their buying patterns are different and their data needs can be substantial. He said these customers often focus on “performance for dollar,” and Backblaze has been emphasizing that value proposition.
As an example, Suidan referenced a deal discussed on the company’s most recent earnings call in which a CTO heard about Backblaze from another CTO, began discussions and closed an almost $1 million deal within 11 days. He said these customers “move faster,” validate needs quickly and make decisions rapidly.
Suidan also discussed a generative AI video creation customer that moved one use case from a hyperscaler to Backblaze. He said the company did not stop using the hyperscaler entirely, but chose Backblaze for a specific use case and is now discussing expansion into other use cases. He said the value proposition in that case centered on dollar-for-performance, along with service, responsiveness and transparency.
B2 Overdrive and Product Positioning
Suidan said B2 Overdrive emerged after AI customers told Backblaze that its platform was performing better than the company was presenting to the market. He said AI workloads often require moving large amounts of data quickly for training or inference runs, though not necessarily low latency.
He said Backblaze’s multi-tenant architecture and software layer help support higher throughput, and the company has been packaging capabilities to better monetize that performance. Suidan said customer discussions around Overdrive are active, though Backblaze does not disclose exactly how much revenue it drives. He said many deals involve a mix of Overdrive and non-Overdrive services, with different tiers depending on performance needs.
Suidan also referenced B2 Neo as an offering aimed at neocloud providers. He said neoclouds face a build-versus-buy decision for storage, and Backblaze can often provide that storage more efficiently than they can build it themselves.
Legacy Backup Remains a Cash Contributor
While the company’s cloud storage business is the growth driver, Suidan said the computer backup business remains highly sticky and contributes cash that helps fund B2 growth, including R&D and sales and marketing. He said customers and small businesses use the product for an average of nine years.
He said the business has lower gross margin than B2, but a strong contribution margin because it requires less sales, marketing and R&D investment. Suidan said customer churn is about 10%, while revenue is declining roughly 2% to 3%, with the latest quarter down 2%. He said Backblaze is trying to stabilize the business but is not yet guiding to that outcome.
Go-to-Market Changes and Guidance Philosophy
Suidan said Backblaze has been transforming its go-to-market approach as it layers a B2B sales motion on top of its consumer and product-led growth roots. He said the first phase helped more than double average deal size, visible in remaining performance obligations and disclosures around customers with more than $50,000 in ARR.
However, he said Backblaze still needs to improve awareness, outbound demand generation and predictability. The company recently brought in a new chief revenue officer, Anuj, who Suidan said is early in his tenure and focused on improving the demand generation engine and routes to market.
Suidan said Backblaze changed its guidance philosophy to include only what is more predictable. He said the company has removed three items from guidance:
- Deals greater than $500,000 in ARR bookings, because timing can vary by quarter;
- Usage from large customers that exceeds contracted minimums, until the pattern becomes more predictable;
- Benefits from the go-to-market transformation, until pipeline and conversion trends are more established.
He said Backblaze has averaged one to two large deals per quarter, but timing varies, so the company will announce them as they are won rather than include them in guidance.
Suidan also highlighted the company’s Flamethrower program, which offers eligible customers up to $100,000 in credits to store data. He said the program is intended to build awareness among early-stage startups, including AI-native companies, and that some participants are already approaching the end of their credits and entering discussions to convert to paying customers.
Capacity and Supply Chain
In response to an audience question, Suidan said Backblaze maintains capacity across its software platform, data center footprint, hard drives and capital expenditures. He estimated the company could self-fund B2 revenue growth up to about 50%, calling that “a great problem to have.” Growth above that level, he said, could require a review of the company’s capital structure and data center expansion plans.
Suidan said Backblaze is managing hardware supply constraints through close relationships with all three major hard-drive makers. He said the company has direct relationships with those vendors, which is uncommon for a company of its size, and works well in advance on forecasts to secure allocation. He said order fulfillment timelines have increased by a few months, but Backblaze is “well set” for the year and is already looking into next year from a supply standpoint.
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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