Braze, Inc. (BRZE) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Braze's earnings call reflects strong financial performance with a 21% revenue growth forecast and improved operating margins. The Q&A session highlighted positive trends in customer engagement and AI integration. Despite economic headwinds, there is a normalization in buying patterns, and customers are investing in premium channels. The strategic expansion of AI capabilities and strong upsell momentum in high-value customer segments further support a positive outlook. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Revenue $191 million, up 25.5% year-over-year and 6% from the prior quarter. Growth driven by existing customer contract expansions, renewals, and new business.
Braze AI Decisioning Studio Revenue Contribution $4.8 million in the quarter. Organic revenue growth rate was 22.3% year-over-year, marking the second sequential quarter of organic revenue growth acceleration.
Subscription Revenue 95% of total revenue, with the remaining 5% from recurring professional services and one-time configuration and onboarding fees.
Customer Count 2,528 customers, up 14% year-over-year (317 new customers) and 106 sequentially. Largest quarter-over-quarter increase in customer count since Q3 FY2023.
Large Customers ($500,000+ ARR) 303 customers, up 29% year-over-year (69 new customers) and 21 sequentially. Contributed 63% to total ARR compared to 61% in the prior year.
Dollar-Based Net Retention (All Customers) 108%, showing stabilization and benefits from investments to moderate downsell activity.
Dollar-Based Net Retention (Large Customers) 110%, indicating strong expansion across industries and geographic regions.
Revenue Outside the U.S. 45% of total revenue, consistent with the prior quarter and year.
Remaining Performance Obligation (RPO) $891 million, up 24% year-over-year and 3% sequentially. Current RPO was $573 million, up 25% year-over-year and 3% sequentially.
Non-GAAP Gross Profit $132 million, representing a non-GAAP gross margin of 69.1%, down from 70.5% in the prior year due to higher premium messaging volume and hosting costs.
Non-GAAP Sales and Marketing Expenses $77 million or 40% of revenue, compared to $65 million or 43% of revenue in the prior year. Reflects investments in headcount for growth and global expansion.
Non-GAAP R&D Expense $28 million or 15% of revenue, up from $22 million or 15% of revenue in the prior year. Driven by increased headcount for expanding offerings and developing new products.
Non-GAAP G&A Expense $22 million or 12% of revenue, consistent with the prior year but improved efficiency due to scaling and strategic headcount expansion.
Non-GAAP Operating Income $5 million or 2.7% of revenue, compared to a non-GAAP operating loss of $2 million or -1.4% of revenue in the prior year.
Non-GAAP Net Income $7 million or $0.06 per share, compared to $2 million or $0.02 per share in the prior year.
Cash and Marketable Securities $387 million at the end of the quarter.
Cash Flow from Operations $21 million, compared to cash used in operations of $11 million in the prior year.
Free Cash Flow $18 million, compared to negative free cash flow of $14 million in the prior year.
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Operating Highlights
Braze AI Decisioning Studio: Contributed $4.8 million in revenue for the quarter, enabling deeper one-on-one personalization and driving significant customer engagement improvements.
ChatGPT SDK Integration: Launched a fully featured SDK for ChatGPT apps, enabling sophisticated customer engagement strategies and rapid support for new platforms.
AI-driven capabilities: Introduced tools like Braze Liquid Assistant, AI copy and image generation, and AI content quality assurance to enhance campaign creation and personalization.
Customer Growth: Added 106 new customers sequentially and 317 year-over-year, reaching a total of 2,528 customers, a 14% increase.
Large Customer Expansion: Grew large customers (spending $500,000+ annually) by 29% year-over-year to 303, contributing 63% of total ARR.
Geographic Expansion: Revenue outside the U.S. contributed 45% of total revenue, showing strong international presence.
Revenue Growth: Achieved $191 million in revenue, a 25.5% year-over-year increase.
Profitability: Generated $18 million in free cash flow and achieved a non-GAAP operating income of $5 million, demonstrating improved efficiency.
Messaging Volume: Delivered 102.5 billion messages during Cyber Week with 100% uptime, showcasing platform reliability and scale.
AI Integration: Focused on leveraging AI for customer engagement, including reinforcement learning and generative AI to enhance personalization and operational efficiency.
Vendor Consolidation: Positioned as a preferred choice for customers migrating from legacy platforms, emphasizing AI-driven omnichannel solutions.
Innovation: Continued investment in AI and SDK development to maintain leadership in customer engagement technology.
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Risk or Challenges
Market Conditions: Higher seasonal activity during Q4 is expected to impact gross margins, consistent with historical patterns. This could affect profitability and operational efficiency.
Competitive Pressures: Braze faces competition from legacy marketing clouds and less sophisticated point solutions. While Braze has demonstrated competitive takeaways, the dynamic technical and competitive environment poses ongoing challenges.
Economic Uncertainties: The company’s financial outlook and profitability framework are subject to risks and uncertainties, which could cause actual results to differ materially from expectations.
Supply Chain Disruptions: Higher premium messaging volume and hosting costs have impacted gross margins, indicating potential challenges in managing operational costs.
Strategic Execution Risks: The company’s ability to execute on its AI-driven product advancements and customer engagement strategies is critical. Failure to deliver on these could impact its market position and financial performance.
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Guidance & Outlook
Financial Outlook for Q4 FY2026: Revenue is expected to be in the range of $197.5 million to $198.5 million, representing a year-over-year growth rate of approximately 23% at the midpoint. Non-GAAP operating income is expected to be in the range of $12 million to $13 million, with a midpoint non-GAAP operating margin of approximately 6%. Non-GAAP net income is projected to be $15 million to $16 million, or $0.13 to $0.14 per share, based on approximately 113 million weighted average diluted shares.
Financial Outlook for FY2026: Total revenue is expected to be in the range of $730.5 million to $731.5 million, representing a year-over-year growth rate of approximately 23% at the midpoint. Non-GAAP operating income is projected to be in the range of $26 million to $27 million, implying a non-GAAP operating margin of 3.5%, a 350 basis point improvement versus FY2025. Non-GAAP net income is expected to be in the range of $46 million to $47 million, or $0.42 to $0.43 per share, based on a full-year weighted average diluted share count of approximately 110 million shares.
Profitability Framework for FY2027: The company expects to return to its profitability framework outlined at the last Investor Day, targeting a non-GAAP operating income margin of 8% for FY2027.
AI-Driven Product Advancements: Braze is rapidly introducing new AI-driven capabilities, including reinforcement learning and generative AI, to enhance customer engagement. These advancements are expected to drive operational efficiency, personalization at scale, and relevance enhancement for customers.
Market Trends and Customer Behavior: The company anticipates continued vendor consolidation and replacement trends, with customers adopting more channels and AI solutions. This is expected to drive further integration of Braze into customer engagement infrastructures.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What are some reasons Braze Canvas might be an easier starting point for organizations when building new AI use cases?
A:Braze Canvas integrates directly with features like Canvas Context, which supports interaction logic and personalization. It allows organizations to leverage first-party data and deploy purpose-built agent frameworks quickly. The platform also includes automation for experimentation and built-in reporting to track conversions, enabling rapid deployment and testing.
Q:What are the drivers behind the improving trends in Braze's key metrics and stronger 4Q guidance?
A:The improvements are attributed to ongoing productivity enhancements in the sales organization, efforts to mitigate downsell and dollar churn, and momentum in retaining more dollars while selling more effectively and efficiently. These factors have enabled Braze to overachieve in Q3 and provide strong guidance for Q4.
Q:What is driving the growing momentum on the legacy side for Braze?
A:The momentum is driven by consolidation in the startup landscape, stagnation among enterprise competitors, and Braze's differentiation in the market. Braze's leadership in AI innovation, such as the ChatGPT native app SDK, and its strong competitive positioning are also contributing factors.
Q:What is the current status of Braze's net retention rate (NRR), and how is it trending?
A:Braze's in-quarter organic dollar-based net retention rate continues to improve. It was slightly below 107% in Q1, slightly above 107% in Q2, and continues to trend upward in Q3, showing stabilization over the last three quarters.
Q:How does Braze view the monetization of AI and its impact on the business?
A:Braze monetizes AI in two ways: (1) AI that helps with workflow and broad-scale deployment, which is included in the platform without additional charges; and (2) AI that operates in real-time and on a one-at-a-time basis, which will be incorporated into the credit framework and charged based on usage. This approach is expected to provide potential upside as it is integrated into the credits portfolio.
Q:Is Braze seeing customers build bespoke agentic tech stacks, and how does Braze address this?
A:Yes, some customers build systems alongside Braze for data enrichment, orchestration, and personalization. Braze's composable design allows integration with these systems. Over time, Braze has developed more powerful and generalized solutions, such as item recommendations and Decisioning Studio Pro, which often outperform bespoke systems in performance and total cost of ownership.
Q:What is the significance of Braze's integration with ChatGPT, and how does it impact monetization and value delivery?
A:The integration with ChatGPT allows Braze to push first-party data into personalized ChatGPT apps. The impact on monetization depends on how open or closed these ecosystems become. If open, they can serve as extensions of first-party ecosystems, providing data and messaging opportunities. If closed, they emphasize the importance of first-party relationships, driving investment in customer engagement strategies.
Q:What is driving the velocity of new customer generation for Braze?
A:The velocity is driven by strong competitive positioning, regional investments, verticalization efforts, and strategies to mitigate downsell and churn. These factors, combined with the legacy replacement cycle, have contributed to the momentum in net new customer additions.
Q:What are the early customer reactions to AI Decision Studio, and what is its growth potential?
A:Early reactions to AI Decision Studio are positive, with strong pipeline generation and customer wins across verticals and geographies. It is seen as a critical part of Braze's AI roadmap, offering incremental performance for sophisticated customers. While it requires enterprise deal cycles and customer education, it has significant growth potential as it becomes a larger part of Braze's offerings.
Q:What is driving the growth in Braze's $500,000+ customer segment?
A:The growth is driven by strong upsell momentum, cross-channel strategies, and increased message volumes across diverse channels. Customers are expanding their usage of Braze's platform, including new products like Decisioning Studio, leading to higher spending and growth in the $500,000+ customer segment.
Q:Are marketing organizations showing more willingness to invest in Braze's solutions despite economic headwinds?
A:Yes, there are signs of normalization in buying patterns, with customers investing in premium channels like SMS and WhatsApp and resuming credits upsells. While switching costs remain a factor, customers are showing a willingness to invest in solutions that demonstrate ROI and performance.
Q:What is Braze's strategy for expanding AI Decision Studio to mid-market and lower enterprise customers?
A:Braze plans to provide on-ramps for customers to adopt AI-driven relevance optimization, starting with simpler use cases and progressing to more advanced techniques. The goal is to make AI capabilities accessible to a broader range of customers while maintaining performance and flexibility.
Q:Is Braze accessing dedicated AI budgets, and how does it position itself in the market?
A:Rather than targeting experimental AI budgets, Braze focuses on selling performance by demonstrating ROI and uplift in customer engagement. Its composable data and intelligence, combined with cross-channel support, position it as a leader in customer engagement and AI-driven relevance optimization.
Q:What is Braze's approach to M&A, and are there plans for future acquisitions?
A:Braze remains selective in its M&A strategy, focusing on opportunities that drive forward its product roadmap and vision. While it continues to evaluate opportunities, there are no specific plans disclosed for future acquisitions.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about whether marketing organizations are now more willing to invest in Braze's solutions despite economic headwinds. While they provided examples of normalization in buying patterns and investments in premium channels, they did not clearly state whether there has been a broader shift in willingness to invest.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Decisioning
AI campaign
Agent console
Black Friday
Braze AI
Braze message
ChatGPT app
ChatGPT apps
Cyber Monday
Cyber Week
Decisioning Studio
Forge
Friday Cyber
SDK
SDKs
SMS WhatsApp
campaign creation
code
consumer behavior
consumer insight
conversion
interaction
omnichannel customer
period Braze
phase
production
quality assurance
resonance
service firm
BRZE Transcript
Braze, Inc. (BRZE) Q1 2027 Earnings Call Transcript
Positive5-27
The earnings call summary highlights strong financial performance with a 26% YoY growth in Q1, a $100 million share repurchase, and AI-driven product advancements. The Q&A section reveals efficient AI tool adoption, increased sales efficiency, and robust customer engagement, all contributing to a positive outlook. Despite minor concerns like Decisioning Studio bottlenecks, overall sentiment remains positive, supported by strategic hires and AI integration. Market cap suggests moderate stock price movement, leading to a prediction of a 2-8% increase.
Braze, Inc. (BRZE) Q4 2026 Earnings Call Transcript
Positive3-24
The earnings call highlights strong financial performance, optimistic AI-driven product development, and strategic market positioning. The Q&A session reinforced positive sentiment with no changes in guidance philosophy and improved DBNR. Despite mixed margin impacts, the focus on achieving an 8% operating margin and strong early adoption of new products suggest positive market reception. The company's emphasis on AI integration and verticalization further supports growth potential. Given the market cap, the stock price is likely to react positively, within the 2% to 8% range, over the next two weeks.
Braze, Inc. (BRZE) Presents at Barclays 23rd Annual Global Technology Conference Transcript
Neutral12-11
Braze, Inc. (BRZE) Q3 2026 Earnings Call Transcript
Positive12-9
Braze's earnings call reflects strong financial performance with a 21% revenue growth forecast and improved operating margins. The Q&A session highlighted positive trends in customer engagement and AI integration. Despite economic headwinds, there is a normalization in buying patterns, and customers are investing in premium channels. The strategic expansion of AI capabilities and strong upsell momentum in high-value customer segments further support a positive outlook. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8% over the next two weeks.
BRZE Slides
BRZE Report
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