Summary
Backblaze reported first quarter 2026 total revenue of $38.67 million, up 11.7% from the prior-year quarter. Gross profit rose 22.2% to $23.53 million, and gross margin was 60.9%, up 5.2 percentage points. The company still posted an operating loss, but it narrowed 39.0% to $5.35 million. Net loss narrowed 34.1% to $6.15 million. Diluted EPS was a loss of $0.10, a 41.2% narrower loss. Operating margin was -13.8%, up 11.5 percentage points. The income statement improved even as the company kept spending on infrastructure and sales capacity.
Non-GAAP results were stronger. Adjusted EBITDA was $10.1 million, or 26% of revenue, compared with $6.4 million, or 18% of revenue, in Q1 2025. Non-GAAP net income was $2.7 million, compared with a non-GAAP net loss of $1.8 million. Adjusted gross profit was $30.7 million, or 79% of revenue, compared with $27.3 million, or 79% of revenue. Operating cash flow was $3.36 million, down 32.0%. Capital expenditures were $0.65 million, up 29.4%. Adjusted free cash flow was negative $1.8 million, compared with negative $2.1 million. Deferred revenue was $36.31 million, flat. Remaining performance obligations were $76.50 million, up 70.4%, helped by a methodology change that now captures annual and multi-year commitments.
Operational metrics point to AI traction and upmarket progress. Total ARR was $158.2 million, up 13% year over year. B2 Cloud Storage ARR was $93.0 million, up 28%. Computer Backup ARR was $65.2 million, relatively flat. Total company net revenue retention was 103%, compared with 105%. B2 net revenue retention was 110%, compared with 105%, while Computer Backup net revenue retention was 95%, compared with 103%. Gross customer retention was 91%, compared with 90%. AI customer count grew 76% year over year. The company won an AI training data company and a generative AI video creation company that together contributed about $1.5 million in annual contract value. ARR from large customers grew 72%, and the number of customers with $50,000 or more in ARR rose 51% to 187. The existing customer pipeline nearly doubled year over year, and more than 100 companies joined the Flamethrower startup program in under 3 months. The company is also pushing into new ecosystems with B2 Neo, its white-label storage offering for neocloud platforms, and its startup credits program.
Guidance was raised. For the second quarter of 2026, Backblaze expects revenue between $39.8 million and $40.2 million and an adjusted EBITDA margin between 21% and 23%. For the full year 2026, the company raised its revenue outlook to between $161.5 million and $163.5 million from between $156.5 million and $158.5 million. It also raised its full-year adjusted EBITDA margin outlook to between 23% and 25% from between 19% and 21%. Basic weighted average shares outstanding for the second quarter are expected to be between 60.5 million and 60.7 million.
Risks remain. The go-to-market transformation may not achieve its objectives within the expected timeframe or cost, and the sales and marketing spend behind it may not convert into the expected pipeline or contract values. AI customer revenue is early-stage, and widescale adoption is uncertain. Competition includes larger rivals with more resources. The May 1, 2026 B2 pricing increase and the elimination of API transaction fees could change the mix and level of consumption revenue. Cyberattacks, service disruption, software defects, supply chain issues, tariffs, and macro conditions are also cited risks. The company is still working through its restructuring and transformation plan and expects additional charges through the first quarter of 2027. Liquidity and covenant compliance are other areas to watch.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $38.7M | $37.8M | +2.4% | $34.6M | +11.7% |
| Gross profit | $23.5M | $23.4M | +0.4% | $19.3M | +22.2% |
| Gross margin | 60.9% | 62.0% | -1.2 pp | 55.6% | +5.2 pp |
| Research & development | $11.3M | $11.1M | +1.3% | $11.9M | -4.8% |
| Sales & marketing | $10.3M | $9.0M | +14.7% | $9.3M | +11.0% |
| General & administrative | $7.3M | $8.0M | -8.4% | $7.1M | +3.6% |
| Total operating expenses | $28.9M | $28.1M | +2.8% | $28.2M | +2.5% |
| Operating income (loss) | -$5.4M | -$4.7M | -14.7% | -$8.9M | +40.0% |
| Operating margin | -13.8% | -12.3% | -1.5 pp | -25.8% | +11.9 pp |
| Net income (loss) | -$6.1M | -$5.4M | -13.6% | -$9.3M | +34.1% |
| Net margin | -15.9% | -14.3% | -1.6 pp | -26.9% | +11.0 pp |
| Diluted EPS | -$0.10 | -$0.10 | ±$0.00 | -$0.17 | +$0.07 |
| Customers | 500,000 | 500,000 | ±0.0% | 500,000 | ±0.0% |
| Net retention rate | 110.0% | 105.0% | +5.0 pp | 113.0% | -3.0 pp |
Risks
A growing part of the strategy depends on AI model builders and neocloud platforms through B2 Neo and Powered by Backblaze, and the filing warns revenue can be concentrated among a small number of large agreements, so the loss of one significant neocloud customer could disproportionately affect results.
Competition for data center space, infrastructure and equipment has intensified due to AI and compute-intensive workloads, and capacity constraints or unfavorable lease terms could limit scaling; the company expects increased capital expenditures and continued use of finance leases for infrastructure.
The go-to-market transformation, including the 2025 Restructuring and Transformation Plan, is intended to improve sales productivity and move up-market, but execution risks include sales and marketing expenses increasing 11% year over year in FY2026 Q1 and additional restructuring charges of approximately $2.1 million to $4.3 million expected through Q1 2027.
As the company targets larger enterprise, neocloud and AI-focused customers, revenue may become more concentrated among a smaller number of large customers, exposing it to greater revenue volatility and outsized risk from the loss or reduced usage by any single customer.
Cash, cash equivalents and marketable securities decreased to $45.5 million as of March 31, 2026 from $51.4 million as of December 31, 2025, and operating cash flow decreased 32.0% to $3.36 million in FY2026 Q1 from $4.94 million in FY2025 Q1, while the company continues to invest in infrastructure.
The market is intensely competitive with hyperscalers such as AWS, Google Cloud and Azure and storage entrants such as Cloudflare, CoreWeave, DigitalOcean and Vultr, and competitor pricing or bundled offerings could pressure Backblaze's pricing, churn or margins.
B2 Cloud Storage pricing changes took effect May 1, 2026, including higher pay-as-you-go storage pricing and elimination of API transaction fees, and Computer Backup revenue decreased $0.3 million, or 2%, in the three months ended March 31, 2026, with a decline in license counts partly offset by earlier price increases.
International expansion, including a data center region in Canada and 28% of revenue from outside the United States in the three months ended March 31, 2026, subjects the company to evolving rules such as the EU Data Act and AI-specific regulations that may increase compliance costs or affect customer use of the platform.
Customer use of AI workloads and internal use of generative AI expose Backblaze to risks around data provenance, intellectual property, inaccurate outputs, data leakage and evolving AI laws such as the EU AI Act and state AI legislation.
The 2025 restructuring, hiring freeze and prior headcount reductions create risks of losing institutional knowledge, lower execution capacity, and difficulty retaining key employees, especially while data stored and infrastructure deployed continue to grow.
SaaS KPIs
All quarters →Adjusted Gross Margin
Adjusted EBITDA Margin
B2 Cloud Storage Gross Customer Retention Rate
Computer Backup Gross Customer Retention Rate
Gross Customer Retention Rate
Adjusted EBITDA
Annual Recurring Revenue (ARR)
Total Customers
B2 Cloud Storage ARR
Computer Backup ARR
Adjusted Free Cash Flow
Adjusted Free Cash Flow Margin
Adjusted Gross Profit
Non-GAAP Net Income
Non-GAAP Net Income Margin
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from Backblaze, Inc.'s SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.