On Monday, Backblaze (NASDAQ:BLZE) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/290886121
Summary
Backblaze reported a strong Q1 2026 with $38.7 million in revenue, up 12% year-over-year, and B2 cloud storage growing 24%.
The company is seeing significant growth from AI-related customers, with a 76% increase in AI customer usage year-over-year.
Backblaze is focusing on the NEO cloud market, estimating a $14 billion opportunity by 2030, and has secured multiple six, seven, and eight-figure deals.
The company introduced new B2 pricing effective May 1, expected to positively impact revenue and margins.
Guidance for full-year 2026 revenue has been raised to $161.5 million to $163.5 million, with an adjusted EBITDA margin guidance increase to 23-25%.
Full Transcript
Abby (Conference Operator)
Ladies and Gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to the Backblaze first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you and I would now like to turn the conference over to Mimi Kong, Head of Investor Relations. You may begin.
Mimi Kong (Head of Investor Relations)
Thank you. Good afternoon and welcome to Backblaze’s first quarter 2026 earnings call. On the call with me today are Gleb Budman, Co Founder, CEO and Chairperson of the Board, and Mark Sweden, Chief Financial Officer. Today, Backblaze will discuss the financial results that were distributed earlier. Statements on this call include forward looking statements about our future financial results, the impact of our go to market transformation, sales and marketing initiatives, cost saving initiatives, results from new features, the impact of price changes, our ability to compete effectively and manage our growth, and our strategy to acquire new customers, retain and expand our business with existing customers. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including those described in our risk factors that are included in our most recent quarterly report on Form 10Q and our other financial filings. You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on assumptions and beliefs as of today and we undertake no obligation to update them except as required by law. Our discussion today will include non GAAP financial measures. These non GAAP measures should be considered in addition to and not as a substitute for our GAAP results. Reconciliation of GAAP to non GAAP results may be found in our earnings release which was furnished with our Form 8K filed today with the SEC. You can also find a slide presentation related to our comments in the webcast which will also be posted on our Investor Relations page after the call. Please also see our press release or presentation for definitions of additional metrics such as NRR gross customer retention rates and adjusted free cash flows. We will be participating in the Needham Technology Media and consumer conference on May 12th in New York. I hope to see many of you there. Thank you for joining us and I will now like to turn the call over to Cliff.
Cliff
Thank you Mimi and thank you everyone for joining us today. Q1 was a strong quarter. We beat revenue and adjusted EBITDA guidance, ending the quarter with 38.7 million in revenue up 12% year over year with B2 growing 24%. We more than doubled our average sales deal size and drove 72% year over year growth in our 50k port plus ARR cohort. As we continue to move up market and we are on track for our first full year of free cash flow positivity as a public company, what excites Me Most about Q1 goes beyond the numbers. AI is making storage increasingly important and our organization is gelling and executing better than ever to capture that opportunity. This is evidenced by more than 1/3 of all new bookings coming from AI and the number of AI customers using our platform growing by 76% year over year. We entered 2026 saying we would build a more scalable, more predictable growth engine that serves the AI opportunity. Q1 started to show what that looks like in AI. We are seeing demand from two parts of the market. One is companies building the infrastructure and tools that enable AI. The other is companies using that infrastructure to bring AI into products and workflows. We are winning in both. On the infrastructure side, there is a major re platforming happening in the market for the first time in about two decades. The traditional hyperscalers are not the only place companies are building, they’re also building on the Neo clouds. Synergy Research estimates that the NEO cloud market was $25 billion in 2025 and growing to about 400 billion by 2031. In order for these Neo clouds to support their customers AI workflows, they need to offer cloud storage. Some Neo clouds have offered cloud storage built on Flash. It was fast and it worked. But as these platforms have scaled and AI workloads have grown, the economics have become increasingly difficult. Flash is now about 10 times more expensive per terabyte than hard drives. It works well for use cases requiring the lowest latency for smaller data sizes, but becomes unsustainable as at an exabyte scale. As a result, NEO Clouds are now actively looking to introduce a cost efficient hard drive tiered time flash to manage both performance and economics across their infrastructure. At Backblaze, we built an Internet scale file system to optimize performance per dollar out of hard drives and thus believe Backblaze is ideally positioned to provide exactly what these Neo clouds need. We’ve seen support for that belief not only from the multiple signed Neo clouds where we provide this for them already, but also the active engagement we’re having with many of the top neoclouds. We estimate our opportunity to support neoclass at $14 billion by 2030, and with the success we’re seeing, we are aligning resources internally behind that opportunity. In addition to neopods, we’re seeing a significant opportunity for us supporting other AI infrastructure. For example, we are also seeing strong demand from companies supplying large data sets into the AI ecosystem because they need a place to store large data sets efficiently but also be able to move them where they need to go rapidly. One recent example is a training data provider serving AI use cases that selected V2 to store large volumes of video data. A hyper growth company, it was experiencing rate limits and bandwidth constraints with its existing provider and needed a solution that could scale quickly. Backblaze won on both economics and technical fit. The deal closed in just 11 days at nearly a million dollars of arrangement, underscoring how quickly these companies move when infrastructure becomes a constraint and how well Backblaze is suited to the infrastructure side of the AI opportunity. The other part of the AI market we’re seeing is companies using infrastructure like ours to bring AI into their products. As AI models move from text to multimodal, incorporating video, audio and images, the volume of data required to train and run those models grows by orders of magnitude. This is not a future trend, it’s happening now and it’s creating significant and growing need for storage that can handle it economically and at scale. With the generative AI customers we have today, we are finding that price and performance get us in the door, but it is the experience that keeps them and grows them transparent pricing, responsive support and a team that works with them rather than just selling to them. These customers are scaling fast and they do not have time to manage infrastructure problems with Backblaze. They don’t have to. A good example from Q1 is an AI powered video creation company that selected B2 to store data used to train its models. The customer had been running into cost and performance issues with its existing provider. The platform was difficult to manage and the economics were not working at its scale. Backblaze offered the best performance per dollar and a platform that was easy to use and easy to scale. The initial deployment represents nearly half a million dollars of ARR and creates a clear path to expand into higher performance workloads over time. These customer wins are just examples of where we won in Q1 and are reflective of opportunities we have in pipeline going forward. It’s clear that whether customers are building AI infrastructure or using AI in their products, they are scaling fast, the data is growing exponentially and they need infrastructure that is performant, open and cost efficient at scale. That is the moat we have spent 19 years building and AI is making it more valuable, not less, to be the leading storage platform for AI. We are also meeting developers where they already work. We are embedding backwards into the AI ecosystem by integrating directly into the tools developers already use. For Hugging face, which has 13 million users and over 2 million models, we shipped a tool that lets teams store and share model caches on B2 for ComfyUI, which recently raised at a $500 million valuation. We built a plugin to support generative AI workflows for cvat, which is used by tens of thousands of computer vision teams. B2 is now integrated as a backend for training Data and for MLflow, the most downloaded tool for taking AI projects from lab to production. With 60 million monthly downloads. B2 has now been added as an integrated artifact store. So the AI opportunity is making what we do increasingly critical. We’re also stepping up to meet it. A year ago we began a meaningful transformation of our go to market organization focused on three things increasing awareness, driving greater pipeline consistency and expanding revenue within our installed base. In Q1, we delivered progress on all three. On awareness, the Flamethrower startup program is gaining real traction. We have now welcomed approximately 100 companies in under three months, half the time it would typically take. We’ve been added to the A16Z Founder Resource Program, the Launch Startup Showcase and the Startup Grind Conference, all of which expand our reach with venture backed startups. On pipeline consistency, we have completed our core Go to Market systems upgrade, giving our team better visibility and a stronger foundation for a faster, more disciplined revenue motion. And within our installed base, pipeline sourced from existing customers has nearly doubled year over year, reflecting our growing ability to land and expand with our customers. To accelerate this next phase, we welcomed Anush Kumar as our Chief Revenue Officer. Anush has scaled go to market for cloud infrastructure and enterprise storage at NetApp, VMware, Red Hat and SUSE. He brings the pipeline discipline and execution rigor this phase of our growth requires and we believe his leadership will be a meaningful complement to the upmarket momentum we have already built. We also saw encouraging new customer momentum during the quarter across a range of data intensive use cases that included a healthcare data company who selected us for disaster recovery, a cloud gaming platform that chose B2 to store video across multi cloud environments, and an audio streaming platform migrating from self managed infrastructure to B2. These wins reinforce a broader point. Backwave is winning where data is valuable, active and operationally important and this is why I am excited about the opportunity ahead. The shift to multimodal AI is driving exponential data growth and the need for high performance, yet cost efficient storage has never been greater. The customers who are choosing Backblaze are exactly the kinds of customers that compound with us over time. We are stepping up to this opportunity with an up level team, a go to market transformation well underway and a platform we have spent nearly two decades building and optimizing. AI is making everything we have built more valuable and we are becoming the storage infrastructure that powers the AI economy. With that, I’ll turn it over to Mark.
Mark Sweden (Chief Financial Officer)
Thank you Gleb and good afternoon everybody. Our first quarter results reflect the strategy that we have been executing against. We exceeded the top end of both revenue and adjusted EBITDA guidance. Our Q1 outperformance reflects stronger sales execution and the EBITDA demonstrates the operating leverage in the model. Let me walk through the quarter and then cover our outlook. We finished Q1 with revenue of $38.7 million above the high end of our guidance of 38 million. The beat was broad based across both V2 cloud storage and computer backup, with B2 remaining the primary growth driver. B2 cloud storage grew 24% year over year to 22.4 million and ARR grew 28% year over year, reflecting the underlying strength and momentum of the business. The Q1 revenue outperformance was driven by higher customer data consumption on the B2 cloud platform and computer backup coming in slightly more favorable than our forecasted decline on bookings. which primarily affect revenue in future quarters. We closed multiple large deals for a strong quarter. We made several updates this quarter to improve the calculations of our ARR and RPO metrics. I will briefly walk through those changes as I cover the results. ARR increased by more than $5 million sequentially to $158 million with B2 growing 28% year over year. This quarter we updated our ARR methodology to improve comparability across periods and the change is defined in the earnings presentation posted on our Investor Relations website. Under both the new and previous methods, the sequential ARR improvement is approximately $5 million. We ended the quarter with 187 customers contributing over $50,000 in ARR, up 51% from a year ago reflecting continued strong progress upmarket. We also updated our RPO methodology this quarter and described the change in our earnings presentation. The change is aligned to our peer group and RPO is now a more important metric as we continue to move upmarket, signing both annual and multi year customer commitments. Under the updated methodology, RPO increased by $6 million sequentially and by $31 million from the prior year period. Our gross customer retention metrics remain very healthy with customers continuing to use both our B2 and computer backup solutions for nine years on average beginning this quarter. Our reported net revenue retention reflects an in quarter methodology which we believe provides a more current view of our customer expansion and retention trends. In B2, net revenue retention was 110% up from 105% a year ago, reflecting continued expansion within the customer base as a consumption business. V2 benefits from both the organic customer data growth and the cross sell upsell sales motion. Q1 gross margin was 61% versus 56% in the prior year. The year over year improvement shows strong operating leverage continuing to kick in as we tightly manage costs and also from the extension of the useful life of our fixed assets. Total operating expenses were $29 million in Q1, roughly flat compared to Q4 and improved by approximately 600 basis points from the prior year as a percentage of revenue, reflecting strong operating leverage. As we maintain our focus on Cost Management, Q1 adjusted EBITDA was $10 million or 26% of margin, up from $6 million or 18% in the prior year reflecting strong operating leverage as revenue scales sequentially. Margin declined modestly from 28% in Q4, primarily reflecting the one time benefits we referenced in our last earnings call. Adjusted free cash flow was negative $1.8 million in Q1, reflecting earlier payments in the quarter. We are also pulling forward a portion of 2027 CAPEX into 2026 in response to strong demand signals. Even with that pull forward, we …
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