Braze Revenue Jumps 24% in Fiscal Q2

Key Points

• Revenue reached $180.1 million, surpassing both company guidance and analyst expectations on a GAAP basis, and rose 23.8% year over year.

• Non-GAAP EPS of $0.15 far exceeded management's prior outlook of $0.02–$0.03 and improved from $0.09 last year.

• Management raised full-year guidance for revenue and non-GAAP earnings, but free cash flow declined and net retention rates contracted.

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Braze (NASDAQ:BRZE), a leader in customer engagement software, released its results for Q2 FY2026 on September 4, 2025. The company reported GAAP revenue of $180.1 million, surpassing both its own financial guidance of $171.0–$172.0 million and consensus analyst estimates, with non-GAAP earnings per share also outperformed expectations. Revenue grew to $180.1 million, a 23.8% increase from the prior year, outpacing management’s guidance of $171.0–$172.0 million. Non-GAAP EPS reached $0.15, compared to management’s non-GAAP forecast of $0.02–$0.03. These results marked a notable outperformance. Management raised its full-year outlook for both revenue and non-GAAP earnings following strong subscription growth and new customer wins, though some key retention and margin metrics showed signs of pressure. Overall, the quarter reflected continued top-line momentum alongside emerging operating challenges.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2026 earnings report.

About Braze and Business Focus

Braze provides a cloud-based software platform designed to help brands manage customer engagement across digital channels like email, push notifications, in-app messaging, and SMS. The company powers tailored marketing experiences for hundreds of brands globally, serving as a critical technology partner for both digital-first and traditional enterprises.

The company has focused recent strategy around broadening its artificial intelligence (AI) and machine learning capabilities, accelerating real-time data processing, and enabling brands to reach customers with cross-channel communications. Success in these areas depends on platform scalability, rapid integration of new AI-driven tools, customer expansion, and maintaining strong retention rates among large enterprise clients.

Quarterly Highlights and Performance Drivers

The quarter saw revenue climb 23.8 % year over year, significantly outpacing management’s outlook and consensus analyst forecasts on a non-GAAP basis. Subscription revenue rose 22.8% year-over-year, reaching $171.8 million, while professional services and other revenue jumped 50.9% year-over-year. New customer signings and upselling existing accounts drove this growth. Total customers reached 2,422, a 12.0% increase year-over-year, and customers with annual recurring revenue above $500,000 expanded 27% year-over-year to 282.

Non-GAAP operating income reached $6.0 million, much higher than management’s non-GAAP guidance of $0.5–$1.5 million, and reflected a margin of 3.4 %. Non-GAAP earnings per share finished five times above the top of management’s outlook at $0.15. These beats came even as non-GAAP gross margin declined to 69.3%. On a GAAP basis, the operating loss widened due to elevated stock-based compensation, totaling $39.5 million.

The company reported non-GAAP free cash flow of $3.5 million, down from the $7.2 million achieved in the prior year and trailing the $23 million result from the prior quarter. Cash, equivalents, and marketable securities stood at $368.3 million as of July 31, 2025, notably lower from earlier in the year due to the $181.2 million paid for OfferFit.

Braze’s dollar-based net retention rate, a key metric indicating additional revenue growth from existing customers, slipped to 108 %, down from 114 % the year prior. Among large enterprise customers with recurring contracts above $500,000, dollar-based net retention was 111%. Dollar-based net retention for all customers declined to 108% from 114% year-over-year, and for customers with annual recurring revenue of $500,000 or more declined to 111% from 117% year-over-year, which management attributed in part to renewal timing. Meanwhile, remaining performance obligations—a measure of contracted business yet to be recognized as revenue—rose to $862.2 million, indicating strong future demand.

Product and Strategic Developments

During the quarter, the company advanced its AI-powered customer engagement platform. Notably, it launched the Model Context Protocol (MCP) Server, a product designed to connect large language models (LLMs) with Braze’s data for more advanced real-time engagement.

OfferFit is part of Braze’s expanding AI product family and aims to enhance targeting and automation for marketing campaigns. Management described these innovations as strengthening Braze’s market position against traditional marketing software competitors.

The customer list added breadth, as new wins included brands like DocMorris, Fogo de Chão, Gopuff, Kleinanzeigen, Laundryheap, Little Caesars, Metcash, Saily, Sweetgreen, and Wix. These additions demonstrate continued global reach and cross-industry appeal. Remaining performance obligations—a forward-looking pipeline metric—continued to grow, supporting projections for sustained demand and business expansion in upcoming periods.

Braze underscored its core focus areas: real-time data processing for customer engagement, cross-channel outreach spanning email, mobile, and web, robust machine learning capabilities for automation and personalization, and technology integration across business systems. The ability to scale was demonstrated by the customer gains and growing enterprise account base.

Outlook and Guidance

Management raised its financial outlook for both the next quarter and the full fiscal year on a non-GAAP basis. For the third quarter, revenue is projected to be $183.5–$184.5 million, with non-GAAP EPS targeted at $0.06–$0.07. Non-GAAP net income is expected between $6.5 million and $7.5 million. For the full fiscal year ending January 31, 2026, management now forecasts revenue of $717.0–$720.0 million, non-GAAP operating income of $24.5–$25.5 million, and non-GAAP earnings per share of $0.41–$0.42—substantial increases over the prior guidance following recent outperformance and the assimilation of OfferFit into core operations.

Looking forward, the cash balance remains robust, but dilution from ongoing stock-based compensation is something to monitor. With new wins and an expanding product suite, Braze remains focused on scaling its global platform.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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Motley Fool Markets Team is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. The Motley Fool takes ultimate responsibility for the content of these articles. Motley Fool Markets Team cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Braze. The Motley Fool has a disclosure policy.