Backblaze, Inc. Q1 FY2026 earnings call

AI Opportunities - Infrastructure and Product Use

• AI is making storage important, with over one third of new bookings from AI and AI customers using the platform growing 76% year - over - year. Backblaze is well - positioned to support neoclouds, estimated to have a $14 billion opportunity by 2030. For example, a training data provider selected B2 for large - volume video data storage. Also, companies using AI in their products are scaling fast, and Backblaze is meeting them by integrating into tools like Hugging Face, Comfy UI, CVAT, and MLflow.

Go - to - Market Transformation

• The go - to - market organization transformation is progressing. The flamethrower startup program has welcomed approximately 100 companies in under three months. Core go - to - market systems have been upgraded, and pipeline source from existing customers has nearly doubled year - over - year. Anuj Kumar was welcomed as chief revenue officer, bringing pipeline discipline and execution rigor. Saw new customer momentum across various data - intensive use cases like healthcare data, cloud gaming, and audio streaming.

In the first quarter, revenue was $38.7 million, a 12% year - over - year increase. B2 cloud storage grew 24% to over $22.4 million. ARR increased by more than $5 million sequentially to $158 million, with B2 growing 28% year - over - year. There were 187 customers contributing over $50,000 in ARR, up 51% from the previous year. Q1 gross margin was 61% compared to 56% in the prior year. Total operating expenses were $29 million in Q1, roughly flat with Q4 and improved by about 600 basis points as a percentage of revenue compared to the prior year. Q1 adjusted EBITDA was $10 million, a 26% margin, up from $6 million, 18% in the prior year.

Q2 Guidance

• Revenue is expected to be in the range of $39.8 million to $40.2 million. B2 growth in Q2 is closer to 20% compared to the previously expected 12%. Adjusted EBITDA margin for Q2 is expected to be in the range of 21 - 23%.

Full - Year Guidance

• Raised full - year revenue guidance to $161.5 million to $163.5 million, an increase of $5 million from the prior midpoint. Raised full - year adjusted EBITDA margin guidance by 400 basis points to a range of 23 - 25%.

Q: Mike Seekles from Needham asked about AI customer success, specifically visibility in the pipeline, cohort behavior, and sales cycles.

A: Gleb Budman said AI customers are coming through outbound processes and referrals from existing AI customers, and AI companies are growing much faster than average customers due to data growth from AI use cases.

Q: Mike Seekles followed up on B2 NRR of 110%, asking about drivers.

A: Mark Sweetan said RPO disclosure of committed contracts is evidence of performance, with expansion sales being a driver of the NRR increase.

Q: Itai Kidron from Oppenheimer asked about B2 pricing update magnitude and outlook without it.

A: Mark Sweetan said half of the $5 million full - year revenue increase is from the pricing and packaging change and half from organic business health.

Q: Itai Kidron followed up on computer backup NRR and GTM transformation progress.

A: Mark Sweetan said computer backup is forecasted to decline 5% year - over - year, and Gleb Budman said there's still work to do on awareness generation, focusing resources on NeoCloud opportunity, etc.

Q: Eric Sepiger from B Reilly Securities asked about neocloud market engagement and sales hiring.

A: Gleb Budman said they're engaged with most top neoclouds, providing the data lake layer, and have filled various sales roles.

Q: Jeff Van Ree from Craig Hallam asked about neocloud market portion and CapEx.

A: Gleb Budman said engaged with pretty much all top neoclouds, and Mark Sweetan said CapEx is expected to be around mid - thirties as a percent of revenue with various factors driving it.

Q: Jason Ader from William Blair asked about neocloud deal sizes and risk of insourcing.

A: Gleb Budman said neocloud opportunity is $14 billion, deals are with recognizable names, and it's hard for neoclouds to replicate Backblaze's IP.

Q: Jason Ader followed up on CapEx and gross margin.

A: Mark Sweetan said full - year free cash flow is expected to be positive in the second half, and gross margin was boosted by re - evaluating fixed asset useful life, and should stay flat.

Q: Eric Martinuzzi from Lake Street Capital Markets asked about price increase timing and delta vs competitors.

A: Gleb Budman said pricing update was due to platform investment, simplifying pricing, and underlying cost increases, and Backblaze is still dramatically more cost - efficient than alternatives.

Q: Rustam Kanga from Citizens asked about B2Neo workload shift and percentage.

A: Gleb Budman said as workloads shift to inferencing, it becomes more predictable, currently more use cases are related to model building but inferencing is increasing.