Braze Fiscal Q2 2027 Earnings: Revenue Growth Drives Better Operating Leverage

Braze (NASDAQ: BRZE) reported fiscal Q2 2027 revenue of $227.2 million, up 26.2% from $180.1 million, while its GAAP diluted loss per share narrowed to $0.17 from $0.26. Operating leverage improved substantially, and free cash flow increased to $21.7 million despite modest pressure on gross margins.

Core Performance Data

For the quarter ended July 31, 2026, revenue growth was driven primarily by new customers, upsells, and renewals. Braze remained unprofitable under GAAP, but the operating loss narrowed, while non-GAAP operating income and cash generation improved.

The difference between GAAP and non-GAAP results remained significant. Stock-based compensation expense totaled $35.7 million and was a primary contributor to the GAAP operating loss.

Business and Customer Metrics

Subscription revenue remained Braze’s largest revenue source at approximately 91% of the total. Professional services and other revenue grew faster from a smaller base, rising to $19.6 million from $8.3 million.

Customer metrics also moved higher. Total customers increased by 367, while the number generating at least $500,000 in annual recurring revenue increased by 79. Dollar-based net retention improved for both the overall customer base and larger customers.

Remaining performance obligations reached $1.09 billion as of July 31, 2026, including $691.1 million classified as current and expected to be recognized in less than one year. This provides visibility into contracted revenue, although the timing of recognition can vary with renewals, service delivery, and contract terms.

Slower Expense Growth Offset Gross-Margin Pressure

GAAP gross margin declined to 66.8% from 67.7%, while non-GAAP gross margin fell to 68.6% from 69.3%. Braze did not provide a specific explanation for the decline in the supplied results, so the durability of this pressure remains an area to monitor.

Operating expenses grew much more slowly than revenue. Total GAAP operating expenses increased by about 5.8% to $170.0 million, compared with revenue growth of 26.2%. Sales and marketing expense rose by about 12.4%, research and development increased by about 9.8%, and general and administrative expense declined by about 13.5%.

That expense discipline improved Braze’s GAAP operating margin to approximately negative 8.0% from negative 21.5%. Its non-GAAP operating margin increased to approximately 9.7% from 3.3%, demonstrating improving operating leverage even as gross margin moved lower.

Cash Flow and Balance Sheet

Net cash provided by operating activities rose to $24.2 million from $7.0 million. Free cash flow increased to $21.7 million from $3.5 million, representing a record fiscal second-quarter result for Braze.

Cash and cash equivalents, restricted cash, and marketable securities totaled $413.9 million at quarter-end, compared with $415.9 million on January 31, 2026. The provided results did not explain the modest decline in total liquidity despite positive quarterly free cash flow.

Guidance

Braze initiated guidance for fiscal Q3 2027 and updated its full-year fiscal 2027 outlook. The release did not include the previous full-year ranges, so the size and direction of the update cannot be determined from the supplied information.

At the midpoint, Q3 revenue guidance is approximately 1% above fiscal Q2 revenue. All earnings guidance below is presented on a non-GAAP basis.

Braze did not reconcile this guidance to comparable GAAP measures because of uncertainty surrounding items including stock-based compensation, which can be affected by changes in its share price.

Management Commentary

CEO Bill Magnuson attributed the quarter’s performance to Braze’s role in helping customers demonstrate measurable returns from customer engagement. He said adoption of products including BrazeAI Operator, BrazeAI Agent Console, and BrazeAI Decisioning Studio was accelerating as customers focused more heavily on return on investment.

Braze also expanded its AI capabilities, entered a three-year strategic collaboration agreement with AWS, and broadened its integration with Databricks CustomerLake. New customer wins and expansions included Chime, Wilson Sporting Goods, Foxtel Group, and several international brands.

Recent Insider Transactions

The supplied six-month insider summary classified 2,478,502 shares across 16 transactions as purchases or acquisitions and 332,050 shares across 12 transactions as sales, resulting in net acquisitions of 2,146,452 shares. Because the acquisition category includes zero-price stock awards, grants, and gifts, it should not be interpreted as equivalent to open-market buying.

The five most recent reported entries were direct sales. These transactions are presented objectively and do not, by themselves, establish insiders’ views about the company’s outlook.

Risks Investors Should Monitor

• Gross-margin pressure: Both GAAP and non-GAAP gross margins declined. Continued compression could limit the benefit of revenue growth and slower operating-expense growth.
• Ongoing GAAP losses: Braze’s GAAP operating and net losses narrowed but remained material. Stock-based compensation of $35.7 million continued to create a substantial difference between GAAP and non-GAAP profitability.
• Dependence on customer additions and expansion: The company identified new customers, upsells, and renewals as its primary revenue drivers. Weaker acquisition, retention, or customer expansion could pressure growth and future revenue recognition.
• Limited visibility into future GAAP earnings: Braze’s guidance is non-GAAP and was not reconciled to GAAP measures because of potentially material variability in stock-based compensation and other adjustments.

Summary

Braze’s fiscal Q2 2027 results combined 26.2% revenue growth with substantially improved operating leverage and cash flow. Customer growth, higher retention, and expansion among larger accounts supported the quarter, while slower expense growth helped offset modest gross-margin pressure. The main points to monitor are whether Braze can sustain customer-driven growth, stabilize gross margins, and continue narrowing the gap between its GAAP losses and non-GAAP profitability.