Backblaze Q1 2025 slides: B2 Cloud Storage accelerates as AI drives growth

Introduction & Market Context

Cloud storage provider Backblaze Inc (NASDAQ:BLZE) released its Q1 2025 earnings presentation on May 7, revealing strong revenue growth and significant margin improvement. The company’s stock responded positively, surging 8.41% in aftermarket trading to reach $4.90, though still trading 55% below its 52-week high of $10.

The results come amid increasing demand for cloud storage solutions, particularly for AI and machine learning workloads, where Backblaze is positioning itself as a cost-effective alternative to larger providers like Amazon (NASDAQ:AMZN) Web Services.

Quarterly Performance Highlights

Backblaze reported total revenue of $34.6 million for Q1 2025, representing 15% year-over-year growth and exceeding analyst expectations of $34.22 million. The company’s B2 Cloud Storage segment was the standout performer, growing 23% year-over-year to reach $18.0 million, accelerating from 22% growth in the previous quarter.

As shown in the following revenue breakdown:

The company’s Annual Recurring Revenue (ARR) reached $140.8 million overall, with B2 Cloud Storage contributing $73.8 million. Computer Backup, Backblaze’s more mature business line, grew 8% year-over-year to $16.6 million.

Customer retention metrics remained strong, with a 90% gross customer retention rate and net revenue retention of 113% across the company. The B2 Cloud Storage segment showed particularly impressive customer economics with 117% net revenue retention.

AI Momentum and Strategic Initiatives

A key highlight of the presentation was Backblaze’s growing momentum in the AI sector. The company reported a 66% year-over-year increase in AI customer count and a remarkable 25x increase in AI customer data storage.

To capitalize on this growth, Backblaze announced a new offering called "B2 Overdrive," designed specifically for throughput-intensive workloads like AI/ML and high-performance computing. The service promises terabit-speed performance at exabyte scale with predictable pricing starting at $15/TB and unlimited free egress—a direct challenge to the egress fees charged by major cloud providers.

The company also highlighted progress in its go-to-market transformation, reporting more than doubled bookings year-over-year in Q1 2025. This included securing its largest total contract value (TCV) deal ever—a multi-million dollar, multi-year agreement that displaced Amazon AWS at an existing customer that had initially started with a small contract.

Detailed Financial Analysis

Backblaze’s profitability metrics showed substantial improvement in Q1. The company reported an adjusted EBITDA margin of 18%, tripling from the previous period and exceeding guidance. The adjusted free cash flow margin improved from -16% in 2024 to -6% in Q1 2025, continuing the company’s progress toward positive cash flow.

The following chart illustrates Backblaze’s path to profitability since its IPO:

The B2 Cloud Storage segment is expected to maintain its growth trajectory throughout 2025, with organic year-over-year growth projected to reach 30%+ by Q4 2025:

Forward-Looking Statements

Based on its strong Q1 performance, Backblaze raised its full-year guidance. For Q2 2025, the company expects revenue between $35.2 million and $35.6 million, with adjusted EBITDA margin of 14% to 16%. For the full year 2025, revenue guidance stands at $144.0 million to $146.0 million, while adjusted EBITDA margin guidance was raised from 16-18% to 17-19%.

The company also outlined plans to reduce equity dilution, including transitioning from "Sell to Cover" to "Net Share Settlement" for executive equity vests and shifting from all-equity bonuses to a mix of equity and cash in the near term, with a long-term goal of moving to all-cash bonuses.

CEO Gleb Budman expressed confidence in the company’s trajectory during the earnings call, stating, "We are building a great company and these false claims won’t derail Backblaze’s growth story." He particularly emphasized the AI segment’s expansion, noting, "Our AI customer base grew by 66%. Their data with us grew by 25 times."

While Backblaze faces intense competition from established cloud storage providers and potential macroeconomic headwinds, its Q1 2025 results and raised guidance suggest the company is successfully executing its growth strategy, particularly in the rapidly expanding AI market segment.

Full presentation:

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