Backblaze grew its calendar Q4 revenues faster than analysts expected as the cloud storage business outpaced the wider backup sector.
Revenues in the quarter ended December 31 were $22.9 million, 23 percent higher year-on-year, but there was a loss of $14.8 million, 54 percent deeper than last year’s $9.6 million loss. Costs are rising faster than revenues. Full 2022 revenues were $85.2 million, 26 percent higher year-on-year, with a loss of $51.7 million.
CEO Gleb Budman said: “We were pleased to finish 2022 with strong Q4 overall revenue growth of 23 percent driven by an increasing proportion of our B2 Cloud Storage service, which grew 44 percent in Q4. We are excited as we begin 2023 as we see the opportunity to help more small and large businesses reduce the cost of their cloud infrastructure.”
He added: “As we continue to grow revenue, we’re moderating expense growth and are targeting to approach adjusted EBITDA breakeven in Q4 of this year.”
Backup storage brought in $13.1 million, 11 percent higher than a year ago, while generic cloud storage revenues rose 44 per cent, four times faster, to $9.5 million.
A chart looking at the revenue history of the classic backup storage business versus the cloud storage business shows the lower backup storage growth rate:
At these growth rates, cloud storage revenues could exceed backup storage revenues in the second or third 2023 quarters. The cloud storage business operates well below Amazon Web Services’ S3 price umbrella, and that gives it a tailwind.
William Blair analyst Jason Ader told subscribers that the cloud storage business “remains well positioned as a low-cost cloud storage alternative … providing a tailwind for the business as customers look to reduce cloud costs.” Backblaze, Ader said, has a “large opportunity to provide cloud storage to the underserved midmarket.” Possibly Backblaze is thinking about how it might revitalize the backup storage business.
Backblaze expects next quarter’s revenues to be between $23.1 million and $23.5 million, 20 percent higher year-on-year at the midpoint, and full 2023 revenues are being guided to be between $98 million and $102 million, up 17.4 percent at the midpoint.