Backblaze (BLZE) Q2 Revenue Jumps 16%

Backblaze (BLZE 3.51%), the independent cloud storage platform provider, reported its financial results for the second quarter of fiscal 2025 on August 7, 2025. Backblaze topped analyst expectations, reporting GAAP revenue of $36.3 million for Q2 2025 (beating the $35.4 million consensus) and achieving Non-GAAP EPS of $0.01, better than the expected loss of $0.05. The quarter saw material growth in the B2 Cloud Storage segment, with revenue increasing 29% year-over-year and a significant improvement in key profitability metrics, including adjusted EBITDA margin rising to 18%. Despite ongoing losses under standard accounting (GAAP net loss) and negative adjusted free cash flow, the period showed clear signs of progress toward operational leverage and the company’s stated goal of reaching positive adjusted free cash flow by late FY2025.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Recent Focus Areas

Backblaze provides cloud-based storage solutions for businesses and consumers. Its main products are B2 Cloud Storage, a scalable data storage service for enterprises and developers, and Computer Backup, an online backup product for individuals and small businesses. The business runs its own purpose-built infrastructure to deliver simple, transparent, and cost-effective storage at scale.

Recently, Backblaze has focused on scaling its infrastructure, expanding its customer base to larger enterprise clients, and integrating artificial intelligence (AI) features and use cases across its platform. Its long-term success depends on achieving efficient growth, maintaining competitive pricing and ease of use, innovating in AI/ML (machine learning) integrations, and deepening its channel and technology partner network.

Quarterly Performance: Revenue, Profitability, and Segment Trends

Backblaze’s Q2 2025 results outperformed analyst expectations, led by standout performance in the B2 Cloud Storage business. B2 Cloud Storage revenue rose 29% to $19.8 million, outpacing the legacy Computer Backup division, which posted $16.5 million (up 4%). B2 Annual Recurring Revenue (ARR) reached $80.7 million, up 29%. Computer Backup ARR increased 3% to $65.2 million.

Non-GAAP net income moved into positive territory at $0.8 million, a marked turnaround from a loss a year ago. Adjusted EBITDA, a common metric of core profitability, more than doubled year over year to $6.6 million, or 18% of revenue. Adjusted gross margin improved to 79%, up from 77% in the same period last year. Management attributes these margin gains to greater efficiency in data center infrastructure operations.

Net revenue retention (NRR)—a measure of customer loyalty and account expansion—dropped to 112% in B2, down from 126% in Q2 2024, as last year’s price increase faded from the comparison. B2’s gross customer retention remained strong at 89%, while Computer Backup retention held steady at 90% for Q1 2025.

GAAP net loss narrowed to $7.1 million from $10.3 million in Q2 2024, reflecting improved operating leverage. Adjusted free cash flow remained negative for the first six months of 2025 at $(6.0) million, but improved by almost half compared to the same period last year. Cash and marketable securities totaled $50.5 million, down modestly from the prior quarter.

One-time developments in the quarter included the closing of a $20 million credit facility, providing future financial flexibility for infrastructure investment. Backblaze also announced its first cash-neutral stock repurchase program.

Core Business Segments and Recent Developments

B2 Cloud Storage, Backblaze’s main growth engine, is an object storage product that allows businesses to store, retrieve, and manage large amounts of unstructured data such as photos, videos, and AI/ML datasets. The quarter saw a surge in upmarket activity—customers contributing over $50,000 in ARR grew 53% year over year. Notably, Backblaze secured its first six-figure B2 Overdrive customer in early Q3 2025, just two months after the product’s launch. B2 Overdrive is a high-performance version of the base B2 Cloud Storage offering, designed for data-intensive workloads, especially supporting AI and analytics solutions. Enterprise contracts also set new company records, with one multi-million dollar deal displacing an incumbent public cloud provider.

The Computer Backup product, meanwhile, delivered reliable but slower growth, with revenue increasing 4% year-over-year. This online backup service for end users posted modest ARR gains and retained a high customer retention rate. Despite the stability in this segment, management’s strategic focus is shifting increasingly toward B2 Cloud Storage and enterprise AI use cases, as Computer Backup becomes a smaller part of total growth.

Profitability metrics showed marked improvement, as evidenced by higher gross profit, improved adjusted EBITDA, and a shift to non-GAAP net income compared to Q2 2024. Adjusted gross margin (a calculation that excludes capitalized software and stock-based compensation) was 79%, up from 78% in Q2 2024. Gross profit under accounting rules (GAAP) rose to $23.0 million. Stock-based compensation continued to rise, hitting $7.3 million, and remains a factor in non-GAAP and GAAP profitability comparisons.

AI integration and product innovation moved ahead this quarter. Backblaze launched new cyber security features such as AI-driven anomaly alerts, expanded role-based access controls, and added detailed access logs. Management highlighted rapid onboarding of new customers using AI and analytics workloads as proof the platform is attracting larger, more sophisticated users. The pricing model, with B2 Overdrive starting at $15 per terabyte per month, is still estimated to be significantly lower than traditional public cloud options. Management states it is about 90% less expensive than alternatives such as AWS for comparable workloads, reinforcing the company’s value proposition.

The Powered By Backblaze program enables third parties to build and offer branded storage solutions by leveraging Backblaze infrastructure. The majority—about 73%—of FY2024 revenue still came from the traditional self-serve customer acquisition channel, but the direct sales team is now central to upmarket deal-making and enterprise customer wins.

Looking Ahead: Guidance and Watch Points

For Q3 2025, management projected revenue in the $36.7 to $37.1 million range, with adjusted EBITDA margin guidance of 17-19%. For FY2025, management raised expected revenue to between $145.0 million and $147.0 million, up slightly from earlier targets, and maintained guidance for margin improvement. B2 Cloud Storage revenue is forecast to accelerate each quarter, targeting annualized growth above 30% by Q4 2025. Management also reaffirmed its goal of achieving positive adjusted free cash flow by Q4 2025.

Backblaze does not currently pay a dividend.

Investors should monitor several areas in coming quarters. Net revenue retention in B2 fell as expected after last year’s price hike but now shows signs of stabilizing, with B2 net revenue retention at 117% in Q1 2025 compared to 126% in Q1 2024. Management flagged extended decision cycles among some enterprise buyers in Q1 2025 but was confident that upmarket bookings and trial conversions offset delays. With significant growth in high-value deals and AI workload onboarding, the health of the direct sales channel and infrastructure investment will remain important. Stock-based compensation and share dilution are being addressed, with management planning to limit future dilution as free cash flow improves. Backblaze remains focused on efficient capital deployment, ongoing product innovation, and preserving pricing advantages against much larger competitors.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.