Braze, Inc. Q2 FY2026 earnings call

Key Points

• Delivered great second quarter results with $180 million revenue, up 24% year - over - year and 11% from prior quarter. Passed $700 million of committed annual recurring revenue.
• Drove efficiency in business, with $6 million of non - GAAP operating income, $17 million of non - GAAP net income and $4 million of free cash flow in the quarter. Posted 3 straight quarters of positive non - GAAP operating income and free cash flow and 5 straight quarters of positive non - GAAP net income.
• Achieved solid bookings across verticals and geographies. Customer count increased by 80 sequentially and 259 year - over - year to 2,422. Large customer additions were strong. Had recent new business wins and existing customer expansions.
• Braze remains future - focused, rapidly deploying new AI solutions. After closing the acquisition of OfferFit Technologies in early June, got off to a strong start with OfferFit by Braze, integrating teams, melding cultures, and beginning to educate customers on the potential of AI decisioning.
• Plan to share more AI vision and upcoming product innovation plans during the annual customer conference Forge from September 29 to October 1 in Las Vegas.

In the fiscal second quarter 2026, Braze generated $180 million of revenue, up 24% year - over - year and 11% from the prior quarter. Subscription revenue contributed 95% of the second quarter revenue. Revenue outside the U.S. contributed 45% of the total revenue in the second quarter. Non - GAAP gross profit in the quarter was $125 million, representing a non - GAAP gross margin of 69.3%. Non - GAAP sales and marketing expenses were $70 million or 39% of revenue. Non - GAAP R&D expense was $27 million or 15% of revenue. Non - GAAP G&A expense was $22 million or 12% of revenue. Non - GAAP operating income was $6 million or 3.4% of revenue. Total customer count increased 12% year - over - year to 2,422 customers. The number of large customers (spending at least $500,000 annually) grew 27% year - over - year to 282. Customers spending $500,000 or more annually contributed 62% to total ARR.

Third Quarter 2026

• Expect revenue to be in the range of $183.5 million to $184.5 million, representing a year - over - year growth rate of approximately 21% at the midpoint.
• Third quarter non - GAAP operating income is expected to be in the range of $3.5 million to $4.5 million, implying a non - GAAP operating margin of approximately 2% at the midpoint.
• Third quarter non - GAAP net income is expected to be in the range of $6.5 million to $7.5 million, and third quarter non - GAAP net income per share in the range of $0.06 to $0.07 per share.

Full Fiscal Year 2026

• Expect total revenue to be in the range of $717 million to $720 million, representing a year - over - year growth rate of approximately 21% at the midpoint. OfferFit is expected to contribute approximately 2 percentage points to year - over - year growth for the full fiscal year.
• Fiscal year 2026 non - GAAP operating income is expected to be in the range of $24.5 million to $25.5 million, implying a non - GAAP operating margin of 3.5%, a roughly 350 basis point improvement versus fiscal year 2025.
• Non - GAAP net income for the same period is expected to be in the range of $45.5 million to $46.5 million, and net income per share is expected to be $0.41 to $0.42 per share.

Risks

• The statements related to the business are forward - looking and subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations, such as market uncertainties, competitive pressures, and potential impacts from macroeconomic conditions.

Q: You beat Q2 by $8 million. You're raising the full year by $14 million. You're raising full year operating profit by $15 million. CRPO growth accelerated 300 basis points. Bill, what's changed here with the demand environment and appetite to lean into Braze now? And then Isabelle, what's behind your confidence that you can drive higher growth and higher operating leverage here for the rest of the year?

A: William Magnuson mentioned that there hasn't been a meaningful change in the macro or demand environment but they've been happy with global execution, high competitive win rates, and the attenuation of downsell activity. Isabelle Winkles said that they're seeing sustained performance in dollar - based net retention, OfferFit is performing as expected, and they're pleased with the plan for capital deployment through the back of the year.

Q: I want to ask about the OfferFit. It's -- you talked about strong start with OfferFit. Help us understand a little bit more what are you hearing from your customer base after this integration? And what kind of ACV uplift we see from your customer base with OfferFit?

A: William Magnuson said that they were excited to tally post - acquisition OfferFit wins in all three regions, encouraged by pipeline generation and integration pace, and sees high attach rates potential. Isabelle Winkles reiterated that they talked about a 2% uplift to year - over - year revenue growth and are on pace for that contribution.

Q: Great to join the call. So I want to ask about the OfferFit. It's -- you talked about strong start with OfferFit. Help us understand a little bit more what are you hearing from your customer base after this integration? And what kind of ACV uplift we see from your customer base with OfferFit? And I have a follow - up.

A: William Magnuson said that they were excited to tally post - acquisition OfferFit wins in all three regions, encouraged by pipeline generation and integration pace, and sees high attach rates potential. Isabelle Winkles reiterated that they talked about a 2% uplift to year - over - year revenue growth and are on pace for that contribution.

Q: Congrats on a nice quarter and lots of great stats here given lots of different thesis going on in the market. To that end, I feel like I need to ask the AI question. Can you talk a little bit or just remind us again how the usage is trending for your AI products, maybe in a little more detail to sort of provide some meat on the bone on the defensibility of what we think is Braze's position? And then talk a little bit maybe also about the forward deployment of folks you have, I think, around OfferFit.

A: William Magnuson said that they're seeing rapid levels of adoption across the Braze AI feature set, AI is helping close the gap for prospects, and they're excited to share more about the upcoming AI road map at Forge, with concepts like composable intelligence.

Q: That's super helpful. And then second question is on sales execution. You all have been talking about this and I think showing results demonstrating that the sales execution has gotten better. I think we underestimated maybe just how much better -- how much of that contributed to it. I think we underestimated maybe just how much better -- how much of that contributed to it.

A: William Magnuson said that what they're seeing is a synchronization of operational changes and investment that has led to high competitive win rates and better qualification of late - stage pipeline.

Q: Perfect. At the moment, like the customer addition was really decent. And you talked about still challenging environments out there. But if you think about where are we in terms of customer understanding of your offering, but also customers kind of thinking about how they kind of are doing -- communicating with their clients in this new AI world, do you see a change in behavior or change in thinking there that kind of helps you kind of to have a better situation in the market -- position in the market?

A: William Magnuson said that many fundamentals of customer engagement are timeless, AI helps bridge the gap between promise and reality, and OfferFit increases leverage and ROI for customer engagement teams.

Q: Yes. Okay. Perfect. And Isabelle, thanks for the extra disclosure on or the extra comments on NRR. If you think about it, obviously, it's a backwards - looking kind of metrics. If you think about it, like about a year ago, we had like kind of much higher numbers. How quickly does that come back once the world is changing? You have obviously OfferFit to kind of as a cross - sell upsell. What are the puts and takes to think about the changing of that number going forward?

A: Isabelle Winkles said that the downsell environment moderating and stronger performance in that area will help the NRR metric, and with the strong demand environment and OfferFit sales, there's opportunity for the metric to reaccelerate but no specific time period is called.

Q: Congrats on the quarter and the strong results. Apologies if there's any background noise. But just maybe on -- going back to the outperformance in the quarter, it was a lot stronger than what we've seen in past quarters. So could you just talk about maybe what area really exceeded your expectations in particular? And as we think about the assumptions implied in the guide going forward, how have you adjust those accordingly and anything to keep in mind there?

A: Isabelle Winkles said that the downsell component came in better than anticipated, general demand environment was strong, revenue reserves came in better than anticipated, and some overages were above expectations, which contributed to the overperformance in the quarter.

Q: Congrats on the quarter and the strong results. Apologies if there's any background noise. But just maybe on -- going back to the outperformance in the quarter, it was a lot stronger than what we've seen in past quarters. So could you just talk about maybe what area really exceeded your expectations in particular? And as we think about the assumptions implied in the guide going forward, how have you adjust those accordingly and anything to keep in mind there?

A: Isabelle Winkles said that the downsell component came in better than anticipated, general demand environment was strong, revenue reserves came in better than anticipated, and some overages were above expectations, which contributed to the overperformance in the quarter.

Q: I'll echo my congrats on the strong quarter. So Bill, I know you said the demand environment is fairly stable. If you kind of unpack the geos in the end markets, have you seen any changes over the course of the year that you would call out in terms of the demand environment from a net new perspective?

A: William Magnuson said that there were quarter - by - quarter differences in country - specific performance globally, but averaging over the last few quarters, they've been happy with global performance, with strong contributions and win rates from each region and subregion.

Q: I'll echo my congrats on the strong quarter. So Bill, I know you said the demand environment is fairly stable. If you kind of unpack the geos in the end markets, have you seen any changes over the course of the year that you would call out in terms of the demand environment from a net new perspective?

A: William Magnuson said that there were quarter - by - quarter differences in country - specific performance globally, but averaging over the last few quarters, they've been happy with global performance, with strong contributions and win rates from each region and subregion.

Q: Brian Peterson: I'll echo my congrats on the strong quarter. So Bill, I know you said the demand environment is fairly stable. If you kind of unpack the geos in the end markets, have you seen any changes over the course of the year that you would call out in terms of the demand environment from a net new perspective?

A: William Magnuson said that there were quarter - by - quarter differences in country - specific performance globally, but averaging over the last few quarters, they've been happy with global performance, with strong contributions and win rates from each region and subregion.

Q: Brian Schwartz: Bill, given that the sales productivity is improving, which we can see in the results, I think in your prepared remarks, you said conversions are normalizing, pipeline is at record levels and you have the CRO in place. Does that change at all the pace of hiring new sales reps in the second half of the fiscal year?

A: William Magnuson said that they are expanding sales capacity in the second half of the year, with the OfferFit acquisition and Ed's onboarding events behind them, setting the stage for investment plan execution.

Q: Brian Schwartz: And the follow - up I had for Isabelle. In terms of thinking about the operating leverage, are the internal uses of AI that you're using at Braze and/or the low - cost labor arbitrage, is that moving the needle yet? Is that having an impact on the margin outperformance that we've seen so far? Or is that still ahead of the business?

A: Isabelle Winkles said that more leverage is coming from cost - optimized location, and the internal use of AI tooling is still in early days and not yet at a point to materially replace human capacity.

Q: Matthew VanVliet: I guess first on the sales execution front, curious on how your average deal sizes came in relative to what was expected in the pipeline. Just are you seeing sales cycles drawn out or deals come in maybe at a smaller price point than you were anticipating, but the volume is sort of making up for it? And then secondarily, curious on where we're at on the average duration of sales reps maturation and how much maybe influence that did have on sales execution as well?

A: William Magnuson said that there's a little bit of quarter - by - quarter noise on average deal sizes, with most inputs to sales productivity remaining fairly consistent over the last few quarters.

Q: Derrick Wood: Great. Congrats from me as well. Bill, with search and SEO getting disrupted by AI, are you seeing customers look to shift more marketing spend into first - party data and customer engagement solutions like yours? Just wondering how you see the market reacting to this AI disruption and how you guys are trying to capitalize.

A: William Magnuson said that they will benefit from the need for brands to avoid downsides of demand aggregators, and the importance of first - party data and customer engagement solutions increases with AI disruption, but it's still early days for major budget changes.

Q: Yun Suk Kim: Congrats from me as well. If you can provide some color around any trend that you're seeing around different messaging channels, which specific premium channels performed well in the quarter? And is there any messaging channel you expected to get a boost from when a customer adopts OfferFit?

A: William Magnuson said that they're seeing higher adoption of premium messaging channels due to the flexible credits model, and OfferFit decisioning engine can be deployed more broadly across marketing organizations.

Q: Patrick Walravens: Kincaid LaCorte: This is Kincaid on for Pat. We've seen customers in this over $500,000 cohort going up quarter - over - quarter, but we've seen the dollar - based net retention rate dropping. Are we going to see that reaccelerate at any point?

A: Isabelle Winkles said that they're seeing stabilization in dollar - based net retention, with Q2 being slightly higher than Q1 on an in - quarter basis, and they're encouraged by the direction of travel.

Q: Tyler Radke: So I guess just going back to one of the comments this quarter, Isabelle, I think you talked about some better reserve dynamics just on some of the payment terms. You also talked about improving retention rates across the board. So would just be curious, like what's the underlying demand driver here? Is it -- are you seeing kind of improvements on the messaging or MAU side? Just any commonality across kind of the better payments and better retention?

A: Isabelle Winkles said that better payments are due to customer health and customers prioritizing Braze, and overall demand environment components perform well, with messaging performing well and broad adoption of entitlements.

Q: Arjun Bhatia: Willow Miller: I'm Willow Miller on for Arjun Bhatia. We appreciate the color on the down selectivity in the prepared remarks. But can you also comment on where you are in terms of ZIRP era customer renewals? Could we expect any more in the balance of the year?

A: Isabelle Winkles said that they're happy to see the overall trajectory on downsell activity and stabilization in dollar - based net retention, and they'll talk more about those metrics in the coming quarters.