10-Q: Backblaze Reports Q1 2026 Results, Revenue Up 12%

Backblaze, Inc. announced its first quarter 2026 financial results, showing a 12% increase in total revenue to $38.7 million, driven primarily by growth in its B2 Cloud Storage segment.

Summary

• Backblaze reported a 12% increase in total revenue for the first quarter of 2026, reaching $38.7 million compared to $34.6 million in the same period of 2025.
• B2 Cloud Storage revenue grew by 24% to $22.4 million, while Computer Backup revenue saw a slight decrease of 2% to $16.2 million.
• Gross margin improved to 61% from 56% in the prior year, largely due to a reduction in depreciation expense from extending the useful life of infrastructure equipment.
• The company reported a net loss of $6.1 million for the quarter, an improvement from the $9.3 million net loss in Q1 2025.
• Operating expenses increased by 3% to $28.9 million, with sales and marketing expenses rising 11% due to restructuring costs and marketing initiatives.
• Annual Recurring Revenue (ARR) for the total company increased to $158.2 million from $139.4 million in the prior year.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing, with solid revenue growth and improved gross margins, though the continued net loss and increased operating expenses temper the overall sentiment.

Positives

• Total revenue increased by 12% year-over-year to $38.7 million.
• B2 Cloud Storage revenue showed strong growth of 24% year-over-year.
• Gross margin improved significantly to 61% from 56% in Q1 2025.
• Net loss decreased to $6.1 million from $9.3 million in the prior year.
• Net revenue retention rate for B2 Cloud Storage was strong at 110%.
• Total Company ARR grew by 13.5% to $158.2 million.

Negatives

• Computer Backup revenue decreased by 2% year-over-year.
• The company continues to operate at a net loss, with an accumulated deficit of $227.7 million as of March 31, 2026.
• Sales and marketing expenses increased by 11% due to restructuring costs and investments in growth initiatives.
• Investment income decreased by 24% due to lower interest rates on marketable securities.

Risks

• Intense competition from larger players like AWS, Google Cloud, and Azure.
• Potential for service disruptions or data loss due to hardware failures, cyberattacks, or natural disasters.
• Reliance on third-party vendors and suppliers, including data center and hard drive providers, which could lead to supply chain disruptions.
• The evolving legal and regulatory landscape around AI could impact customer usage of the platform.
• The company has a history of cumulative losses and does not expect to be profitable for the foreseeable future.
• Potential for material defects or errors in software or hardware failures.
• The company's international operations are subject to increased business, regulatory, and economic risks.
• The company's reliance on AI technologies, both internally and for customer use, carries risks of inaccuracies, bias, and evolving regulations.

Future Outlook

The company expects to continue investing in its sales and marketing organization and development to deliver new features and capabilities. Significant investments are also planned for data center infrastructure and technical operations. Backblaze does not expect to be profitable for the foreseeable future due to these ongoing investments.

Management Comments

• The company aims to make customers succeed by solving their toughest data storage challenges through its purpose-built, web-scale software infrastructure.
• Backblaze is focused on specialized storage and an open cloud ecosystem that integrates with a broad range of partners.
• The company is making targeted investments to position itself in emerging ecosystems shaped by the AI era, including neocloud platforms and next-generation developers/startups.
• Backblaze is focused on improving operational efficiency across the organization, including integrating talent and driving productivity.

Industry Context

StockSavvy.ai notes that Backblaze's Q1 2026 results reflect continued growth in the cloud storage market, particularly driven by AI workloads. The company's strategic focus on B2 Neo and the Flamethrower program indicates an effort to capture market share in the burgeoning AI infrastructure and startup ecosystems, while also facing intense competition from established cloud giants.

Comparison to Industry Standards

• Backblaze's gross margin of 61% is competitive within the cloud infrastructure sector, though it may trail behind hyperscalers with greater economies of scale.
• The company's Net Revenue Retention Rate (NRR) of 110% for B2 Cloud Storage is a strong indicator of customer loyalty and expansion, often exceeding industry benchmarks for SaaS businesses.
• The company's focus on cost efficiency and operational improvements, including extending asset useful lives, aligns with industry trends of optimizing infrastructure costs.
• While Backblaze is not a hyperscaler, its B2 Cloud Storage offering competes with object storage services from Amazon S3, Google Cloud Storage, and Azure Blob Storage, aiming to differentiate on price and simplicity.

Legal Proceedings

• The company is involved in various claims and legal actions arising in the ordinary course of business, but none are expected to have a material adverse effect on its financial position, results of operations, or cash flows as of March 31, 2026.

Stakeholder Impact

• Shareholders: Continued investment for growth may delay profitability, but improved revenue and margins are positive indicators. Potential dilution from stock-based compensation is being offset by share repurchases.
• Employees: Restructuring activities may impact workforce, but ongoing investments in R&D and sales indicate continued employment opportunities.
• Customers: Continued investment in platform enhancements and new features like B2 Neo and Flamethrower program aim to provide better services and support for AI workloads.
• Creditors: The company is in compliance with its credit agreement covenants, and the maturity date of the revolving credit facility has been extended.

Next Steps

• Continue to invest in sales and marketing to support business growth.
• Enhance platform features and integrate advanced technologies like AI.
• Optimize cost structure and improve operational efficiency.
• Expand international operations into targeted geographies.
• Complete the 2025 Restructuring and Transformation Plan by Q1 2027.

Key Dates

Recommendation

Backblaze demonstrates solid revenue growth and improved margins, indicating positive operational execution. However, the continued net loss, significant ongoing investments, and intense competitive landscape warrant a cautious 'hold' recommendation until a clear path to profitability emerges.

Keywords

Backblaze, 10-Q, SEC Filing, Cloud Storage, B2 Cloud Storage, Computer Backup, Data Center, AI, Financial Results, Revenue, Net Loss, Gross Margin, ARR