Braze, Inc. Q3 FY2026 earnings call

Key Points

• Strong Q3 results with 25.5% year-over-year revenue growth and 6% sequential growth.
• Drove efficiency, improving non-GAAP operating margins by over 400 basis points and generating $18 million in free cash flow.
• Achieved strongest customer additions in 3 years, adding 106 sequentially and 317 year-over-year.
• Notable customer wins across industries, leveraging AI-driven omni-channel solutions.
• Cyber Week performance: 102.5 billion messages sent, 28.5 million messages per minute peak throughput, and 60 billion messages during Black Friday to Cyber Monday with 100% uptime.
• AI-driven capabilities: Agent Console, Operator, Decisioning Studio, and ChatGPT native app SDK integration.

Braze reported revenue of $191 million in the fiscal third quarter, up 25.5% year-over-year and 6% sequentially. Subscription revenue contributed 95% of Q3 revenue, with the remaining 5% from recurring professional services and one-time fees. Total customer count increased 14% year-over-year to 2,528, with large customers (spending >$500,000 annually) up 29% to 303, contributing 63% to ARR. Non-GAAP gross profit was $132 million, with a margin of 69.1%, and non-GAAP operating income was $5 million, 2.7% of revenue.

Guidance Details

• Q4 2026 revenue expected in the range of $197.5 million to $198.5 million, representing a year-over-year growth rate of approximately 23% at the midpoint.
• Q4 non-GAAP operating income projected to be between $12 million and $13 million, with non-GAAP net income between $15 million and $16 million.
• Full fiscal year 2026 revenue expected $730.5 million to $731.5 million, a 23% year-over-year growth at midpoint.
• Fiscal year 2026 non-GAAP operating income expected $26 million to $27 million, and non-GAAP net income $46 million to $47 million.
• Target 8% non-GAAP operating income margin for fiscal year 2027.

Risks

• Risks associated with forward-looking statements, including market uncertainties, competitive landscape, and execution risks.
• Risks related to differences between actual results and forward-looking expectations, including those from non-GAAP financial measures.

Question and Answer

• Q: Thoughts on why Avis might be an easier starting point for AI use cases?

A: Agility of deploying agent framework into Canvas, leveraging first-party data and interaction support available in the Canvas environment.

• Q: Market momentum on legacy side?

A: Braze stands out due to AI innovation, competitive positioning, and the enterprise replacement cycle shifting from 'if' to 'when' as customers see Braze as a preferred solution.

• Q: AI impact on growth algorithm?

A: Monetization in two buckets: general AI usage with no direct charge and real-time large language model (LLM) usage charged via a credit framework.

• Q: Customers building bespoke agent tech stacks?

A: Braze's composability allows integration of bespoke systems, but Braze continues to develop generalized solutions that outperform bespoke in-house systems.

• Q: ChatGPT integration and customer interest?

A: Early days, but open ecosystems could make in-chat apps an extension of the first-party ecosystem, requiring investment in first-party data to build direct customer relationships.

• Q: AI Decision Studio reception?

A: Strong pipeline, customer wins, cross-sell potential, and enterprise deal cycles with proof points from significant uplift in customer engagement metrics.

• Q: Pipeline and verticals?

A: No large rotations in vertical opportunities, but deeper penetration in regulated verticals through start-up proof points leading to traditional enterprise adoption.

• Q: Customer additions and expansion?

A: Sales team incentivized, with upsell from customers spending under $500,000 to over, driven by investments in premium channels and normalized buying patterns.

• Q: AI Decision Studio go-to-market?

A: Enterprise deal cycle, customer education, and proof points from uplift driving deal velocity and internal confidence in the solution.

• Q: AI budgets and go-to-market?

A: Selling performance through demonstrable uplift in key customer journey points, combining Braze's composable data, intelligence, and cross-channel support.

• Q: Expanding product portfolio beyond first-party data?

A: Braze focuses on building direct customer relationships even if initial purchases are via agents, emphasizing value in maintaining strong connections with customers despite potential agent-mediated transactions.

• Q: M&A plans?

A: Active corporate development (CorpDev) with a selective approach, focusing on organic and inorganic opportunities that align with leading product road maps and visions.