BRZE Q3 Deep Dive: AI Adoption, Customer Growth, and Expanding Engagement Channels

Customer engagement platform Braze (NASDAQ:BRZE) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 25.5% year on year to $190.8 million. Guidance for next quarter’s revenue was optimistic at $198 million at the midpoint, 2.7% above analysts’ estimates. Its non-GAAP profit of $0.06 per share was in line with analysts’ consensus estimates.

Is now the time to buy BRZE? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Braze delivered a quarter that exceeded Wall Street’s revenue expectations and was met with a positive market reaction, driven by robust customer additions and the increasing adoption of AI-powered customer engagement solutions. Management credited the quarter’s performance to a broad-based expansion across verticals and geographies, as well as a surge in multi-channel messaging during key marketing periods like Cyber Week. CEO William Magnuson emphasized that Braze’s AI-driven platform is enabling clients to orchestrate more sophisticated campaigns, noting that “marketers continue to evolve away from single channel campaigns toward more sophisticated programs leveraging dynamic data to create and strengthen direct relationships.”

Looking forward, Braze’s guidance reflects management’s confidence in continued growth from expanded AI adoption and further penetration into large enterprise accounts. The company sees growing demand for its AI decisioning studio and anticipates additional momentum from innovations such as its ChatGPT native app SDK. CFO Isabelle Winkles stated that ongoing investments in customer retention and vertical market strategies are supporting higher revenue visibility, while AI features are expected to “fundamentally rewrite the rules of customer engagement.” Management also highlighted that its profitability framework remains on track, with further operating margin expansion anticipated next year.

Key Insights from Management’s Remarks

Management attributed quarterly outperformance to a combination of strong new customer wins, deepening AI integration, and growing usage of premium messaging channels, especially around high-traffic events.

• AI-driven platform adoption: The company saw rapid uptake of its AI decisioning tools and agent console, with customers deploying these features for personalized campaign creation and operational efficiency. A notable example was Aeroflow Health’s use of the agent console to automate SMS conversations, resulting in significant conversion improvements.
• Expansion in customer base: Braze achieved its largest net new customer increase in three years, adding 106 customers sequentially, and highlighted strong growth in large customers with over $500,000 annual spend. This reflects successful vertical and regional go-to-market strategies.
• Multi-channel engagement surge: During Cyber Week, Braze delivered over 100 billion messages, with premium channels like SMS and WhatsApp seeing a 90% year-over-year increase. Management attributed this to marketers seeking more personalized and diversified engagement strategies.
• Competitive wins from legacy platforms: The company continued to displace legacy marketing clouds, citing recent migrations from global appliance manufacturers and financial service firms. Management believes Braze’s real-time, AI-enabled capabilities are a key differentiator driving these conversions.
• Gross margin dynamics: While non-GAAP gross margins declined slightly due to higher messaging volume and hosting costs, management pointed to operational efficiencies and a disciplined approach to investments, with ongoing improvements in sales productivity and customer retention programs.

Drivers of Future Performance

Braze expects continued revenue growth and improving profitability, primarily driven by expanded AI product adoption, deeper enterprise penetration, and ongoing customer retention initiatives.

• AI monetization and product expansion: Management expects AI decisioning studio and new AI-powered features to drive incremental revenue, particularly as more customers adopt advanced personalization and automation tools. The company plans to introduce usage-based pricing for certain AI functions, which could provide additional upside.
• Enterprise and vertical growth: Continued focus on large enterprise wins and verticalized go-to-market strategies is expected to expand Braze’s addressable market. Management highlighted momentum in regulated and capital-intensive sectors, signaling future penetration into traditional banks, insurers, and healthcare providers.
• Operational discipline and margin improvement: Braze is targeting further operating margin expansion through disciplined spending and efficiency gains, even as it invests in R&D and sales capacity. Management noted that stabilization in net revenue retention and reduced customer churn are supporting improved revenue predictability.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will watch (1) the adoption rate and monetization of Braze’s AI decisioning studio and operator tools, (2) further market share gains from legacy platform replacements and expansion into regulated industries, and (3) sustained growth in premium messaging channels during major marketing events. Execution on vertical-specific strategies and customer retention improvements will also be key indicators of trajectory.

Braze currently trades at $34.42, up from $30.65 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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