Backblaze Raises 2026 Outlook as B2 Revenue Jumps 47%

Backblaze raised its fiscal 2026 outlook after rapid growth in its B2 Cloud Storage business lifted third-quarter revenue and expanded adjusted profitability. B2 revenue increased 47% year over year, while the company said demand from artificial intelligence customers and larger enterprise deals contributed to broader adoption.

Total revenue for the quarter ended September 30, 2026, rose 26% to $46.7 million. B2 Cloud Storage generated $30.5 million, with net revenue retention of 115% and gross customer retention of 89%. B2 annual recurring revenue reached $127 million, up 53% from a year earlier.

Computer Backup revenue declined 2% to $16.2 million. The segment reported net revenue retention of 94% and gross customer retention of 91%. At the company level, net revenue retention was 105%, while gross customer retention was 91%.

Backblaze posted a GAAP net loss of $2.4 million, or 5% of revenue, compared with a loss of $3.8 million, or 10% of revenue, in the prior-year quarter. Adjusted EBITDA increased to $15.2 million from $8.4 million, and the adjusted EBITDA margin widened to 33% from 23%.

Non-GAAP net income rose to $6.7 million from $1.9 million. Non-GAAP diluted earnings were $0.09 per share, compared with $0.03 a year earlier. Adjusted gross margin increased to 81% from 79%, while GAAP gross margin rose to 64% from 62%.

The company generated $9 million in operating cash flow during the quarter. After capital expenditures, finance-lease principal payments and specified adjustments, adjusted free cash flow was $0.5 million, representing a 1% margin, compared with negative $3.5 million and a negative 9% margin a year earlier. For the first nine months of 2026, adjusted free cash flow totaled $1.9 million, also a 1% margin.

Backblaze highlighted increasing adoption among larger customers. The company ended the quarter with 254 customers contributing more than $50,000 each in ARR. Revenue from customers above that threshold reached $50 million in ARR, up 109% year over year, while the number of such customers increased 57%.

Four deals carrying more than $500,000 in ARR were booked during the quarter. Three were expansions involving AI customers, including a data-training provider that added more than $4 million of ARR through a new B2 workload. The fourth was a new global networking technology customer using Backblaze’s white-label offering.

Self-service acquisition also increased, with net new B2 self-serve customers reaching four times the year-earlier level. Backblaze said AI referral traffic rose 230% year over year and converted at more than twice the rate of organic search, measured by self-serve account creation or contacts with the sales team. The number of new AI builders entering the company’s pipeline doubled from the second quarter.

Management is seeking to reach AI customers through startup programs, investor networks, industry events and developer tools. Its initiatives include an open-source B2 Model Context Protocol server that allows AI agents to use B2 storage within customer-defined permissions, as well as reference architectures for AI workloads.

For the fourth quarter, Backblaze expects revenue of $49.8 million to $50.2 million and an adjusted EBITDA margin of 32% to 34%. The company expects B2 revenue growth of about 60% in the period.

Backblaze raised and narrowed its full-year revenue outlook to between $177.8 million and $178.2 million. It also raised its expected fiscal 2026 adjusted EBITDA margin to a range of 30% to 31%.

The company separately reported raising $201 million through 0% coupon financing intended to replace higher-cost capital leases. Its capped-call structure would result in no illustrative equity dilution at stock prices up to $33.76, assuming the principal is paid in cash, according to the presentation.

Backblaze cautioned that revenue from AI customers remains at an early stage and that widespread adoption is uncertain. It also identified risks involving customer concentration, customer consumption, the timing of capacity ramps, supply availability and pricing, and its ability to scale operations. The company said these factors could cause actual revenue, including revenue associated with its strategic agreement with CoreWeave, to differ from contracted amounts.