Backblaze, Inc. Q3 FY2026 earnings call

• AI Infrastructure Partnerships: Backblaze is focusing on executing and ramping existing large-scale agreements with AI infrastructure providers like CoreWeave and another major Neocloud customer. These deals involve multi-year minimum commitments and are moving into execution ahead of schedule.
• AI Builder Momentum: There is strong momentum among 'AI builders' (startups and enterprises using AI directly). The pipeline of new AI builders doubled in Q3 compared to Q2. Customer acquisition is being driven by increased visibility via AI search engines (230% YoY growth in visits) and ecosystem programs like Flamethrower.
• Strategic Focus on ROI: Customers are increasingly focused on efficiency and ROI in AI, leading to greater adoption of storage tiering and open models. Backblaze’s high-performance capacity tier helps customers manage data growth while improving infrastructure economics.
• Product Development: Backblaze launched an open-source B2 MCP server, allowing AI agents to interact directly with B2 storage with governance controls. Reference architectures for B2 in AI workflows have also been published.
• Operational Execution: Hardware shipments are tracking ahead of schedule, and development work for key partners was completed early. The company is adding capacity ahead of customer ramps, which will temporarily impact GAAP gross margins due to depreciation starting before associated revenue recognition.

Total revenue reached $47 million, a 26% year-over-year increase. B2 Cloud Storage was the primary growth driver, with revenue accelerating to 47% year-over-year growth (up from 34% in Q2). Computer Backup revenue was $16 million, representing a 2% year-over-year decline but showing sequential improvement due to stabilization initiatives. B2 ARR grew 53% year-over-year to $127 million. The company does not provide explicit percentage contribution of each segment to total revenue in the transcript, though B2 is clearly the dominant growth engine.

• Q4 Revenue Guidance: Raised to $49.8 million - $50.2 million. At the midpoint, B2 revenue growth is expected to accelerate to approximately 60% year-over-year.
• Full Year 2026 Revenue Guidance: Raised to $177.8 million - $178.2 million, a $5 million increase at the midpoint from previous guidance.
• Adjusted EBITDA Margin: Q4 margin expected to be 32% - 34%. Full year 2026 adjusted EBITDA margin raised to 30% - 31%, up from the previous outlook of 27% - 29%.
• Capital Expenditures: Full-year PP&E capital expenditures are expected to remain between 55% and 65% of revenue. For Q4, this implies $65 million - $83 million in CapEx, largely funded by convertible debt proceeds.
• Forward Outlook: Management expressed confidence in sustaining over 40% B2 growth in 2027, driven by broad-based strength and major partner ramps.

• Temporary Margin Pressure: Deploying capital for contracted demand means depreciation expenses will begin before associated revenue ramps, potentially reducing GAAP gross margins by 3 to 6 percentage points over the next few quarters.
• Execution Risk with Large Partners: While committed, there is significant organizational focus required to deliver on multi-exabyte commitments for partners like CoreWeave and other Neoclouds; failure to execute could impact relationships.
• Computer Backup Decline: The legacy Computer Backup segment continues to see year-over-year declines (low single digits expected in Q4), requiring ongoing retention and optimization efforts to stabilize.
• Supply Chain and Data Center Constraints: Scaling requires securing hardware allocations and data center capacity. While allocations are secured, fulfillment timelines (now 4-5 months) and power availability remain critical operational factors.

Q: Etai Kidron asked if the focus on ramping existing Neocloud customers signaled a slowdown in pursuing new ones or a strategic shift.

A: Gleb Budman clarified it is not a strategy change; the team continues to pursue new Neoclouds. However, significant organizational resources are dedicated to executing flawlessly on signed deals (CoreWeave and another large partner) to ensure successful scaling, which he views as the best path to capitalize on the broader opportunity. Parallel efforts continue for the AI builders segment.

Q: Jason Ader asked about the timeline for CoreWeave's ramp given market concerns and its impact on Q4 guidance.

A: Marc Suidan confirmed CoreWeave’s ramp extends through mid-next year, contributing modestly to Q3 but significantly to future quarters. Gleb Budman affirmed no signs of risk with CoreWeave, citing committed contracts and strong partnership. Marc added the company is well-capitalized with access to over $400 million to fund these commitments without liquidity concerns.

Q: Mike Sikos requested a breakdown of Q3 outperformance drivers and CapEx payback economics.

A: Gleb corrected that the rapid early ramp was due to a different Neocloud partner, not CoreWeave. Marc noted that 11 deals >$500k ARR drove the acceleration. Regarding CapEx, Marc stated a ~2-year payback period, requiring $2 of CapEx for every $1 of new ARR. Most Q4 CapEx will be paid in cash, impacting free cash flow temporarily, but the model remains sustainable given revenue growth.

Q: Eric Seppager asked about the relative opportunity size between AI infra providers vs. AI builders and the CoreWeave ramp trajectory.

A: Gleb explained that while AI infra companies are maturing, many early-stage ones prioritize GPUs over storage, whereas later-stage ones recognize storage needs. Conversely, the AI builder side includes tens of thousands of venture-backed startups with immediate, large storage needs today. Marc detailed CoreWeave’s ramp: 70% managed storage ramps monthly through July 2027 under a two-way minimum commitment, while the remaining 30% represents higher-margin managed services.