Backblaze, Inc. (NASDAQ:BLZE) is one of the small-cap tech stocks on Wall Street's radar. On November 6, 2025, Needham maintained its Buy rating on Backblaze and cut its 12-month price target to $8. However, we could not find any commentary accompnying the price-target update. The same day, Backblaze reported Q3 2025 results. The company's Q3 worked because mix and scale finally lined up. B2 Cloud Storage jumped 28% to $20.7M while Computer Backup stayed flat, so growth came from the higher-velocity prod ...

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]

Financial Performance - Dropbox reported third-quarter revenue of $634.4 million, flat year-over-year but exceeding analyst expectations [1] - Adjusted earnings per share were $0.74, beating Wall Street's expectations by 14.1% [1] - Operating margins improved to 27.5%, up from 20% in the same quarter last year [1] - The company generated free cash flow of $293.7 million [1] Stock Performance - Shares of Dropbox increased by 9.7% during the afternoon session, closing at $30.86, a 7.5% rise from the previous close [1][2] - The stock is up 4.4% since the beginning of the year and is trading close to its 52-week high of $33.27 [5] - The stock has shown low volatility, with only four moves greater than 5% in the past year, indicating that the market views the recent news as significant [3] User Metrics - There was a slight sequential decline in total paying users, but the focus remained on strong profitability metrics [1]

Core Insights - Dropbox reported Q3 CY2025 results with revenue of $634.4 million, flat year-on-year, but exceeding analyst expectations of $624.1 million, representing a 1.7% beat [6] - Non-GAAP profit was $0.74 per share, surpassing analyst estimates of $0.65 by 14.1% [6] - Adjusted operating income reached $261 million, with a margin of 41.1%, exceeding expectations of $231.7 million [6] Revenue and Financial Performance - Revenue remained flat year-on-year at $634.4 million, but beat analyst estimates [6] - Annual recurring revenue was $2.54 billion, slightly above estimates, but showed a 1.7% year-on-year decline [6] - Market capitalization stood at $7.74 billion [6] Operational Highlights - Management attributed performance to improved retention in individual and self-serve team plans and operational efficiency [3] - CEO Andrew Houston noted a 75% reduction in search latency for the new Dash AI product, contributing to product engagement [3] - Customer satisfaction scores reached the highest level in the individuals segment, aiding retention [8] Dash AI and Future Outlook - The Dash AI platform is a key focus for scaling, with management indicating that 2026 will be crucial for its growth [4] - Early engagement with Dash showed 60% of managed users active at least twice weekly, indicating strong initial adoption [7] - Continued investment in AI talent and marketing is expected to support adoption, particularly among small and medium-sized businesses [4] Challenges and Strategic Adjustments - The company faced headwinds from the exit of FormSwift and reduced managed sales investment, impacting near-term revenue [4] - Downsizing in the managed sales channel contributed to a decline in paying users, but management is focused on stabilizing this segment [8] - Recent acquisitions, such as Mobius Labs, are aimed at enhancing multimodal AI capabilities and product differentiation [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]

Group 1 - Backblaze, Inc. (NASDAQ:BLZE) is gaining attention from hedge funds, indicating a positive sentiment in the small-cap tech sector [1] - Oppenheimer analyst Ittai Kidron has raised the price target for Backblaze from $10 to $11, reflecting confidence in the company's revenue growth and customer acquisition strategies [1][2] - The company is experiencing steady deal flow in Q3 and a healthy pipeline momentum heading into Q4, with the competitive landscape described as "normal" [1][2] Group 2 - Backblaze is recognized for its affordable and scalable B2 cloud platform, catering to developers, SMBs, and enterprise clients with object storage and backup solutions [3] - The company positions itself as a cost-effective alternative to larger hyperscalers in the cloud storage market [3]

Core Insights - Backblaze is committed to the open cloud movement and will participate as a Silver sponsor at KubeCon + CloudNativeCon North America in Atlanta from November 10-13 [1][2] - The conference is expected to attract over 9,000 attendees and focuses on cloud-native developments, particularly in AI applications, allowing Backblaze to showcase its high-throughput cloud object storage [2][4] Company Highlights - Backblaze provides a modern alternative to traditional cloud providers, emphasizing fast, affordable, and independent cloud storage solutions [3] - The company serves over 500,000 customers across 175 countries, offering high-performance, secure cloud object storage for various applications including AI workflows and media management [4] Industry Context - Kubernetes is utilized by 70% of enterprise companies operating in the cloud, highlighting the significance of cloud-native technologies in the current market [2] - The conference will feature a dedicated learning track on AI and machine learning advancements in cloud-native settings, indicating a growing trend in the integration of AI with cloud infrastructure [4]

Core Insights - The acquisition of Storj by Inveniam Capital Partners is a significant development that could transform the Web3 cloud services and decentralized data management landscape [1][2] Company Overview - Storj will operate as an independent subsidiary post-acquisition, maintaining its leadership, employees, and customer relationships [3] - Colby Winegar will continue as CEO, and Ben Golub will join Inveniam's board of directors [3] Token and Ecosystem Impact - The utility, liquidity, and exchange listings of the STORJ token will remain unchanged, continuing to serve as the unit of exchange for bandwidth and storage within the Storj ecosystem [4] - Payments to node operators and community incentives will also remain unaffected [4] Strategic Rationale - Inveniam's acquisition aims to strengthen the connection between blockchain infrastructure and decentralized finance, with Storj's technology being a crucial component [5] - The integration is expected to accelerate Storj's growth, expanding its global presence and creating new use cases in AI, tokenized real-world assets, and enterprise cloud infrastructure [5] Technological Integration - Storj's technology will be integrated into Inveniam's decentralized operating system for private market assets, enhancing transparency, data access, and performance validation [6] Market Outlook - With Inveniam's financial support, analysts predict that Storj will scale more rapidly, potentially attracting renewed institutional interest in the STORJ token [7]