10-Q: Backblaze Reports Strong B2 Cloud Storage Growth

Backblaze, Inc. announced a 18% increase in total revenue for Q2 2026, driven by a 34% surge in B2 Cloud Storage revenue, alongside improved gross margins.

Summary

• Backblaze reported an 18% year-over-year increase in total revenue for the three months ended June 30, 2026, reaching $42.7 million.
• B2 Cloud Storage revenue grew by 34% to $26.6 million, while Computer Backup revenue saw a slight decrease of 2% to $16.1 million.
• Gross margin improved to 63% for the quarter, up from 62% in the prior year period, and 62% for the six-month period compared to 60% in the prior year.
• The company reported a net loss of $5.1 million for the quarter, an improvement from $7.1 million in the prior year period.
• Significant investments are being made in sales and marketing to support growth, particularly in AI and neocloud ecosystems.
• A major strategic agreement with CoreWeave was signed in June 2026, with an estimated total contract value of $335.1 million over five and seven years.
• The company is continuing its 2025 Restructuring and Transformation Plan, incurring $3.5 million in charges for the six months ended June 30, 2026.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as cautiously optimistic, with strong revenue growth in B2 Cloud Storage and improved gross margins, but continued net losses and significant investments in growth initiatives.

Positives

• Total revenue increased by 18% to $42.7 million for the three months ended June 30, 2026.
• B2 Cloud Storage revenue saw a substantial 34% increase, reaching $26.6 million.
• Gross margin improved to 63% for the quarter, indicating better cost management relative to revenue.
• The company secured a significant strategic agreement with CoreWeave valued at approximately $335.1 million.
• Net loss for the quarter improved to $5.1 million from $7.1 million in the prior year.
• Annual Recurring Revenue (ARR) for B2 Cloud Storage increased by 39% to $113.3 million.
• Net revenue retention rate for B2 Cloud Storage was strong at 113%.

Negatives

• Computer Backup revenue decreased by 2% to $16.1 million for the three months ended June 30, 2026.
• The company continues to incur net losses, with a loss of $5.1 million for the quarter.
• Operating expenses increased by 6% to $31.0 million for the quarter, driven by general and administrative costs.
• The company is making significant investments in sales and marketing, which are expected to increase.
• Restructuring costs of $3.5 million were incurred in the first six months of 2026.

Risks

• Intense competition from larger cloud providers like AWS, Google Cloud, and Azure.
• Potential for service disruptions due to hardware failures, natural disasters, or cybersecurity attacks.
• Reliance on third-party vendors and suppliers for data center and hardware needs.
• The company's business may become substantially dependent on a limited number of large customers.
• The evolving regulatory landscape for AI could impact customer usage of the platform.
• Potential for material defects or errors in software and hardware.
• The company has a history of cumulative losses and does not expect to be profitable in the foreseeable future.
• Increased operating costs due to inflation and interest rate environments.

Future Outlook

The company expects continued growth in B2 Cloud Storage revenue, driven by go-to-market initiatives, customer adoption, and new enterprise agreements. Investments in sales and marketing are expected to increase to support this growth. The company anticipates incurring additional restructuring charges through the first quarter of 2027.

Management Comments

• "Our mission is to make customers successful by solving their toughest data storage challenges."
• "We aim to achieve this mission through purpose-built software and operational expertise that together enable a cloud storage solution optimized for price-to-performance at scale."
• "We view this agreement [with CoreWeave] as a significant example of the value Backblaze provides to neoclouds and in the AI infrastructure ecosystem."
• "The neocloud market is projected to grow from $35 billion this year to over $236 billion by 2031, driven almost entirely by demand for AI compute."

Industry Context

StockSavvy.ai notes that Backblaze's performance aligns with the broader trend of increasing demand for cloud storage, particularly driven by AI and data-intensive workloads. The company's strategic focus on neocloud platforms and AI developers positions it to capitalize on this growing market, though competition remains intense.

Comparison to Industry Standards

• Backblaze's B2 Cloud Storage revenue retention rate of 113% is strong compared to industry averages, which can vary but often aim for retention above 100% through expansion.
• The company's gross margin of 63% is competitive within the cloud storage sector, though it may be lower than hyperscale providers who benefit from greater economies of scale.
• The net loss position is common for growth-stage technology companies investing heavily in market expansion and product development, similar to many in the cloud infrastructure space.

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.

Stakeholder Impact

• Shareholders: Continued investment in growth may lead to future returns, but current net losses and stock volatility present risks.
• Employees: Restructuring activities may impact headcount and morale, while growth initiatives could create new opportunities.
• Customers: Price increases for B2 Cloud Storage may affect some customers, while new strategic agreements like CoreWeave's could lead to expanded services.
• Suppliers: Continued demand for infrastructure equipment supports suppliers, but potential supply chain disruptions remain a risk.

Next Steps

• Continue to scale direct sales organization and enhance marketing capabilities.
• Drive expansion within the existing customer base by introducing new features.
• Focus on serving AI-related ecosystems and neocloud platform providers.
• Integrate AI into development lifecycle and enhance cloud service offerings.
• Continue to invest in data center infrastructure and technical operations.
• Complete the 2025 Restructuring and Transformation Plan by Q1 2027.

Key Dates

Recommendation

Backblaze shows strong growth in its core B2 Cloud Storage offering and improved margins, bolstered by a significant strategic deal with CoreWeave. However, the company continues to operate at a net loss and is undertaking substantial investments and restructuring, which introduces execution risk. While the growth trajectory is positive, the path to profitability is not yet clear, warranting a 'hold' position until sustained profitability and clearer operational execution are demonstrated.

Keywords

cloud storage, B2 Cloud Storage, Computer Backup, data center, AI, neocloud, infrastructure, storage solutions