Braze Grows Revenue and Expands AI Suite

Braze (NASDAQ:BRZE) reported its fiscal 2026 first-quarter results on June 5, with revenue up 20% year over year to $162.1 million, non-GAAP operating margin up by more than 900 basis points, and non-GAAP net income of $7 million. Standout factors in the customer engagement platform operator's performance included continued customer expansion, a significant AI acquisition, and strategic pricing model changes.

Significant Expansion of AI-Driven Platform Capabilities Via OfferFit Acquisition

Prior to acquiring OfferFit in a deal that closed this week, Braze had built a multiyear partnership with the AI decisioning platform operator; approximately one-third of OfferFit’s customers were already using Braze's platform as of the end of the quarter. The results for fiscal Q1, which ended April 30, included approximately $6 million in vendor payments for the acquisition, and OfferFit is projected to contribute approximately $11 million to $12 million in fiscal 2026 revenue, equating to about 2% incremental growth at the midpoint of the $702 million to $706 million annual revenue guidance for the year.

"To accelerate our progress in this area, earlier this week, we successfully closed the acquisition of OfferFit -- a leading AI decisioning company that leverages proprietary reinforcement learning to enable brands to deliver highly relevant, and personalized customer engagement at scale. OfferFit has spent the last four and a half years building and deploying a leading multiagent solution that autonomously explores solution spaces across life cycle marketing campaigns. In the short term, we anticipate that OfferFit's solution will enable us to increase deal sizes their distinctive reinforcement learning products and services, while also setting us apart from competitors by offering a broad range of AI-driven optimization capabilities at various price tiers and service levels."
— Bill Magnuson, co-founder and CEO

This acquisition structurally enhances Braze's AI product suite, creates additive cross-sell potential within its growing large customer base, and uniquely positions the platform for accelerated wallet share capture versus legacy and point-solution competitors.

Operating Efficiency and Durable Profitability Amidst Macro Volatility

Non-GAAP operating margin flipped to positive 2% (versus negative 7% in the prior-year period), and free cash flow reached $23 million, inclusive of acquisition-related outflows. Sequential operating cost leverage persisted even as non-GAAP spending on R&D rose by $2 million to reach $25 million (15% of revenue) and non-GAAP sales and marketing expenses increased by $4 million to $64 million (39% of revenue) amid its global expansion initiatives.

"That top-line growth continues to be paired with efficiency improvements, as we increased our non-GAAP operating margin by over 900 basis points year over year and realized our fourth straight quarter of non-GAAP net income profitability, achieving over $7 million of net income, and nearly $23 million of free cash flow in the quarter."
— Bill Magnuson, co-founder and CEO

The company's non-GAAP margin expansion and cash generation validate management’s disciplined approach to capital allocation, supporting Braze's ability to finance product investments and push for greater scale without sacrificing profitability.

Strategic Pricing Overhaul Accelerates Adoption and Reduces Friction

The company rolled out an updated pricing and packaging structure in May that replaced its longstanding data point-based limits with API rate-based usage, addressing a primary point of friction in its sales processes. The shift was enacted after private pilots demonstrated positive competitive results and early indications of customer appreciation for the flexibility. Within days of launch, the company had already closed its first deal under the new model, with sales cycles and negotiation times reported as shortened and customers have shown early signs of appreciating the enhanced flexibility.

"[W]ith the continued build-out and capabilities of the Braze Data Platform, the amount of data flowing through Braze and the number of use cases that people want to accomplish with the Braze data platform continues to expand. And so having a kind of a tollgate on the data points as they came into Braze was not only a friction point in sales cycles, but it was holding back increased usage. And so our R&D teams have gone on a ... multiyear journey behind the scenes to be able to shift from these data points toward a more API rate limit-based way of making sure that we're able to guarantee the levels of poor performance that we want to and also be able to do that with keeping our COGS and our margin profile in the place that we want it to be. And so we're really excited about this moving into [the] market more broadly [and] our pricing and packaging becoming available in more and more places. We deployed it in a more private pilot throughout last year, and the competitive results of it were extremely good."
— Bill Magnuson, co-founder and CEO

This pricing innovation removes a key barrier to workload expansion, strengthens Braze's differentiation against both legacy and challenger platforms, and the new pricing model eases customer experimentation and multichannel adoption, and is expected to support net retention, though it is too early to determine its long-term impact.

Looking Ahead

For its fiscal Q2 2026, management projects revenue of $171 million to $172 million, with a year-over-year growth rate of approximately 18%, and a non-GAAP operating margin of approximately 1%. The fiscal 2026 guidance range is for $702 million to $706 million in revenue, representing 19% growth at the midpoint, with OfferFit expected to contribute a roughly 2% incremental uplift and non-GAAP operating margin improvement of approximately 100 basis points versus 2025. Management forecasts a return to the pre-existing operating income margin framework in fiscal 2027, following this integration year.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Braze. The Motley Fool has a disclosure policy.