BL Q2 Deep Dive: Strategic Shift to Larger Deals and Platform Expansion Drives Mixed Results

Accounting automation software maker Blackline (NASDAQ:BL) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 7.2% year on year to $172 million. The company expects next quarter’s revenue to be around $178 million, close to analysts’ estimates. Its non-GAAP profit of $0.61 per share was 19.7% above analysts’ consensus estimates.

Is now the time to buy BL? Find out in our full research report (it’s free).

StockStory’s Take

BlackLine’s Q2 results were met with a negative reaction from the market, despite revenue and non-GAAP profitability exceeding Wall Street expectations. Management attributed the quarter’s performance to larger deal momentum, a shift toward targeting mid-market and enterprise customers, and the early success of its new platform pricing model. CEO Owen Ryan noted, “We saw significant strength in both the volume and size of net new deals with the average new deal size growing by an impressive 35% year-over-year.” However, the company’s customer count declined, reflecting a deliberate move away from smaller accounts, and some large deals were delayed due to external uncertainties.

Looking ahead, BlackLine’s outlook depends on continued adoption of its Studio360 platform, expanded partnerships, and the ongoing transition to platform-based pricing. Management’s guidance for higher full-year revenue and non-GAAP margins is based on stronger pipelines, faster deal cycles, and deepening customer commitments, especially in enterprise and public sector segments. CFO Patrick Villanova highlighted upcoming investments in geographic expansion and public sector readiness, cautioning that “our outlook on margins for the full year reflects measured investments into strategic growth initiatives like Saudi Arabia as well as the public sector that can further accelerate growth in 2026 and beyond.”

Key Insights from Management’s Remarks

Management credited Q2’s performance to the successful execution of its platform-centric strategy, including larger deal wins, a shift to a new pricing model, and key partnerships.

• Deal size expansion: The average new deal size increased 35% year-over-year, driven by broader adoption of BlackLine’s record-to-report solutions and a more value-based platform sales approach.
• Platform pricing traction: Around half of eligible new customers adopted the new pricing model, which CEO Owen Ryan described as “a key differentiator from multiple large enterprise and upper mid-market deals.”
• Strategic customer focus: BlackLine intentionally deprioritized smaller, less complex accounts in favor of larger mid-market and enterprise clients, leading to a decline in total customer count but higher average revenue per customer.
• Partner-led growth: The partner channel, including system integrators and SAP, played a pivotal role in securing large deals and expanding pipeline activity, with partner-sourced bookings reaching record levels.
• Studio360 enhancements: Significant progress was made on Studio360, BlackLine’s AI-powered finance platform, including new data connectors and expanded automation capabilities, positioning the company for deeper integration with key enterprise resource planning (ERP) systems.

Drivers of Future Performance

Management expects future growth to be driven by expanded platform adoption, deeper partner engagements, and continued focus on large-scale customers, with ongoing investment in strategic initiatives.

• Studio360 commercialization: Accelerating rollout and commercialization of Studio360, especially through the SAP partnership, is expected to broaden BlackLine’s addressable market and enable deeper integration with customer financial systems.
• Public sector and international expansion: Investment in public sector readiness, including FedRAMP certification, and geographic expansion in regions like Saudi Arabia are seen as key growth levers for the coming quarters.
• AI and automation focus: Management is prioritizing development of advanced AI and automation features, such as Agentic analytics and configurable dashboards, aimed at improving productivity and compliance—a critical factor for adoption in finance departments.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) the pace of Studio360 adoption and commercialization, particularly through SAP and partner channels; (2) execution of public sector and international expansion, including progress toward FedRAMP certification; and (3) sustained improvement in average deal size and customer renewal rates as BlackLine continues to shift its customer mix. The impact of new AI-driven features and upcoming product releases will also be closely monitored.

BlackLine currently trades at $49.40, down from $54.49 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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