Backblaze Q3 2025 slides: AI focus drives growth as margins expand

Introduction & Market Context

Backblaze Inc (NASDAQ:BLZE) presented its Q3 2025 results on November 6, highlighting significant financial improvements despite a challenging market reception. The cloud storage provider reported a 14% year-over-year revenue increase to $37.2 million, with its B2 Cloud Storage segment growing at 28%.

Despite beating analyst expectations with a surprise profit of $0.03 per share versus an anticipated loss of $0.01, Backblaze's stock has experienced significant pressure. According to market data, shares fell 27.3% following the earnings release, with pre-market trading showing an additional 8.35% decline.

Quarterly Performance Highlights

Backblaze delivered what it described as a "double beat" on revenue and adjusted EBITDA margin in Q3 2025, with particularly strong performance in its B2 Cloud Storage business.

As shown in the following financial highlights:

The company's B2 Cloud Storage revenue reached $20.7 million, growing 28% year-over-year with a trailing four-quarter net revenue retention (NRR) of 110%. Meanwhile, Computer Backup revenue remained flat at $16.5 million. Total gross customer retention across the business stood at a healthy 91%.

Profitability metrics showed substantial improvement, with adjusted EBITDA margin reaching 23% - a milestone achieved one quarter ahead of the company's previously announced target.

Strategic Initiatives

Backblaze is strategically positioning itself as a critical infrastructure provider for the AI economy, emphasizing its ability to deliver cost-effective data storage solutions for AI applications.

The company's strategic positioning in the AI market is illustrated in this slide:

Management highlighted that Backblaze enables AI companies to use any compute platform while avoiding high egress costs typically associated with larger cloud providers. The company noted that its solutions are already trusted by hundreds of AI companies, with AI-related storage now accounting for approximately 25% of new business.

The presentation showcased several large customer wins that demonstrate Backblaze's value proposition:

These customer examples highlight Backblaze's ability to win six and seven-figure deals across various sectors, including AI startups, surveillance applications, and media development.

Detailed Financial Analysis

Backblaze's financial trajectory shows significant improvement across multiple metrics, particularly in margins and cash flow.

The company's path to positive adjusted free cash flow demonstrates consistent progress:

Adjusted EBITDA margin has improved from 5% at IPO to 20% in Q1-Q3 2025, while adjusted free cash flow margin has improved from -54% in 2022 to -9% in Q1-Q3 2025. The company expects to reach cash flow breakeven in Q4 2025.

The reconciliation of non-GAAP measures shows substantial year-over-year improvement:

GAAP net loss improved to $3.778 million from $12.753 million in the year-ago quarter, while adjusted EBITDA nearly doubled to $8.387 million (23% margin) from $3.749 million (12% margin) in Q3 2024.

The company's evolving financial profile demonstrates improving operational efficiency:

The Rule of 40 Score (combining B2 growth and adjusted free cash flow margin) has improved from 9% in Q4 2024 to 19% in Q3 2025, with expectations of reaching 25-28% in Q4 2025.

Forward-Looking Statements

Looking ahead, Backblaze provided guidance for Q4 2025 and the full year:

For Q4 2025, the company expects revenue between $37.3 million and $37.9 million, with adjusted EBITDA margin between 20% and 22%. For the full year 2025, revenue is projected to be between $145.4 million and $146.0 million, with adjusted EBITDA margin between 18% and 20%.

The company also outlined its growth targets for B2 Cloud Storage:

After exceeding growth targets in Q2 2025 (29% actual vs. 23-25% outlook), B2 growth came in at the low end of the outlook range in Q3 2025 (28% actual vs. 28-30% outlook). For Q4 2025, Backblaze expects B2 growth of 25-28%.

The company is executing phase 2 of its go-to-market transformation, focusing on driving self-serve momentum and increasing direct sales efficiency:

These initiatives aim to streamline AI use case adoption, deepen developer relationships, and upgrade go-to-market systems to support continued growth.

Despite the strong operational performance and improving financial metrics, investors appear concerned about the growth trajectory, particularly as B2 growth is expected to moderate slightly in Q4. However, management emphasized that the company is on track to achieve positive adjusted free cash flow in Q4 2025, a significant milestone in Backblaze's path to sustainable profitability.

Full presentation:

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