Backblaze Q3 2026 slides: AI strategy drives 47% B2 growth

Backblaze (NASDAQ:BLZE) presented its third-quarter 2026 results on November 2, showcasing significant acceleration in its B2 Cloud Storage business driven by artificial intelligence workloads. The company’s shares surged 39.86% in after-hours trading to $10.35 following the earnings release, reflecting investor enthusiasm for both the quarter’s performance and raised full-year guidance.

The presentation, delivered by CEO and Co-Founder Gleb Budman and CFO Marc Suidan, highlighted how the company’s strategic focus on AI infrastructure is translating into measurable business results. With B2 revenue growth reaching 47% year-over-year and the company achieving positive adjusted free cash flow for the first time, Backblaze appears to be capitalizing on what management describes as "rapidly expanding storage needs" and "greater focus on AI ROI" across the industry.

The company’s third-quarter results demonstrated broad-based momentum across multiple metrics, as illustrated in the following key highlights from the presentation:

Total revenue reached $46.7 million, representing 26% year-over-year growth, while B2 Cloud Storage—the company’s primary growth engine—accelerated to 47% year-over-year revenue growth. This marked a significant acceleration from the 34% growth rate reported in the second quarter.

Customer acquisition metrics showed particularly strong performance, with the company adding four times as many net new B2 self-serve customers compared to the prior year. The upmarket segment also gained traction, with 254 customers now contributing more than $50,000 in annual recurring revenue (ARR), and four deals exceeding $500,000 in ARR closed during the quarter.

The company’s mission, as stated in the presentation, is "to make customers unstoppable by solving their toughest data storage challenges"—a positioning that appears increasingly relevant as AI workloads drive exponential data growth.

Backblaze’s presentation emphasized how its strategic focus on AI builders is generating tangible business results. The company reported that the number of new AI builders entering its sales pipeline doubled in the third quarter compared to the second quarter, signaling strong momentum in this critical customer segment.

As shown in the following data on AI search visibility and customer acquisition:

The company’s AI referral traffic grew 230% year-over-year, roughly twice the market growth rate of 117%. More importantly, conversion rates from AI search proved more than twice as effective as organic search for both self-serve account creation and sales contacts. This suggests that Backblaze’s content strategy is successfully establishing authority within AI search platforms, creating a sustainable customer acquisition channel.

The company categorizes its AI customer base into three segments: foundation model developers, physical AI companies, and generative media companies. To reach these customers, Backblaze is leveraging AI search visibility, building relationships across the AI ecosystem, and developing specialized tools for developers and AI agents.

Management noted that "trusted content builds authority in AI search," highlighting the importance of thought leadership in capturing this growing market opportunity. The company’s Flamethrower startup program has attracted hundreds of participating startups, providing an early-stage pipeline of potential high-growth customers.

The presentation showcased four significant customer wins, each with annual recurring revenue exceeding $500,000, demonstrating Backblaze’s ability to move upmarket:

Three of the four deals represented expansions with existing AI builder customers: an AI training data provider, a generative AI media customer, and an AI audio customer. The fourth was a new logo win with a global networking technology customer implementing Backblaze’s white-label "Powered by Backblaze" solution for core workloads.

One customer case study illustrated the rapid expansion potential within AI workloads. The following chart shows the growth trajectory of an AI builder customer:

This AI training data provider began with a customer referral, reached nearly $1 million in ARR within 11 days from trial to signed deal, expanded by more than $1 million in the second quarter of fiscal 2026, and added a $4 million expansion in the third quarter for a new data processing workload. The customer’s capacity grew 7.0 times versus the initial landing, with just 12 weeks from initial landing to first expansion.

While the presentation notes this represents a single customer example and is not indicative of other customers or future results, it demonstrates the company’s ability to expand within AI workloads as customer data needs scale rapidly.

The company’s financial performance showed significant improvement across profitability metrics, as highlighted in the following summary:

B2 Cloud Storage ARR reached $127 million, up 53% year-over-year, while the B2 Rule of 40 score—calculated by adding B2 growth rate with adjusted free cash flow margin—reached 48. The company also raised its full-year fiscal 2026 guidance and projected approximately 60% B2 growth in the fourth quarter.

The acceleration in B2 revenue growth over recent quarters is illustrated in the following chart:

The presentation breaks down B2 revenue growth into four drivers: new direct sales, new self-serve customers, direct cross-sell and upsell within existing customers, and net organic growth. The 47% year-over-year growth in the third quarter represents the highest rate in 10 quarters, with contributions across all four categories.

Upmarket customer momentum continued to build, as shown in the following data on customers contributing more than $50,000 in ARR:

The number of customers contributing more than $50,000 in ARR grew 57% year-over-year to 254, while ARR from this segment increased 109% year-over-year to $50 million. This upmarket shift is significant for the business model, as larger customers typically demonstrate higher retention rates and provide more predictable revenue streams.

A comprehensive view of the company’s financial and operational metrics for the third quarter is presented in the following table:

B2 Cloud Storage achieved 64% gross margin, 115% net revenue retention, and 89% gross customer retention. The Computer Backup business, while declining 2% year-over-year in revenue, maintained stable retention metrics with 94% net revenue retention and 91% gross customer retention.

The company’s path toward sustainable profitability is illustrated in the following trend of adjusted EBITDA and free cash flow margins:

Since its 2021 IPO, Backblaze has dramatically improved its adjusted EBITDA margin from 5% to 30% year-to-date in 2026, while adjusted free cash flow margin turned positive at 1% year-to-date after several years of investment. This progression demonstrates the operating leverage inherent in the cloud storage business model as the company scales.

Backblaze raised its full-year fiscal 2026 guidance, reflecting confidence in sustained momentum. The updated guidance is presented below:

For the fourth quarter of 2026, the company expects revenue between $49.8 million and $50.2 million, with adjusted EBITDA margin of 32% to 34%. For the full year, revenue guidance increased to $177.8 million to $178.2 million, up from a previous midpoint of $173 million. Adjusted EBITDA margin guidance rose to 30% to 31%, compared with prior guidance of 27% to 29%.

Management indicated that B2 revenue growth should reach approximately 60% year-over-year in the fourth quarter, representing further acceleration from the third quarter’s 47% growth rate. The company also stated expectations for B2 growth to remain at 40% or higher in fiscal 2027.

However, the presentation noted that capital expenditures will increase significantly as Backblaze builds out capacity for contracted demand from CoreWeave, other neocloud customers, and AI builders. According to the earnings call, CapEx is expected to rise by approximately 10 times over the next year, which could temporarily pressure free cash flow margins even as the company maintains strong revenue growth.

The presentation included forward-looking statements subject to risks and uncertainties, including those related to AI customer revenue, growth rates, market opportunity estimates, sales and marketing initiatives, new features, pricing, supply availability, and the strategic agreement with CoreWeave.

Backblaze emphasized its strategic positioning to capitalize on industry themes of rapidly expanding storage needs and greater focus on AI return on investment. The company’s value proposition centers on delivering "the scale and economics AI needs," positioning B2 Cloud Storage as purpose-built for the current market opportunity.

The company also highlighted its capital structure optimization, having raised $201 million through zero-coupon convertible notes to replace higher-cost capital leases. This financing provides flexibility to fund capacity expansion while minimizing dilution through capped-call protection structures.

With cash, equivalents, and marketable securities totaling $230 million at quarter-end and year-to-date operating cash flow of $23 million, Backblaze appears well-positioned to fund its growth initiatives while maintaining financial flexibility.

The strong after-hours stock reaction—pushing shares from $7.40 to $10.35—suggests investors view the combination of accelerating growth, improving profitability, and raised guidance as validating the company’s AI-focused strategy. However, shares remain well below the 52-week high of $23.99, indicating room for continued recovery if the company can sustain its current momentum through fiscal 2027.

Full presentation:

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