3 Reasons to Hold BLZE Stock Now Despite a 56.8% Year-to-Date Rally

Backblaze BLZE has experienced a remarkable 56.8% surge year to date (YTD), outperforming the Zacks Internet-Software industry and Zacks Computer and Technology sector's return of 16.7% and 19.6%, respectively. This impressive rally has caught investors' attention, particularly as the cloud storage provider continues to capitalise on the AI revolution and demonstrate solid execution on its growth strategy. However, with shares trading at elevated levels following this substantial run-up, investors face a critical decision about whether to hold existing positions or wait for a more favourable entry point.

BLZE YTD Performance

Accelerating Growth in B2 Cloud Storage

Backblaze’s B2 Cloud Storage business remains the cornerstone of its expansion, driven by accelerating enterprise adoption and rising demand for scalable, cost-efficient infrastructure supporting AI, media and cybersecurity workloads. The segment is benefiting from a more enterprise-focused sales mix, expanding developer integrations and the rollout of B2 Overdrive, a high-performance tier designed for compute-intensive applications. Its open-cloud model and transparent pricing continue to attract customers seeking flexibility outside hyperscale ecosystems.

BLZE expects B2 Cloud Storage revenue growth between 28% and 30% for the third quarter of 2025, reflecting sustained enterprise momentum and broader participation in AI-related data management. The Zacks Consensus Estimate for Backblaze’s third-quarter 2025 B2 Cloud Storage revenues is pegged at $20.88 million, indicating 29% year-over-year growth.

BLZE’s focus on enterprise scale, predictable pricing and AI-aligned product innovation continues to strengthen B2 Cloud Storage as its most durable and profitable growth engine.

Expanding AI and Cybersecurity Offerings Strengthen Market Position

BLZE is deepening its competitive positioning by embedding artificial intelligence and cybersecurity into its cloud storage platform. The company is benefiting from the surge in AI workloads that demand scalable, secure and cost-efficient infrastructure, an area where its open-cloud architecture and transparent pricing provide a clear advantage over hyperscale providers.

AI-related customers now account for a growing portion of enterprise revenues, helping diversify growth and improve visibility across data-intensive use cases. Simultaneously, new cybersecurity features such as Anomaly Alerts, Enterprise Web Console and Bucket Access Logs enhance threat detection, access control and audit transparency, critical capabilities for enterprises prioritizing compliance and data protection.

This strategic focus is translating into improving operating performance. The Zacks Consensus Estimate for BLZE’s third-quarter 2025 loss is pegged at a penny per share, unchanged over the past 30 days. The earnings figure suggests a 90% improvement year over year, reflecting expanding margins and disciplined cost management as BLZE targets positive adjusted free cash flow by the fourth quarter of 2025.

Backblaze, Inc. Price and Consensus

Backblaze, Inc. price-consensus-chart | Backblaze, Inc. Quote

By aligning its product roadmap with AI and cybersecurity trends, BLZE is evolving from a niche storage provider into a more integrated, data-centric infrastructure player with growing relevance across enterprise workloads.

Competition and Valuation Limit Near-Term Upside

Backblaze operates in a converging cloud ecosystem where Dropbox DBX, Datadog DDOG and Amazon AMZN increasingly compete for overlapping enterprise workloads. Dropbox continues to expand its cloud collaboration and backup offerings aimed at SMBs, Datadog is extending its observability and security analytics into storage and infrastructure monitoring, while Amazon Web Services remains the dominant hyperscaler with integrated compute, storage and AI services. Each is targeting a broader share of enterprise data spending, intensifying competition across adjacent markets.

Backblaze’s transparent pricing, open-cloud design and lean operating model help it stand out among independent providers, but the push from larger, diversified rivals constrains near-term market share gains.

From a valuation standpoint, BLZE trades at a forward 12-month price-to-sales ratio of 3.27X, compared with 3.12X for Dropbox, 3.06X for Amazon and 15.1X for Datadog. Despite trading close to Dropbox and Amazon levels, the company carries a Zacks Value Score of F, reflecting that the stock is overvalued relative to its fundamentals following a 56.8% rally this year. Over the medium term, valuation multiples could remain elevated as investors price in continued growth in B2 Cloud Storage, stronger AI-related demand and expanding enterprise mix. Sustained improvement in margins or consistent earnings delivery could justify the current premium. However, given solid demand trends and ongoing product innovation aligned with AI and cybersecurity growth, prudent investors may choose to maintain current positions while awaiting more attractive entry points in 2025.

BLZE Valuation

Conclusion

Backblaze continues to demonstrate strong operational execution and resilient demand across its B2 Cloud Storage and AI-driven workloads. Its expanding enterprise mix, product innovation and improving profitability trends provide a solid foundation for long-term growth. However, the sharp year-to-date rally has pushed the stock to levels that already reflect much of the near-term optimism. At the same time, robust B2 growth, expanding margins and favourable AI adoption trends offer support for maintaining exposure. Prudent investors may hold existing positions to benefit from ongoing execution strength, while new investors should wait for a better entry point as valuations stabilise going ahead.

Backblaze currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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