Investors with an interest in Internet - Software stocks have likely encountered both VNET Group (VNET) and Braze, Inc. (BRZE) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Sty ...

Group 1: Company Overview - Braze, Inc. (BRZE) is experiencing significant activity in the options market, particularly with the Oct 17, 2025 $22.50 Call showing high implied volatility, indicating potential for a major price movement [1] - Currently, Braze holds a Zacks Rank 3 (Hold) in the Internet - Software Industry, which is in the top 25% of the Zacks Industry Rank [3] Group 2: Analyst Sentiment - Over the past 60 days, no analysts have increased their earnings estimates for Braze for the current quarter, while six analysts have revised their estimates downward, leading to a decrease in the Zacks Consensus Estimate from eight cents per share to three cents [3] Group 3: Options Market Insights - The high implied volatility surrounding Braze suggests that options traders are anticipating a significant price movement, which could indicate an upcoming event that may lead to a rally or sell-off [2][4] - Options traders often seek to sell premium on options with high implied volatility, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected [4]

Group 1 - The individual investor focuses on managing personal capital accumulated over the years, utilizing a diverse range of investment strategies including fundamental, technical, and momentum investing [1] - The investor aims to leverage the strengths of various investment approaches to refine their investment process [1] - The purpose of writing on Seeking Alpha is to track the performance of investment ideas and connect with like-minded investors [1] Group 2 - There is no stock, option, or similar derivative position held by the analyst in any mentioned companies, nor are there plans to initiate such positions in the near future [2] - The article reflects the author's personal opinions and is not influenced by compensation from any company [2] - Seeking Alpha does not provide recommendations or advice regarding the suitability of investments for particular investors [3]

Core Insights - Braze reported a 20% year-over-year revenue increase to $162.1 million for fiscal Q1 2026, with a non-GAAP operating margin improvement of over 900 basis points and a non-GAAP net income of $7 million [1][5] Financial Performance - The company achieved a non-GAAP operating margin of 2%, a significant turnaround from a negative 7% in the prior-year period, and generated free cash flow of $23 million, despite acquisition-related expenses [4][5] - Non-GAAP R&D spending rose by $2 million to $25 million, representing 15% of revenue, while sales and marketing expenses increased by $4 million to $64 million, accounting for 39% of revenue [4] Strategic Developments - Braze acquired OfferFit, an AI decisioning platform, which is expected to contribute approximately $11 million to $12 million in fiscal 2026 revenue, equating to about 2% incremental growth [2][3] - The acquisition enhances Braze's AI product suite and positions the company for increased wallet share capture against competitors [3] Pricing Strategy - The company implemented a new pricing model in May, shifting from data point-based limits to API rate-based usage, which has already shown positive results in sales cycles and customer satisfaction [6][7] - This pricing overhaul is expected to facilitate workload expansion and strengthen Braze's competitive differentiation [8] Future Outlook - For fiscal Q2 2026, management projects revenue between $171 million and $172 million, reflecting an 18% year-over-year growth rate, with a non-GAAP operating margin of approximately 1% [9] - The fiscal 2026 revenue guidance is set at $702 million to $706 million, indicating a 19% growth at the midpoint, with OfferFit contributing an estimated 2% incremental uplift [9]

Braze, Inc. BRZE reported better-than-expected earnings for the first quarter on Thursday.The company posted quarterly earnings of 7 cents per share which beat the analyst consensus estimate of 5 cents per share. The company reported quarterly sales of $162.06 million which beat the analyst consensus estimate of $158.66 million.Braze lowered its FY2026 adjusted EPS guidance from 31 cents to 35 cents, but raised its FY2026 sales outlook from $686.00 million-$691.00 million to $702.00 million-$706.00 million. ...

Core Insights - Braze, Inc. reported quarterly earnings of $0.07 per share, exceeding the Zacks Consensus Estimate of $0.05 per share, compared to a loss of $0.05 per share a year ago, representing a 40% earnings surprise [1] - The company achieved revenues of $162.06 million for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 2.12% and showing an increase from $135.46 million year-over-year [2] - Braze has consistently surpassed consensus EPS estimates over the last four quarters [2] Financial Performance - The earnings surprise of 40% this quarter follows a previous quarter where Braze delivered a 140% surprise by posting earnings of $0.12 per share against an expected $0.05 [1] - The current consensus EPS estimate for the upcoming quarter is $0.08, with projected revenues of $168.37 million, and for the current fiscal year, the EPS estimate is $0.33 on revenues of $688.81 million [7] Market Position - Despite the positive earnings report, Braze shares have underperformed the market, losing about 12.6% since the beginning of the year, while the S&P 500 has gained 1.5% [3] - The Zacks Industry Rank places the Internet - Software sector in the top 23% of over 250 Zacks industries, indicating a favorable outlook for companies within this sector [8] Future Outlook - The sustainability of Braze's stock price movement will depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] - The current estimate revisions trend for Braze is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6]

Revenue and Growth - Revenue for the three months ended April 30, 2025, was $162.1 million, representing a year-over-year growth of 19.6% from $135.5 million in the same period of 2024[129] - Revenue for the three months ended April 30, 2025, was $162.1 million, a 19.6% increase from $135.5 million in the same period of 2024, primarily driven by a $24.8 million increase in subscription revenue[162] - Total customers grew to 2,342 as of April 30, 2025, from 2,102 as of April 30, 2024, indicating a strong customer acquisition strategy[162] - As of April 30, 2025, the company had 2,342 customers, with a dollar-based net retention rate of 109% for the trailing 12 months[137] - Approximately 46% of revenue for the three months ended April 30, 2025, was generated outside of the United States, compared to 44% in the same period of 2024[139] Financial Performance - Net losses for the three months ended April 30, 2025, were $35.6 million, compared to $35.7 million in the same period of 2024[129] - The company incurred a net loss of $35.6 million for the three months ended April 30, 2025, compared to a net loss of $35.7 million in the same period of 2024[160] - Gross profit increased by $20.3 million, or 22.3%, to $111.2 million, with a gross margin improvement to 68.6% from 67.1%[164] - Operating cash flow for the three months ended April 30, 2025, was $24.1 million, up from $19.4 million in the prior year[172] - Other income, net, increased by $0.5 million, or 9.3%, to $5.7 million, driven by higher investment income from marketable securities[168] Cash Flow and Liquidity - Non-GAAP free cash flow was $22.9 million for the three months ended April 30, 2025, up from $11.4 million in the same period of 2024[129] - Free cash flow for the three months ended April 30, 2025, was $22.9 million, an increase from $11.4 million for the same period in 2024, driven by higher collections from new contracts and renewals[180] - As of April 30, 2025, the company had cash, cash equivalents, and marketable securities totaling $539.8 million, with $307.8 million invested in government and corporate debt securities[191] - The company assesses liquidity primarily through cash on hand and projected timing of billings under contracts, believing current resources will meet requirements for at least the next 12 months[181] Expenses and Investments - Operating expenses are expected to increase as the company expands its operations and invests in sales and marketing to drive growth[152] - Research and development expenses rose by $2.4 million, or 7.1%, to $36.8 million, reflecting continued investment in platform enhancements[166] - General and administrative expenses surged by $13.7 million, or 51.2%, to $40.5 million, largely due to increased professional services and legal costs related to acquisitions[167] - The cost of revenue increased by $6.3 million, or 14.2%, to $50.9 million, primarily due to higher hosting and messaging fees[163] Future Outlook - The company plans to continue investing in research and development to enhance its platform and expand its channel offerings, particularly in artificial intelligence capabilities[140] - The company expects free cash flow to fluctuate in future periods due to changes in operating expenses and macroeconomic factors affecting collection efforts[180] Customer Retention and Turnover - The decline in the dollar-based net retention rate from 117% to 109% was attributed to customer turnover and renewals at lower subscription levels due to macroeconomic conditions[138] - The company employs a land-and-expand business model, which allows for growth as customers increase their usage of the platform[128] Foreign Currency and Risk Management - The company does not currently face significant foreign currency risk as most sales are denominated in U.S. dollars, with only sales in Japan denominated in Yen[193] - The company uses derivative financial instruments, primarily forward exchange contracts, to hedge against foreign currency exchange rate fluctuations[194] Seasonality - The company experienced seasonality in cost of revenue, with the highest increase in messaging volume typically occurring in the fourth quarter due to holiday season activity[185]

Braze (BRZE) Q1 2026 Earnings Call June 05, 2025 04:30 PM ET Company Participants Christopher Ferris - Head - IRBill Magnuson - Chairman, Co-Founder, President & CEOIsabelle Winkles - Chief Financial OfficerArjun Bhatia - Co-Group Head - Technology, Media & CommunicationsPinjalim Bora - Executive Director - Equity ResearchBrett Huff - Managing DirectorDerrick Wood - Managing DirectorNick Altmann - Director - U.S. Software Equity Research Conference Call Participants Gabriela Borges - AnalystDavid Hynes Jr. ...

Financial Data and Key Metrics Changes - Braze reported Q1 2026 revenue of $162.1 million, representing a nearly 20% year-over-year increase [6][18] - Non-GAAP operating margin improved by over 900 basis points year-over-year, with non-GAAP net income of $7 million and free cash flow of nearly $23 million [6][24] - Total remaining performance obligation (RPO) was $829.3 million, up 26% year-over-year, while current RPO increased by 24% year-over-year to $522 million [20] Business Line Data and Key Metrics Changes - Subscription revenue accounted for 96% of total revenue, with the remaining 4% from professional services and onboarding fees [18] - The customer count rose to 2,342, an increase of 11% year-over-year, with large customers (spending at least $500,000 annually) growing by 24% year-over-year to 262 [18][19] - Dollar-based net retention (DBNR) was 109 overall and 112 for large customers, indicating strong customer expansion [19] Market Data and Key Metrics Changes - Revenue outside the U.S. contributed 46% of total revenue, up from 45% in the previous quarter [20] - The company secured new business wins across various sectors, including fintech, luxury retail, and healthcare, demonstrating broad market strength [7][9] Company Strategy and Development Direction - Braze aims to become the leading customer engagement platform globally, focusing on AI-driven solutions and first-party data utilization [6][10] - The acquisition of OfferFit is expected to enhance Braze's AI capabilities and customer engagement strategies, allowing for more personalized experiences [12][14] - The company is committed to investing in technology and community to elevate customer engagement practices [11] Management's Comments on Operating Environment and Future Outlook - Management noted that global trade concerns have not significantly impacted deal cycles, and they expect continued momentum despite a noisy macro environment [6][7] - The company anticipates that the legacy replacement cycle and vendor consolidation trends will persist, providing opportunities for market share growth [9][10] - Management expressed confidence in achieving sustained profitable growth while navigating economic uncertainties [6][27] Other Important Information - Braze's non-GAAP gross profit for the quarter was $112 million, with a gross margin of 69.3%, up from 67.9% in the prior year [21] - The company ended the quarter with approximately $540 million in cash and equivalents, indicating strong liquidity [24] Q&A Session Summary Question: Reconciling sequential growth and CRPO dynamics - Management acknowledged that CRPO is sensitive to renewal dollars and emphasized that revenue is the key metric to watch for macro stabilization [32][34] Question: Performance of Project Catalyst - Project Catalyst is in private beta, and while specific uplift case studies are not available, initial results show promise in optimizing customer engagement strategies [43][45] Question: Renewal cadence and OfferFit feedback - Q1 was a heavy renewal quarter, with expectations for a drop in Q2 and Q3, followed by another increase in Q4 [63] - Early feedback on OfferFit has been positive, with strong interest from customers and successful presentations at events [55][57] Question: Pricing and packaging changes - The new pricing model has relaxed data point limits, improving customer flexibility and reducing friction in sales cycles [70][72] Question: Impact of OfferFit on EBIT guidance - OfferFit is expected to contribute significantly to EBIT, with around 80% of the impact attributed to its integration [74][76]

[Financial & Business Highlights](index=1&type=section&id=Financial%20%26%20Business%20Highlights) Braze reported a strong start to fiscal year 2026, with Q1 revenue growing 19.6% year-over-year to $162.1 million, achieving non-GAAP operating profitability of $2.8 million, and strategically acquiring AI company OfferFit [Q1 2026 Financial Highlights](index=1&type=section&id=Q1%202026%20Financial%20Highlights) In Q1 FY2026, revenue reached $162.1 million, a 19.6% increase YoY, demonstrating improved profitability with non-GAAP operating income of $2.8 million and nearly doubled free cash flow, despite a decline in dollar-based net retention Q1 FY2026 Key Financial Metrics (vs. Q1 FY2025) | Metric | Q1 FY2026 | Q1 FY2025 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $162.1 million | $135.5 million | +19.6% | | Subscription Revenue | $154.9 million | $130.1 million | +19.1% | | **GAAP Gross Margin** | 68.6% | 67.1% | +1.5 p.p. | | **Non-GAAP Gross Margin** | 69.3% | 67.9% | +1.4 p.p. | | **GAAP Operating Loss** | $(40.2) million | $(40.1) million | - | | **Non-GAAP Operating Income/(Loss)** | $2.8 million | $(10.0) million | Improved | | **GAAP Net Loss per Share** | $(0.34) | $(0.35) | Improved | | **Non-GAAP Net Income/(Loss) per Share** | $0.07 | $(0.05) | Improved | | **Free Cash Flow** | $22.9 million | $11.4 million | +100.9% | Q1 FY2026 Key Customer Metrics (as of April 30) | Metric | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Customers** | 2,342 | 2,102 | +11.4% | | Customers with ARR ≥ $500k | 262 | 212 | +23.6% | | **Dollar-Based Net Retention** | 109% | 117% | -8 p.p. | | Dollar-Based Net Retention (ARR ≥ $500k) | 112% | 119% | -7 p.p. | - Remaining performance obligations (RPO) as of April 30, 2025, were **$829.3 million**, with **$522.2 million** expected to be recognized as revenue within one year[2](index=2&type=chunk) [Recent Business Highlights](index=2&type=section&id=Recent%20Business%20Highlights) The company strengthened its strategic position by acquiring OfferFit, an AI decisioning engine, to enhance its product offerings, expanded its platform with new messaging channels, and bolstered its leadership team - Hired seasoned SaaS leader Ed McDonnell as Chief Revenue Officer, effective early July, to lead global revenue operations[1](index=1&type=chunk)[7](index=7&type=chunk) - Completed the acquisition of OfferFit, an AI Decisioning Engine, to enhance customer relationship transformation and business value[1](index=1&type=chunk)[7](index=7&type=chunk) - Notable new business wins in the quarter included Beyond, Inc., Fubo, LUSH Cosmetics, and ThredUp[7](index=7&type=chunk) - Introduced two new dynamic messaging channels, RCS and Banners, to create more immersive customer journeys[7](index=7&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) Braze initiated guidance for Q2 FY2026, projecting revenue of $171.0 million - $172.0 million and non-GAAP operating income of $0.5 million - $1.5 million, while updating its full-year FY2026 guidance to forecast revenue between $702.0 million - $706.0 million and non-GAAP net income per share of $0.15 - $0.18 Fiscal Year 2026 Guidance | Metric (in millions, except per share) | Q2 2026 Guidance | Full Year 2026 Guidance | | :--- | :--- | :--- | | **Revenue** | $171.0 - $172.0 | $702.0 - $706.0 | | **Non-GAAP operating income** | $0.5 - $1.5 | $5.5 - $9.5 | | **Non-GAAP net income** | $2.5 - $3.5 | $17.0 - $21.0 | | **Non-GAAP net income per share, diluted** | $0.02 - $0.03 | $0.15 - $0.18 | | Weighted average shares, diluted | approximately 113.0 | approximately 115.0 | - Braze has not reconciled its non-GAAP guidance to the most comparable GAAP measures due to the uncertainty and potential variability of items like stock-based compensation expense[5](index=5&type=chunk) [Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section provides the unaudited condensed consolidated financial statements for the three months ended April 30, 2025, including the Statement of Operations, Balance Sheet, and Statement of Cash Flows, offering a detailed view of the company's financial performance and position [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the quarter ended April 30, 2025, Braze's revenue increased to $162.1 million from $135.5 million in the prior year, with gross profit growing to $111.2 million, and GAAP net loss per share improving slightly to $0.34 despite higher operating expenses Statement of Operations Highlights (in thousands) | Account | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | | :--- | :--- | :--- | | Revenue | $162,059 | $135,459 | | Gross Profit | $111,202 | $90,911 | | Total operating expenses | $151,424 | $130,991 | | Loss from operations | $(40,222) | $(40,080) | | Net loss attributable to Braze, Inc. | $(35,786) | $(35,641) | | Net loss per share, basic and diluted | $(0.34) | $(0.35) | - Total stock-based compensation expense for the quarter was **$30.4 million**, up from **$28.3 million** in the prior-year period[26](index=26&type=chunk) - General and administrative expenses included a one-time acquisition-related expense of **$10.0 million** in the quarter ended April 30, 2025[26](index=26&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of April 30, 2025, Braze reported total assets of $889.1 million, a slight increase from $871.0 million, maintaining a strong liquidity position with cash, cash equivalents, and marketable securities totaling $539.3 million, while total liabilities stood at $414.7 million Balance Sheet Highlights (in thousands) | Account | April 30, 2025 | January 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $231,499 | $83,062 | | Marketable securities | $307,795 | $430,457 | | **Total Assets** | **$889,134** | **$870,998** | | Deferred revenue | $265,015 | $239,976 | | **Total Liabilities** | **$414,675** | **$396,249** | | **Total Stockholders' Equity** | **$474,426** | **$474,861** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 FY2026, Braze generated $24.1 million in cash from operating activities, with non-GAAP free cash flow significantly increasing to $22.9 million, and the company's cash and cash equivalents balance substantially rising to $232.0 million Statement of Cash Flows Highlights (in thousands) | Account | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,144 | $19,395 | | Net cash provided by/(used in) investing activities | $122,837 | $(10,604) | | Net cash provided by/(used in) financing activities | $605 | $(1,881) | | **Net change in cash, cash equivalents, and restricted cash** | **$148,437** | **$6,573** | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section details the adjustments made to reconcile GAAP results to non-GAAP measures, with significant items like stock-based compensation and acquisition-related expenses converting a GAAP operating loss of $40.2 million into a non-GAAP operating income of $2.8 million - Non-GAAP financial measures exclude expenses such as stock-based compensation, employer taxes on stock-based compensation, charitable contributions, acquisition-related expenses, and amortization of intangible assets[9](index=9&type=chunk) Reconciliation of GAAP Operating Loss to Non-GAAP Operating Income (in thousands) | Description | Three Months Ended April 30, 2025 | | :--- | :--- | | **Loss from operations (GAAP)** | **$(40,222)** | | Stock-based compensation expense | $30,399 | | Acquisition related expense | $10,020 | | Employer taxes related to stock-based compensation | $1,430 | | 1% Pledge charitable contribution expense | $1,109 | | Amortization of intangibles expense | $101 | | **Non-GAAP income from operations** | **$2,837** | Reconciliation of GAAP Operating Cash Flow to Non-GAAP Free Cash Flow (in thousands) | Description | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities (GAAP)** | **$24,144** | **$19,395** | | Purchases of property and equipment | $(217) | $(6,915) | | Capitalized internal-use software costs | $(1,055) | $(1,039) | | **Non-GAAP free cash flow** | **$22,872** | **$11,441** | [Other Information](index=3&type=section&id=Other%20Information) This section provides definitions for key business metrics used by the company, such as Annual Recurring Revenue (ARR) and Dollar-Based Net Retention Rate, and includes the standard forward-looking statements disclaimer regarding potential risks and uncertainties [Definition of Other Business Metrics](index=3&type=section&id=Definition%20of%20Other%20Business%20Metrics) Braze defines its key non-financial metrics to provide clarity, including 'customer' as the ultimate parent-level entity with an active subscription, 'Annual Recurring Revenue (ARR)' as the annualized value of current subscription contracts, and 'Dollar-Based Net Retention Rate' measuring ARR changes within a customer cohort over 12 months - A customer is defined as the separate and distinct, ultimate parent-level entity with an active subscription[13](index=13&type=chunk) - Annual Recurring Revenue (ARR) is the annualized value of customer subscription contracts as of the measurement date, assuming contracts are renewed on existing terms[14](index=14&type=chunk) - Dollar-Based Net Retention Rate is calculated by comparing the ARR from the same cohort of customers at the beginning and end of a 12-month period, reflecting expansion, contraction, and attrition[16](index=16&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The press release contains forward-looking statements concerning the financial outlook for fiscal 2026 and the expected benefits from the OfferFit acquisition, which are subject to significant risks and uncertainties that could cause actual results to differ materially - Forward-looking statements in the report pertain to the financial outlook for Q2 and the full fiscal year 2026, and the anticipated benefits of the OfferFit acquisition[18](index=18&type=chunk) - These statements are subject to substantial risks, including unstable market conditions, failure to achieve financial targets, history of operating losses, and competition[19](index=19&type=chunk)