Backblaze cloud storage revenues fire up nicely while backup is flat

Backblaze cloud storage and backup revenues were $37.2 million, beating the high-end of its guidance, with reduced GAAP losses of $3.8 million as the business progresses to profitability.

However the backup cloud storage business is not growing at all.

CEO Gleb Budman said: “I am pleased with our third quarter financial results exceeding the high end of our revenue and Adjusted EBITDA guidance and expanding gross margin … We remain on track to be free-cash-flow positive in Q4. B2 Cloud Storage grew 28 percent YoY and we won another seven-figure expansion with an existing customer, reinforcing the value of our price-performance and open platform.”

Operating cash flow during the nine months ended September 30, 2025 was $14.2 million, compared to $10.3 million during the nine months ended September 30, 2024. Adjusted free cash flow during the nine months ended September 30, 2025 was $(9.5) million, compared to $(15.6) million in the nine months ended September 30, 2024. Cash, cash equivalents, and marketable securities totaled $50.3 million as of September 30, 2025.

The revenue and profit history chart shows a straightforward story of growing revenues with a deepening loss curve turning upwards from Q4 2025 onwards, as Backblaze focussed on becoming profitable. It expects to reach free cash flow profitability next quarter.

The two business segment revenue results however, tell differing stories. B2 Cloud Storage revenue was $20.7 million, increasing 28 percent YoY, but Computer Backup revenue was flat, for the third consecutive quarter, at $16.5 million. Backblaze noted that a high growth AI-powered video surveillance customer significantly expanded its B2 Cloud Storage footprint in terms of quarter. Budman said in the earnings call: “We signed a new 6-figure deal with an AI start-up focused on large-scale vision language models.” The AI cloud storage business is booming, not so its cloud backup.

The net revenue retention rates (NRR) tell a similar story. NRR was 106 percent compared to 118 percent a year ago, with B2 Cloud Storage NRR 110 percent compared to 128 percent a year ago, and Computer Backup NRR 101 percent compared to the year-ago 109 percent.

CFO Marc Suidan said: “In Computer Backup, revenue was flat year-over-year, reflecting the final roll-off of the price increase implemented in 2023.”

Four quarters of flattening and flat backup storage revenues says there is an endemic lack of growth problem here. At the same time Object First’s rocketing growth with its Veeam-focussed, small-medium business Ootbi appliance suggest Veeam customers are not going to Backblaze. There is business to be had here but it’s not coming to Backblaze.

In last quarter’s earnings call Budman said backup storage in the cloud, particularly for consumers on a self-serve basis, was a secular decline business. Consumers who stream data are less likely to backup data to a cloud supplier. Backblaze was applying more of its focus to the backup business, and, he said: “We’ve put a tiger team, internally on computer backup.” No results yet then.

Suidan commented: “We’re obviously taking action to try to stabilize that.” We’re not hearing that Backblaze is trying to attract business backup-to-the-cloud customers.

Our understanding is that the B2 cloud storage business, with its AI prospects, looks enticing and achievable to Backblaze while growing the Computer Backup business looks far more difficult. It basically sells disk drive storage, and a terabyte of B2 cloud storage is effectively worth more than a terabyte of Computer Backup storage. Hence the sales focus.

Next quarter’s outlook is for revenues of $37.6 million +/- $3 million, implying 11.2 percent growth at the mid-point, slower than recent quarterly growth rates. B2 cloud storage growth in Q4 is expected to be between 25 percent and 28 percent. This implies to us that computer backup revenues will show a decline.

Full 2025 year revenues will be $145.7 million +/- $3 million; a 14.2 percent annual growth rate at the mid-point.

Backblaze, which is moving upmarket from small to mid-market, data-rich companies, and from self-serve to a more direct sales-led motion, wants a higher 30 percent growth rate for B2, and it’s finding large deals take longer to close. Budman said: “To help reach our growth goals, we’re launching Phase 2 of our go-to-market transformation, focused on accelerating the velocity of both our self-serve and direct sales motions.”

That involves some job losses through restructuring counter-balanced by sales and sales ops talent acquisition. AI is key: “We do want to lean in with the AI use cases because we do see that is transformative for the industry and where we see a lot of opportunity ahead.”

He added this point about direct sales: “To accelerate this, we’re also partnering with advisers and a consulting team who has helped both Snowflake and Databricks in their go-to-market execution. We’re reinforcing our sales and marketing engine and remain confident in our ability to deliver consistent, durable growth over time.”