Core Insights - The Gartner IT Infrastructure, Operations & Cloud Strategies Conference 2025 will take place from December 9-11, 2025, in Las Vegas, focusing on cloud strategies and infrastructure trends [1] Company and Industry Summary - Gartner analysts will provide additional analysis on cloud strategies and infrastructure and operations trends during the conference [1]

SAN MATEO, Calif.--(BUSINESS WIRE)--Backblaze, Inc. (Nasdaq: BLZE), the high-performance cloud storage platform for the AI era, today announced that Laquie TN Campbell, Senior Product Marketing Manager for Media and Entertainment, will be featured on a panel discussion at the 2025 Sports Video Group (SVG) Summit, taking place December 15–16 in New York, New York. Attendees can visit booth #308 to discuss their storage needs and media workflows. Backblaze experts will be available throughout the conference f ...

Group 1 - Backblaze, Inc. (NASDAQ:BLZE) is recognized as a small-cap tech stock with a focus on cloud storage solutions, particularly B2 object storage and Computer Backup [1][3] - On November 6, 2025, Needham maintained a Buy rating on Backblaze but reduced its 12-month price target to $8, with no additional commentary provided [1][2] - In Q3 2025, Backblaze reported a 28% increase in B2 Cloud Storage revenue, reaching $20.7 million, while Computer Backup revenue remained flat [2] Group 2 - The company's gross margin improved to 62% from 55%, and adjusted EBITDA margin approached 23%, indicating operational efficiency [2] - Annual Recurring Revenue (ARR) increased by 13% to $147.2 million, driven by B2 revenue of $81.8 million [2] - A cautionary note was raised as Net Revenue Retention (NRR) decreased to 106% from 118%, suggesting a slowdown in upselling compared to the previous year [2]

Core Insights - Backblaze released its Q3 2025 Drive Stats report, analyzing the performance and reliability of over 328,000 hard drives, highlighting a quarterly failure rate increase from 1.36% in Q2 to 1.55% in Q3, with an annualized failure rate (AFR) of 1.57% for 2024 [2][3] Drive Performance and Reliability - Four hard drive models achieved zero failures this quarter: Seagate HMS5C4040BLE640 (4TB), Seagate ST8000NM000A (8TB), Toshiba MG09ACA16TE (16TB), and Toshiba MG11ACA24TE (24TB) [2] - High-capacity drives (20TB+) increased by nearly 8,000 units, now representing 21% of the active drive pool, while the lifetime AFR remained steady at 1.31% [3] Failure Analysis Methodology - Backblaze employs SMART monitoring, drive monitoring tools, and automated data enrichment to differentiate between true mechanical failures and temporary removals, classifying a drive as failed if it does not re-enter the active population by the end of the quarter [4] - The outlier Toshiba MG08ACA16TE (16TB) recorded a high AFR of 16.95%, attributed to ongoing upgrades requiring temporary drive removals rather than mechanical issues, with expectations for normalization in future reports [5] Data Transparency and Community Engagement - Backblaze has built one of the largest collections of drive reliability data over more than ten years, inviting global IT and data science communities to analyze and learn from its openly available reliability metrics [2][6]

Core Insights - Backblaze, Inc. has released its latest Network Stats Report, highlighting the impact of AI workloads on global data flows and the introduction of a new metric to measure this phenomenon [1] Company Overview - Backblaze is positioned as a high-performance cloud storage platform tailored for the AI era, indicating a strategic focus on supporting AI-driven applications and workloads [1] Industry Trends - The report emphasizes the unprecedented rise of AI-driven data gravity, suggesting a significant shift in how digital infrastructure is being shaped in the context of generative AI [1]

Core Insights - Backblaze, Inc. reported quarterly earnings of $0.03 per share, exceeding the Zacks Consensus Estimate of a loss of $0.01 per share, and showing improvement from a loss of $0.10 per share a year ago, resulting in an earnings surprise of +400.00% [1] - The company achieved revenues of $37.16 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.58% and increasing from $32.59 million year-over-year [2] - Backblaze shares have increased approximately 55.2% since the beginning of the year, significantly outperforming the S&P 500's gain of 15.6% [3] Earnings Outlook - The future performance of Backblaze's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - The current consensus EPS estimate for the upcoming quarter is breakeven on revenues of $38.38 million, while for the current fiscal year, the estimate is -$0.03 on revenues of $146.26 million [7] Industry Context - The Internet - Software industry, to which Backblaze belongs, is currently ranked in the top 35% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Data and Key Metrics Changes - Company revenue grew 14% year over year, reaching $37.2 million, exceeding the high end of guidance of $37.1 million [13] - Adjusted EBITDA margin reached 23%, almost double the 12% from a year ago [18] - GAAP net loss improved to $3.8 million, a 70% improvement from a loss of $12.8 million in the prior year [17] - Adjusted free cash flow was negative $3.5 million, improving by roughly $500,000 year over year [18] Business Line Data and Key Metrics Changes - B2 Cloud Storage revenue grew 28% year over year, compared to organic growth of 19% in the same period last year [13] - Computer Backup revenue was flat year over year, reflecting the final rolloff of the price increase implemented in 2023 [14] - Net revenue retention (NRR) for B2 improved to 116% in Q3 from 109% in Q2 [15] Market Data and Key Metrics Changes - The company is seeing diversification within B2 across core use cases, including live application hot storage, backup, media, and AI-related workloads [14] - Industry-wide demand for data storage is expected to grow rapidly, positioning the company well to support expanding needs [14] Company Strategy and Development Direction - The company is launching phase two of its go-to-market transformation to accelerate sales velocity and improve efficiency [12] - Focus on moving upmarket with larger deals while also increasing the core base of smaller deals for consistency [26] - The company aims to achieve a rule of 40 profile, with a current score of 9 expected to triple by Q4 [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges variability in data usage from large AI customers, impacting growth expectations [26][30] - The company remains confident in its ability to deliver consistent, durable growth over time despite not reaching the 30% B2 growth goal [20] - Management emphasizes the importance of AI workloads and the company's positioning to support these transformative needs [72] Other Important Information - The company ended the quarter with $50 million in cash and marketable securities, largely unchanged from the previous quarter [18] - A modest share repurchase program was initiated, with $1.2 million of shares repurchased in Q3 [19] Q&A Session Summary Question: Sales evolution in phase two - Management discussed the focus on driving execution velocity and moving upmarket while supporting larger deals [25] Question: B2 growth expectations - Management noted that variability from a large AI customer and longer execution times for larger deals impacted growth expectations [26] Question: Data variability from customers - Management explained that AI use cases are evolving rapidly, leading to fluctuations in data storage needs [30] Question: Long-term growth expectations for B2 and CBU - Management indicated that B2 is on track for mid-20s growth in 2025, while Computer Backup is expected to contract in low to mid-single digits [35] Question: Phase two initiative investments - Management clarified that sales and marketing expenses should remain stable as a percentage of revenue, with restructuring costs being one-time charges [52] Question: Larger deals in the pipeline - Management noted that larger deals are more complex and can take longer to close due to various internal factors [57] Question: Improvements in self-serve motion - Management highlighted efforts to enhance the self-serve experience for data-heavy AI use cases [59] Question: Powered By white-label solution - Management expressed excitement about the Powered By initiative and its potential in the Neo Cloud market [67] Question: Uptick in AI video companies - Management confirmed an increase in customers from the AI video sector, reflecting the growing data needs associated with video generation [72]

Financial Performance - Backblaze reported Q3 revenue of $37.2 million, a 14% year-over-year increase, exceeding market expectations [1] - Non-GAAP EPS was $0.03, surpassing market expectations, compared to a loss of $0.10 per share in the same period last year [1] - Adjusted gross profit for Q3 was $29.4 million, representing 79% of revenue, up from $25.5 million or 78% of revenue in the previous year [2] Business Segments - B2 cloud storage revenue reached $20.7 million, a 28% year-over-year growth, while computer backup revenue remained flat at $16.5 million [1] - The company secured a seven-figure expansion deal with an existing customer, highlighting the value of its offerings in the AI and data-intensive workflow space [2] Profitability and Cash Flow - Adjusted EBITDA for Q3 was $8.4 million, accounting for 23% of revenue, compared to $3.7 million or 12% of revenue in the previous year [2] - The company achieved a significant milestone in profitability, with non-GAAP net profit of $1.9 million, compared to a net loss of $4.1 million in the same quarter last year [2][3] - Cash and cash equivalents totaled $50.3 million as of September 30, 2025 [2] Future Outlook - For Q4, the company expects revenue between $37.3 million and $37.9 million, with adjusted EBITDA margin between 20% and 22% [3] - Full-year revenue guidance for 2025 is narrowed to between $145.4 million and $146.0 million, with adjusted EBITDA margin expectations raised to between 18% and 20% [3]

Financial Performance - B2 Cloud Storage revenue grew by 29% year-over-year in Q2 2025[11, 19, 33], accelerating from 23% growth in Q1 2025[11] - Total company revenue reached $36.3 million in Q2 2025, representing a 16% year-over-year increase[42] - The company's adjusted EBITDA margin doubled year-over-year[33, 61], reaching 18% in 1H 2025[44] - The company is targeting 30%+ B2 growth in Q4 2025[34, 35, 40] Customer Growth and Value - The number of customers with ARR (Annual Recurring Revenue) above $50,000 increased by 30% year-over-year[19, 20] - AI customers' data stored grew by 40x year-over-year[28] - The AI customer count increased by 70% year-over-year[28] - 3 of the top 10 customers are AI companies[28] Financial Strategy - The company secured a new $20 million line of credit[32, 33] - A stock buyback program of up to $10 million was approved[32, 33, 49, 50] - The company aims to reduce equity dilution by 15% to 25%[34]

Revenue Growth - Backblaze reported a revenue growth of 28% for B2 Cloud Storage in the current quarter compared to the same period last year[128]. - The annual recurring revenue (ARR) for B2 Cloud Storage increased to $81.8 million as of September 30, 2025, up from $64.9 million in the previous year, representing a growth of 26%[144]. - Backblaze's total annual recurring revenue reached $147.2 million as of September 30, 2025, compared to $130.5 million in the previous year[144]. - Revenue for the three months ended September 30, 2025, was $37,162 thousand, a 14% increase from $32,589 thousand in the same period of 2024[168]. Customer Retention - The net revenue retention rate for B2 Cloud Storage was 110% as of September 30, 2025, down from 128% in the previous year, attributed to the impact of a price increase announced in October 2023[145]. - Backblaze's gross customer retention rate remained stable at 89% for B2 Cloud Storage and 90% for Computer Backup as of September 30, 2025[144]. Product Development - The company launched B2 Overdrive, a premium cloud storage solution, in April 2025 to cater to data-intensive workloads[139]. - The company is focusing on expanding revenue within existing customers through new features and enhanced customer success programs[136]. - Backblaze's direct sales activities are increasingly contributing to the acquisition of larger customers as the company moves up-market[126]. Financial Performance - Gross margin improved to 62% for the three months ended September 30, 2025, compared to 55% for the same period in 2024, primarily due to a decrease in depreciation expense[174]. - The net loss for the three months ended September 30, 2025, was $3,778 thousand, compared to a net loss of $12,753 thousand in the same period of 2024[168]. - Adjusted gross profit increased to $29,359 thousand for the three months ended September 30, 2025, compared to $25,469 thousand for the same period in 2024, with an adjusted gross margin of 79%[186]. - Adjusted EBITDA increased to $8,387 thousand for the three months ended September 30, 2025, compared to $3,749 thousand for the same period in 2024, with an adjusted EBITDA margin of 23%[189]. Expenses - Research and development expenses for the three months ended September 30, 2025, were $11,235 thousand, representing 30% of total revenue[168]. - Sales and marketing expenses for the three months ended September 30, 2025, were $8,996 thousand, accounting for 24% of total revenue[168]. - The company expects operating expenses, excluding depreciation and stock-based compensation, to remain flat in 2025 compared to the prior year[158]. - Investment in research and development is anticipated to increase in absolute dollars as the company focuses on enhancing cloud service offerings[160]. Cash Flow and Investments - Net cash provided by operating activities was $14,231 thousand for the nine months ended September 30, 2025, compared to $10,272 thousand for the same period in 2024[195]. - Adjusted free cash flow was $(9,485) thousand for the nine months ended September 30, 2025, improving from $(15,603) thousand for the same period in 2024, with an adjusted free cash flow margin of (9%) compared to (17%) in 2024[195]. - The company incurred cash used in investing activities of $22.2 million for the nine months ended September 30, 2025, up from $11.9 million in the same period of 2024[220]. Debt and Financing - The company has $20.0 million available under a senior secured revolving credit facility, with $2.5 million outstanding as of September 30, 2025, and an interest rate of 7.51%[204]. - The company amended its credit agreement in August 2025 to permit share repurchases, allowing up to $10.0 million to be excluded from covenant restrictions[206]. - The company was in compliance with the covenants under the credit agreement as of September 30, 2025, which includes a minimum liquidity requirement of $10.0 million[207]. Market and Currency Risks - The company has minimal foreign currency risk as most sales and operating expenses are denominated in U.S. dollars[230]. - Future international sales increases may expose the company to foreign currency exchange rate fluctuations[230]. - The company may consider using derivatives or other financial instruments in the future to hedge foreign currency exchange risk[230].