BLZE — Q2 2026 Financial Report Analysis

B2 Cloud Storage drove 18% growth, but much of the story is a contract that hasn't started billing yet

Backblaze's revenue for the quarter ended June 30, 2026 was $42.7 million, up 18% from $36.3 million a year earlier. Its two businesses went in different directions. B2 Cloud Storage, which sells online storage that developers and companies pay for by the terabyte, grew 34% to $26.6 million. Computer Backup, the older flat-fee service that backs up laptops and desktops, slipped 2% to $16.1 million. Backblaze still lost money under standard accounting (GAAP): a net loss of $5.1 million, down from $7.1 million. The number that matters most going forward was signed during the quarter but has not yet produced any revenue: a $335 million, five-to-seven-year storage contract with CoreWeave, an AI cloud provider. That contract pushed contracted-but-not-yet-billed revenue from $70 million to $396 million.

At a glance

• $396.0 million of remaining performance obligations (revenue customers have contracted for but Backblaze hasn't delivered yet), up from $70.2 million at December 31. That is more than twice the company's full-year revenue guidance, and the 10-Q attributes most of the increase to CoreWeave.
• About 13.5% revenue growth without the price increase. The May 1 rise in B2's pay-as-you-go rate (from $6.00 to $6.95 per terabyte per month) added $1.5 million in its first two months. Without it, B2 would have grown about 26% instead of 34%.
• A $5.1 million GAAP loss but $12.8 million of adjusted EBITDA (30% of revenue). Most of the $17.9 million gap is $8.8 million of stock-based pay and $6.9 million of depreciation. Stock-based pay alone came to 20.5% of revenue.

Results versus a year ago

ARR (annual recurring revenue) is the current monthly or daily revenue run-rate multiplied out to a full year. NRR (net revenue retention) compares this quarter's revenue from customers who were already paying a year ago with what those same customers paid back then. Above 100% means existing customers are spending more on balance. Backblaze changed how it calculates both measures starting in Q1 2026 and restated prior periods to match, so they aren't comparable with figures in older reports. The release states the YoY growth rates for ARR but not the prior-year dollar amounts, so those cells are blank.

Where the growth came from

The 10-Q breaks down the $6.7 million increase in B2 revenue:

• $4.5 million from new customers. This is the largest piece, and it comes from the push toward larger accounts. ARR from customers paying $50,000+ a year rose 67%, and the number of those customers rose 57%.
• $1.5 million from the May 2026 price increase. This covers only May and June. Q3 will be the first full quarter at the new price, which also removed API transaction fees.
• $0.7 million from existing customers storing more data. That is small next to the other two, and it matches B2's NRR edging down from 114% to 113%.

The 10-Q says B2's 39% ARR growth was "primarily driven by the May 2026 price increase, as well as revenue recognized from a new enterprise customer engagement." In other words, the headline acceleration in B2 revenue growth, from about 24% in Q1 (implied by the six-month and Q2 figures) to 34% in Q2, was helped by pricing and by one large customer, not only by a wider customer base.

Computer Backup lost $0.7 million to fewer licenses, partly offset by heavier use and the last of earlier price increases. Its NRR fell from 99% to 94%. Management says this is because the prior year still included the phased-in price rises. Even so, the product is now shrinking slowly in license count, and B2 has grown to 62% of revenue from 55% a year ago.

The CoreWeave contract, and what it costs

CoreWeave signed two order forms, lasting five and seven years, for committed B2 storage capacity and managed storage services. Together they are worth about $335.1 million. As part of the deal, Backblaze gave CoreWeave warrants (rights to buy stock at a fixed price) on 4,194,876 shares at $7.60 per share, valued at about $21.7 million. Three details from the 10-Q matter here:

• No revenue from it was recognized in Q2. The note on warrants says "recognition of the related revenue had not commenced as of June 30, 2026."
• The warrants will reduce reported revenue. Their fair value is "recognized as a reduction of revenue in the same pattern as the related revenue," so the net contract value is about $313.4 million.
• The warrants vest only while the contract continues. They vest quarterly over five years, and vesting stops if an order form is terminated. That limits Backblaze's cost if the relationship ends early. The 4.2 million shares equal about 6.8% of the 61.8 million shares outstanding.

Delivering multi-exabyte capacity requires buying hard drives and servers and leasing data-center space before the revenue arrives. The financing came after the quarter ended: on August 24 Backblaze issued $201.25 million of 0% convertible senior notes due 2031. These are bonds that can be turned into shares at an initial price of about $21.94 per share. Backblaze also bought a "capped call" that offsets dilution up to $33.76 per share. The company estimated net proceeds at about $192.7 million with the over-allotment option exercised, part of which paid for the capped call. The rest is earmarked for "general corporate purposes, including capital expenditures." Compared with the $49.9 million of cash and marketable securities at June 30, this roughly quadruples the cash on hand. Converting all the notes into stock would mean about 9.2 million new shares, roughly 15% of the shares outstanding, though the capped call offsets that dilution for share prices between $21.94 and $33.76.

Takeaway: The quarter's 18% growth leaned partly on a price increase. Backblaze's next few years depend on the CoreWeave contract, which added about $313 million (net of warrants) to contracted revenue but has not yet produced a dollar of revenue. The company has now borrowed $201 million in convertible notes to build the capacity for it. Watch for the quarter when CoreWeave revenue starts, and for whether gross margin holds once that capacity is depreciating.

What the headline numbers hide

• Cash flow is weaker than "operating cash flow" suggests. Operating cash flow for H1 was $13.8 million against a net loss of $11.2 million. The gap comes mainly from adding back $16.1 million of stock-based pay and $13.8 million of depreciation. But Backblaze leases much of its storage hardware, and lease repayments are recorded as financing, not as operating or capital spending. After $6.6 million of capital spending and $8.5 million of finance-lease principal payments, H1 cash flow was about -$1.3 million. The company's "adjusted free cash flow" of $1.4 million gets back to positive only by also excluding $2.7 million of restructuring payments.
• Most of the GAAP-to-adjusted gap is stock-based pay, and it's growing. Stock-based compensation was $8.8 million in Q2, or 20.5% of revenue (20.1% a year ago). The 10-Q says part of the increase comes from paying the 2026 bonus plan in stock ($1.5 million in R&D, $0.6 million in G&A, and $0.4 million in sales and marketing in Q2). Paying bonuses in stock instead of cash flatters adjusted EBITDA and operating cash flow, and the cost shows up as dilution instead.
• Restructuring keeps recurring. Backblaze excluded $1.3 million in Q2 and $3.5 million in H1 under its "2025 Restructuring and Transformation Plan," and expects another $2.4 million to $3.7 million through Q1 2027. This follows a 2024 restructuring that cost $4.9 million. Two consecutive plans spanning more than two years look more like an ongoing cost than a one-off.
• H1 gross margin got help from an accounting change. H1 depreciation fell $1.5 million "primarily due to the extension of the useful life of our infrastructure equipment." That helped lift H1 gross margin from 60% to 62%. In Q2 alone, GAAP gross margin slipped from 63.5% to 62.8%, as new capacity added $1.0 million of depreciation and $0.9 million of data-center rent and facility costs.
• Part of the per-share improvement comes from a larger share count. The net loss narrowed 28%, but the loss per share narrowed about 34%, because weighted average shares rose 9.3% (to 60.8 million from 55.6 million). Spreading a loss over more shares makes it look smaller per share. There were no buybacks to speak of: H1 treasury stock purchases were $1.4 million.
• Rising interest costs. Interest expense rose to $1.3 million from $0.9 million "primarily due to a higher volume of finance leases." Finance-lease liabilities reached $46.7 million, up from $36.2 million at year-end. The new notes carry no regular interest, so they shouldn't add to this, but the lease-financed equipment needed for CoreWeave will.
• Receivables grew faster than revenue. Accounts receivable rose to $5.3 million from $3.5 million at December 31, which the 10-Q attributes to "higher revenue from enterprise customers and the timing of billings." The amount is small, but two customers account for 27% of receivables. That is what a shift toward large contracts looks like, and it means more depends on fewer customers.

Guidance and outlook

Management raised its full-year 2026 revenue guidance to $172.0–174.0 million (from $161.5–163.5 million) and its adjusted EBITDA margin guidance to 27–29% (from 23–25%). For Q3 it guided to revenue of $44.4–44.8 million, about 4% above Q2 at the midpoint, with a 27–29% adjusted EBITDA margin. With H1 revenue at $81.4 million and Q3 at the midpoint, the full-year range implies Q4 revenue of about $46–48 million.

Our read: The raised guidance is credible in the near term, because Q3 gets a full quarter of the higher B2 price that contributed only two months in Q2. Over the longer term, three things decide whether Backblaze outgrows its loss-making history:

1. When CoreWeave revenue actually starts. The 10-Q says growth depends on "customer deployment schedules and usage levels, and the commencement of contracted services." That makes the contract's timing uncertain, and the warrant charge will reduce the revenue it reports.
2. Whether gross margin holds as capacity is added ahead of revenue. Q2 already showed new depreciation and rent eating into margin. Once capacity built with the convertible-note proceeds goes into service, depreciation will rise before the CoreWeave revenue that is meant to cover it.
3. Whether B2 growth holds up without new price increases. Existing-customer expansion contributed only $0.7 million this quarter. Once the May price increase has been in place for a full year, B2 growth will depend on new customers and on CoreWeave.

Backblaze is still an emerging growth company with a modest balance sheet that is taking on a contract larger than its entire current annual revenue. The upside is real, and the source filings support it. So does the execution risk.