Backblaze (BLZE) Q2 2026 earnings review
Landmark AI Deal Triggers RPO Explosion and Accelerating Growth
Backblaze delivered a blowout quarter, cementing its status as the capacity storage tier for AI infrastructure. A massive $335 million strategic agreement with CoreWeave triggered an unprecedented spike in Remaining Performance Obligations (RPO) to $396 million. Driven by AI demand, B2 Cloud Storage growth is accelerating, jumping to 34% YoY and lifting total revenue by 18%. Crucially, this growth is highly profitable: Adjusted EBITDA margins expanded to 30%, up from 18% a year ago. While the legacy Computer Backup segment continues to slowly decay, the explosive traction in B2 prompted management to significantly raise full-year guidance for both revenue and profitability.
🐂 Bull Case
The $335 million, 5-year CoreWeave deal is definitive proof of Backblaze's 'Neocloud' thesis. AI hyperscalers require cost-effective HDD storage capacity to complement expensive GPU/flash tiers, and Backblaze is winning this massive infrastructure layer.
The B2 segment specifically achieved a 'Rule of 40' score of 42 (34% revenue growth + 8% total company Adj. FCF margin). Strong operating leverage on fixed data center assets is driving rapid margin expansion.
🐻 Bear Case
The Computer Backup business reversed into a 2% YoY decline, with NRR dropping to 94%. This segment will continue to suppress total company growth rates until B2 becomes an overwhelmingly dominant share of the mix.
The CoreWeave deal fundamentally alters Backblaze's risk profile. While it guarantees volume, it introduces significant customer concentration and requires margin-impacting CapEx buildouts to service a single entity.
⚖️ Verdict: 🟢🟢
Bullish. The CoreWeave partnership is a company-altering catalyst that validates the AI storage narrative. With B2 growth re-accelerating to 34% and margins scaling beautifully, the structural shift from a consumer backup tool to an enterprise AI infrastructure layer is complete.
Key Themes
The CoreWeave Mega-Deal Transforms the Trajectory
Backblaze signed a 5+ year, $335 million strategic agreement with CoreWeave, embedding Backblaze software and personnel directly into CoreWeave data centers. This new delivery model provides multi-exabyte object storage capacity at the HDD tier. The deal includes $22 million in warrants tied to contract performance and duration, aligning long-term interests but introducing mild dilution. This single transaction drove a $313 million net addition to RPO, providing unprecedented long-term revenue visibility.
Upmarket Go-To-Market Motion Yielding Heavy Returns
The strategic shift to target larger enterprises is accelerating. ARR from customers spending over $50,000 annually surged 67% YoY, and the count of these high-value customers increased by 57% YoY. Q2 saw four new wins exceeding $500,000 in ARR, three of which were directly tied to AI workloads (including a seven-figure deal with a frontier AI model developer). This proves the sales team is successfully monetizing the B2 platform at scale.
Building the AI Developer Ecosystem
Backblaze is actively embedding itself into the AI development pipeline to capture workloads before they scale. In Q2, the company shipped a TypeScript SDK (the preferred language for AI coding agents) and a Genblaze SDK tailored for Generative AI media workflows. By hosting the Generative Media Hackathon and launching specialized AI agent tools, Backblaze is securing grassroots adoption among the next generation of data-intensive startups.
Computer Backup Contraction
The legacy Computer Backup business is actively reversing. Revenue declined 2% YoY to $16.1 million, and Net Revenue Retention (NRR) dropped to an anemic 94% (down from 99% a year ago). Gross customer retention remains stable at 91%, indicating the drop is primarily a lack of expansion and natural secular decay in the consumer desktop backup market. While B2's massive growth masks this weakness, Backup still represents nearly 38% of total revenue.
Embedded Warrant Dilution
To secure the $335 million CoreWeave partnership, Backblaze issued over 4.19 million warrants with an exercise price of $7.60, valued at approximately $22 million. While structured intelligently (vesting tied to 5-year time and milestone performance), this represents a cost of doing business at the hyperscaler level. Investors must monitor if future Neocloud deals will require similar equity concessions to secure capacity contracts.
Other KPIs
Stable. Up sequentially from 110% in 26Q1, but down slightly from 114% in 25Q2. The metric demonstrates healthy expansion within the existing B2 base, fueled by the natural data growth of AI customers whose storage needs expand as their models ingest more inputs.
Reversing positively. Compares to negative $6.0 million in the first half of 2025. This yields a 2% Adjusted FCF margin. Management is successfully balancing heavy CapEx investments needed for AI infrastructure scale with disciplined cash generation.
Stable and exceptional. Improved slightly from 79% in 25Q2. This metric excludes depreciation and stock-based compensation, showing the pure operational efficiency of Backblaze's proprietary storage pod architecture as it absorbs massive data influxes.
Guidance
Accelerating. The midpoint of $44.6 million implies significant sequential growth and validates that the pricing update executed in May 2026, combined with organic B2 momentum, is flowing directly to the top line.
Accelerating. Raised significantly from the prior range of $161.5 - $163.5 million. This massive $10.5 million raise at the midpoint reflects both the new strategic commitments and faster-than-expected ramps from frontier AI model developers.
Accelerating. Raised sharply from the prior expectation of 23% - 25%. This demonstrates profound operating leverage; the incremental revenue from B2 price increases and massive Neocloud volumes is dropping almost entirely to the bottom line.
Key Questions
CoreWeave Deal Ramp Schedule
Regarding the $335M CoreWeave agreement, what does the quarterly revenue recognition and CapEx deployment schedule look like over the 5+ year term? Is there a significant lag before this hits the P&L?
Warrant Structure Precedents
Are equity warrants expected to become a standard requirement for closing 8-figure infrastructure deals with other Neoclouds, or was this a unique strategic alignment specific to CoreWeave?
Computer Backup Floor
With Computer Backup NRR falling to 94% and revenue now contracting, where do you see the natural floor for this business, and are there plans to harvest it for cash rather than attempting to revive growth?
Supply Chain Preparedness
Given the massive commitment to CoreWeave and the general AI capacity boom, what steps are being taken to secure hard drive supply and favorable pricing to protect your 80% adjusted gross margins?