Here's our initial take on Braze's (NASDAQ: BRZE) financial report.
Key Metrics
| Metric |
Q1 2025 |
Q1 2026 |
Change |
vs. Expectations |
| Revenue |
$135.5 million |
$162.1 million |
19.6% |
Beat |
| Earnings per share (adjusted) |
-$0.05 |
$0.07 |
N/M |
Beat |
| Adjusted gross margin |
67.9% |
69.3% |
140bps |
n/a |
| Free cash flow |
$11.4 million |
$22.9 million |
101% |
n/a |
Solid Numbers but One Big Disappointment
At first glance, Braze's fiscal first-quarter earnings look pretty solid. The customer engagement platform company beat expectations on both the top and bottom lines. Revenue climbed by nearly 20% year over year with strong growth in both subscription revenue and professional services.
Furthermore, profitability improved significantly. Braze's adjusted gross margin widened by 140 basis points compared to the same period a year ago. Plus, Braze posted an adjusted net profit for the quarter, while it posted a loss in the same fiscal quarter last year. Free cash flow more than doubled year over year to $22.9 million. Additionally, the company's customer count increased by about 10% year over year, and there are 24% more customers spending $500,000 or more annually compared with a year ago.
However, not all of the news was good. Braze's dollar-based net retention rate was 109% for the quarter, down sharply from 117% a year ago. In simple terms, a 109% rate means that the typical customer that has been with Braze for at least a year is spending 9% more with the company compared to 17% more last year.
Perhaps most significantly is Braze's guidance. For one thing, Braze increased its full-year revenue guidance significantly, and the midpoint of its range ($704 million) was significantly higher than analysts had expected. On the other hand, Braze lowered its adjusted EPS guidance for the full year from $0.33 to $0.165 at the midpoint, which came as a big surprise to many -- especially considering that its adjusted EPS for the first quarter came in ahead of expectations.
Immediate Market Reaction
Not surprisingly, the initial reaction to Braze's earnings was a negative one. As of 4:25pm EDT, about 15 minutes after the earnings release, Braze shares were lower by about 10%. In a nutshell, the combination of a higher-than-expected revenue forecast and lower-than-expected EPS could be causing some profitability concerns among investors.
It's worth noting that this reaction was before management's earnings call, and that the stock was rather volatile in after-hours trading. So, by the time you're reading this, the reaction could be significantly different.
What to Watch
Braze's earnings guidance is disappointing investors, but it's also important to note that the company exceeded expectations for the current quarter and could certainly do so again. Any earnings beat in the second fiscal quarter could be a major catalyst for the stock, but if guidance is lowered again, it could result in more pressure.
Helpful Resources
Should you invest $1,000 in Braze right now?
Before you buy stock in Braze, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Braze wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $674,395!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $858,011!*
Now, it’s worth noting Stock Advisor’s total average return is 997% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of June 2, 2025
Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Braze. The Motley Fool has a disclosure policy.
