AI marketing platform Braze (BRZE.US) reports strong earnings, but shares plunge after hours! Q2 revenue and EPS both exceed expectations, annual guidance raised

According to Zhihui Finance APP, artificial intelligence (AI) marketing platform Braze (BRZE.US) announced better-than-expected results for the second fiscal quarter and raised its full-year guidance for fiscal year 2027. The financial report shows that in the second fiscal quarter ended July 31, Braze achieved revenue of $227.2 million, an increase of 26% year-on-year, exceeding analysts' average estimate of $220.3 million; net loss was $18.9 million, narrowing by 32% compared to the net loss of $27.9 million in the same period last year; adjusted earnings per share were $0.19, higher than analysts' average estimate of $0.15.

Braze stated that revenue growth was mainly driven by upselling, renewals, and new customers. By business segment, subscription revenue increased 21% year-on-year to $207.7 million, exceeding analysts' average estimate of $204.2 million; professional services and other revenue increased 136% year-on-year to $19.6 million, exceeding analysts' average estimate of $15.93 million.

As of the end of the second fiscal quarter, Braze had 2,789 customers, up from 2,422 in the same period last year, including 361 customers with annual recurring revenue (ARR) of $500,000 or more. Both the overall customer base and the group of larger customers saw improvements in their net retention rates. As of July 31, remaining performance obligations amounted to $1.09 billion, of which $691.1 million are current revenue expected to be recognized within less than a year.

It is worth noting that the GAAP gross margin declined from 67.7% to 66.8%, while the non-GAAP gross margin fell from 69.3% to 68.6%. Braze did not provide specifics on the reasons for the gross margin decline, so ongoing pressure on margins remains an issue to watch.

However, the growth rate of operating expenses was much lower than the rate of revenue growth—the second fiscal quarter operating expenses increased 6% year-on-year to $170 million, far lower than the 26% year-on-year growth in revenue. This indicates that, despite a decline in gross margin, the company's operating leverage has improved.

CEO Bill Magnuson attributed this quarter's performance to Braze's role in helping clients achieve significant investment returns. He said that as customers focus more on ROI, products such as BrazeAI Operator, BrazeAI Agent Console, and BrazeAI Decisioning Studio are seeing accelerated adoption.

Braze has also enhanced its AI capabilities, reached a three-year strategic partnership with AWS, and strengthened its integration with Databricks CustomerLake. New customer wins include Chime, Wilson Sporting Goods, Foxtel Group, and several international brands.

For the third fiscal quarter, Braze expects revenue of $229 million to $230 million, exceeding analysts' average estimate of $227.5 million; adjusted earnings per share are expected to be $0.13–$0.14, below analysts' average estimate of $0.16.

Braze also raised its full-year guidance. The company now expects fiscal year 2027 revenue of $910 million to $913 million, previously projected at $895 million to $899 million, and analysts’ average estimate was $898.2 million; full-year adjusted earnings per share are expected to be $0.64–$0.65, previously projected at $0.61–$0.65, and analysts’ average estimate was $0.63.

However, as of press time, Braze fell nearly 13% in after-hours US trading on Tuesday.