Summary
Braze reported fiscal third quarter revenue of $93.1 million, up 45.6% from $64.0 million a year earlier. Year-to-date revenue reached $256.8 million, up 53.2% from $167.6 million. Gross profit rose to $64.0 million from $44.8 million, up 42.9%, while gross margin slipped to 68.7% from 70.0%, down 1.3 percentage points. The top line kept expanding at scale, but the cost of delivering that growth showed up in margins.
GAAP operating loss widened to $36.9 million from $10.4 million, and operating margin fell to -39.6% from -16.3%. Net loss attributable to Braze was $33.4 million, compared with $8.7 million a year earlier. GAAP diluted net loss per share was -$0.35, compared with -$0.42, so the per-share loss narrowed even as total losses grew. On a non-GAAP basis, operating loss was $17.3 million, compared with $5.0 million, and non-GAAP net loss per share was $(0.15), compared with $(0.16). Non-GAAP gross margin was 69.7%, compared with 70.3%. The gap between GAAP and non-GAAP results remains wide, largely because of stock-based compensation and related costs.
Cash generation weakened. Net cash used in operating activities was $23.9 million in the quarter, compared with $2.5 million a year earlier, and $22.3 million for the nine months, compared with $10.9 million. Capital expenditures were $4.2 million in the quarter, compared with $0.4 million a year earlier. Free cash flow, a non-GAAP measure, was negative $28.1 million, compared with negative $3.5 million. Deferred revenue rose to $140.7 million from $98.4 million, up 42.9%, and remaining performance obligations rose to $408.7 million from $304.0 million, up 34.4%. Those forward-looking metrics point to a healthy pipeline, but the cash burn is real.
Operational metrics were mixed. Dollar-based net retention for all customers was 126% for the trailing 12 months ended October 31, 2022, flat with 126% a year earlier. For customers with annual recurring revenue of $500,000 or more, net retention was 129%, compared with 136%. Total customers grew to 1,715 from 1,247, and customers with ARR of $500,000 or more grew to 148 from 97. Monthly active users reached 4.7 billion as of October 31, 2022, up from 3.7 billion as of January 31, 2022. Braze added about 130 employees in the quarter, bringing headcount to nearly 1,500. New business wins included FanDuel, Panera, and Vizio. Product updates included Cloud Data Ingestion, early access for TikTok Audience Sync, and native channel support for WhatsApp coming in 2023.
Guidance points to continued growth but no near-term profitability. For the fiscal fourth quarter ending January 31, 2023, Braze guided revenue of $95.0 million to $96.0 million, non-GAAP operating loss of $(18.5) million to $(19.5) million, non-GAAP net loss of $(17.5) million to $(18.5) million, and non-GAAP net loss per share of $(0.18) to $(0.19), with 97.5 million weighted average shares outstanding. For the full fiscal year ending January 31, 2023, revenue guidance is $352.0 million to $353.0 million, non-GAAP operating loss is $(71.5) million to $(72.5) million, non-GAAP net loss is $(64.5) million to $(65.5) million, and non-GAAP net loss per share is $(0.68) to $(0.69), with 94.8 million weighted average shares outstanding.
Risks remain familiar for a high-growth software company. Management cited unstable market and economic conditions, a history of operating losses, limited operating history at its current scale, and the challenge of managing rapid growth. The filing also points to slower growth from new customers, which may be tied to the uncertain macroeconomic environment. Competition is intense, and Braze relies on third-party cloud infrastructure. Data privacy and cybersecurity risks, changing regulations, and the ability to attract and renew customers are also called out. The company expects the highest sequential increase in messaging volume and compute and storage requirements in the fourth quarter because of holiday activity, which could pressure costs. Braze also disclosed non-cancelable purchase commitments of $168.5 million and operating lease obligations of $62.9 million as of October 31, 2022, due primarily over the next five years. Management says current cash, cash equivalents, and marketable securities should be sufficient for at least the next 12 months, but free cash flow is expected to fluctuate as investment continues.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $93.1M | $86.1M | +8.1% | $64.0M | +45.6% |
| Gross profit | $64.0M | $58.8M | +8.9% | $44.8M | +42.9% |
| Gross margin | 68.7% | 68.2% | +0.5 pp | 70.0% | -1.3 pp |
| Research & development | $25.6M | $23.3M | +9.6% | $12.7M | +100.8% |
| Sales & marketing | $52.8M | $50.0M | +5.7% | $29.6M | +78.7% |
| General & administrative | $22.4M | $20.5M | +9.2% | $12.9M | +73.4% |
| Total operating expenses | $100.9M | $93.9M | +7.4% | $55.2M | +82.6% |
| Operating income (loss) | -$36.9M | -$35.1M | -5.0% | -$10.4M | -252.8% |
| Operating margin | -39.6% | -40.8% | +1.2 pp | -16.3% | -23.3 pp |
| Net income (loss) | -$33.9M | -$33.4M | -1.4% | -$9.1M | -274.2% |
| Net margin | -36.4% | -38.8% | +2.4 pp | -14.2% | -22.2 pp |
| Diluted EPS | -$0.35 | -$0.35 | ±$0.00 | -$0.42 | +$0.07 |
| Customers | 1,715 | 1,599 | +7.3% | 1,247 | +37.5% |
| Net retention rate | 126.0% | 126.0% | ±0.0 pp | — | — |
Risks
MD&A discloses that Braze has seen slower growth from new customers in recent quarters, which it says may be related to the uncertain macroeconomic environment, and warns that customers could decrease spending on customer engagement tools or delay purchasing decisions. The trailing-12-month dollar-based net retention rate for customers with ARR of $500,000 or more was 129% for the period ended October 31, 2022, down from 136% in the prior-year period.
Braze identified three material weaknesses in internal control over financial reporting: insufficient written policies and procedures over the financial statement close process, a lack of properly designed controls for revenue recognition under ASC 606, and inadequate IT controls for systems relevant to financial statement preparation. Remediation controls had not been in operation long enough to demonstrate the weaknesses have been remediated.
Braze has a history of operating losses and cannot be certain when or if it will sustain profitability. Operating loss widened to negative $36.9 million in the quarter ended October 31, 2022 from negative $10.4 million in the prior-year quarter, and the operating margin fell to negative 39.6% from negative 16.3%, as operating expenses grew faster than revenue.
Braze faces intense competition from legacy marketing clouds such as Adobe and Salesforce as well as point solutions, and warns that larger competitors may bundle competing products or restrict platform access. It also cites significant M&A activity among competitors, including Intuit's acquisition of MailChimp and CleverTap's acquisition of Leanplum, which could increase competitive pressure and pricing.
Sales cycles with large enterprise customers are long and unpredictable, generally three to six months but sometimes extending beyond 12 months, with Braze incurring significant sales and marketing spend before any revenue is generated. A sustained economic downturn could further extend these cycles or reduce win rates, delaying revenue relative to the expenses incurred.
Braze cautions that its rapid historical revenue growth, including 45.6% year-over-year growth in the quarter ended October 31, 2022 to $93.1 million, may not be indicative of future performance, and it expects its annual revenue growth rate to decline as its business matures. Failure to hit revenue expectations could be particularly acute given significant expected research, development, marketing and sales spending.
Substantially all of Braze's revenue is attributable to subscriptions for its single cloud-based customer engagement platform, so any decline in demand, slower market growth, or failure to keep pace with new communication channels and mobile platform changes could directly reduce revenue. The company expects to remain substantially dependent on this platform for the foreseeable future.
Braze will cease to qualify as an emerging growth company as of the end of the fiscal year ended January 31, 2023, which removes exemptions from Section 404 auditor attestation and other reporting requirements and is expected to significantly increase legal, accounting and compliance costs. The SEC has also indicated it may increase regulatory focus on the use of customer engagement tools in the financial services industry, which could reduce demand.
SaaS KPIs
All quarters →Monthly Active Users
Total Customers
Current Remaining Performance Obligations
Remaining Performance Obligations
Free Cash Flow
Customers with ARR of $500,000 or more
Non-GAAP Gross Margin
Non-GAAP Operating Loss
Summary, forecast, risks and KPIs are extracted from Braze, Inc.'s SEC filings for Q3 FY2023 (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.