Backblaze cloud revenues grow and accelerate with AI customers

Backup and cloud storage provider Backblaze reported revenues 16 percent higher with major contributing segment cloud storage growing 29 percent.

It earned $36.3 million in second calendar 2025 quarter revenues with a GAAP loss of $7.1 million, improved from the year-ago $10.3 million loss. Its Computer Backup segment revenues were up 4 percent annually to $16.5 million, although down 0.6 percent Q/Q, a second consecutive quarter of sequential decline. The growth was attributed to a price rise. B2 Cloud Storage revenues were $19.8 million compared to $15.4 million a year ago and $!8 million in the previous quarter.

CEO Gleb Budman stated: “We’re pleased with our continued strong quarterly performance, with B2 revenue growth accelerating from 23% to 29% sequentially and solidifying our journey to be Adjusted Free Cash Flow positive in Q4.” The “adjusted” term means excluding one-time costs, non-cash expenses, restructuring costs or litigation expenses, from the free cash flow calculation. Free cash flow is the result after subtracting capital expenditures from operating cash flow.

CFO Marc Suidan said: “Our subsequent aim will be to achieve GAAP net income positivity as operating leverage kicks in.”

There were 150 $50k+ ARR (Annual Recurring Revenue) customers, up 30 percent year-on-year. A second Backblaze customer, an AI company, upgraded their contract to a 7-figure level in the quarter. Budman added: “We also signed our first six-figure B2 Overdrive customer in early Q3, just two months after product launch.” B2 Overdrive provides higher data access speed for AI and high-performance computing (HPC) workloads. This generative AI video company transferred their data from a hyperscale public cloud provider, because “They were getting killed by egress fees” and needed a fast data feed to GPUs which B2 Overdrive provides.

He said in the earnings call: “Our focus has been to accelerate B2 growth and become adjusted free cash flow positive.We’ve accelerated year over year B2 growth from 22 percent at the end of last year to 29 percent this past quarter and we remain on course to be adjusted free cash flow positive in Q4. This marks an important step as we continue our progress towards becoming a profitable Rule of 40 company.”

The Rule of 40 is that a SaaS business’ revenue growth rate plus its profit margin should be equal to or greater than 40 percent. The revenue growth rate could refer to the ARR increase. Profit margin is typically calculated using the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin. It’s not a GAAP measure. A rule of 40 business is generally viewed as a sustainable business, with balanced profitability and growth.

Backblaze has been focussing on its go-to-market activities to get access to more potential customers, with more direct sales focus for large customers. Budman said: “Some of the changes we made in our go to market include rebuilding account-based marketing, which required significant systems and process work, but now enables us to more precisely target organizations for whom we should be an ideal fit when they’re in market and to the broader buying community. We also revamped our approach to customer success to better identify and expand use cases with existing customers.”

He added: “We added a field enablement function to further up level the sales team. We deployed AI in various activities across the go to market motion.”

As a result: “Our pipeline has grown significantly year over year and we’ve had a steadily growing increase in 6 figure opportunities enter the pipeline quarter over quarter, a sign that the machine is gaining momentum.”

The B2 Cloud Storage growth was affected by AI; Budman saying: ”This quarter, the number of AI customers grew 70 percent and data stored by these customers grew 40 times year over year. AI use cases drove the outperformance on our financial metrics this quarter And this is by far the most data hungry industry we have witnessed and we’re confident that AI will significantly drive our market opportunity.”

In contrast the computer backup business segment is fading. Suidan said: “In the [remainder of ] 2025, we see computer backup declining in the low to mid single digits on a quarterly basis. We continue to see areas for growth and are exploring options to improve the business, but at this point, we feel it is prudent to provide this outlook.”

Asked about the backup business, Budman said: “I think in the consumer side of the business, it’s a secular decline business. … And that’s in part because people aren’t doing backups of their laptops and desktops as much as they used to because there’s a lot more streaming in mobile devices and the like. On the business side of that, I think we actually have more opportunity.”

Budman said Backblaze is applying more of its focus to business backup: “We’ve put a tiger team, internally on computer backup.”

Backblaze had 321,201 operating disk drives at the end of the quarter. They have to be replaced, which costs cash, when their operational life comes to a close. It has improved its gross margin by revising its disk drive operating life upwards, Suidan saying: “We evaluated the estimated useful life of our fixed assets based on more recent operational data and found that our hardware last an estimated six years instead of the three to five years estimate that what we previously were using. This change better reflects our business operations and accounts for most of the gross margin improvements this quarter.”

The guidance for the next quarter is $36.9 million +/- $200,000, implying a 13.2 percent growth rate at the mid-point. It expects B2 Cloud Storage revenues to grow between 28 and 30 percent. The full year forecast has been lifted from $145 million +/- $1 million to $146 million +/-$1 million.

The Backblaze board has approved a stock repurchase program. We can hope to see a profitable Backblaze, in the GAAP sense, in 2026