0001628280-25-049877
SEC filingBackblaze's Q3 2025 revenue grew 14% YoY to $37.2M, driven by B2 Cloud Storage growth, while a change in useful life estimate boosted gross margin and reduced net loss.
Backblaze reported a strong third quarter for fiscal 2025, with total revenue increasing 14% year-over-year to $37.2 million. This growth was primarily fueled by the B2 Cloud Storage segment, which saw revenue surge 28% to $20.7 million, driven by higher storage usage from existing customers and new customer acquisitions. The Computer Backup segment remained relatively flat at $16.5 million, as price increases were offset by a decline in license counts.
Gross profit improved significantly, rising 30% to $23.1 million, with gross margin expanding to 62% from 55% in the prior year quarter. This margin expansion was largely attributable to a change in the estimated useful lives of property and equipment, effective April 1, 2025, which reduced depreciation expense by $1.7 million in the quarter. The extension of useful lives for data center and machinery equipment from a range of 3-5 years to a uniform 6 years reflects the company's confidence in the durability of its infrastructure.
Operating expenses decreased 12% year-over-year to $26.4 million, driven by reductions in sales and marketing and general and administrative expenses. This was partially offset by a 5% increase in research and development costs as the company continues to invest in its platform. The net loss narrowed substantially to $3.8 million, or $0.07 per share, compared to a net loss of $12.8 million, or $0.29 per share, in the same period last year.
As of September 30, 2025, Backblaze held $50.3 million in cash, cash equivalents, and marketable securities, down from $54.9 million at the end of 2024. Total assets increased to $191.5 million from $168.6 million, driven by growth in property and equipment and operating lease right-of-use assets as the company expands its data center footprint.
The company's debt profile changed significantly during the quarter. In June 2025, Backblaze entered into a new $20.0 million senior secured revolving credit facility with Citizens Bank, N.A., replacing its prior facility with City National Bank. As of September 30, 2025, $2.5 million was outstanding under the new facility, which was subsequently repaid in full in October 2025. Total liabilities rose to $108.7 million from $90.9 million, primarily due to increases in finance lease and operating lease liabilities.
Stockholders' equity grew to $82.8 million from $77.6 million, supported by proceeds from stock option exercises and stock-based compensation, partially offset by the net loss and $1.2 million in share repurchases.
Operating cash flow improved to $14.2 million for the first nine months of 2025, compared to $10.3 million in the same period of 2024. This improvement was driven by a smaller net loss and non-cash charges, including $20.1 million in stock-based compensation and $19.3 million in depreciation and amortization.
Free cash flow, defined as operating cash flow less capex, capitalized software, and finance lease payments, was negative $9.5 million, an improvement from negative $15.6 million in the prior year period. Capital expenditures totaled $4.4 million, while capitalized internal-use software costs were $5.9 million. Principal payments on finance leases and lease financing obligations consumed $13.9 million.
Management highlighted the company's ongoing go-to-market transformation, which is successfully moving the company up-market, evidenced by multiple deals with total contract values over $1.0 million each. The launch of B2 Overdrive, a premium high-performance storage solution, and new enterprise cybersecurity features are expected to broaden the addressable market among AI and enterprise customers.
In November 2025, the company initiated a new restructuring plan (the "2025 Restructuring Plan") designed to improve efficiency and enhance sales and marketing functions. The company expects to incur total charges of approximately $4.4 million to $6.0 million, primarily in the fourth quarter of 2025, including impairment charges related to office facilities and employee termination expenses.
Key business metrics showed a net revenue retention rate of 106% overall, with B2 Cloud Storage at 110% and Computer Backup at 101%. Annual recurring revenue (ARR) reached $147.2 million, up 13% from $130.5 million a year ago.
Revenue by geographic area remained consistent, with the United States contributing 71% of total revenue. International revenue was led by the United Kingdom, Canada, and other regions.
Deferred revenue totaled $35.7 million, relatively flat compared to year-end 2024. Remaining performance obligations (RPOs) were $46.1 million, with approximately 75% expected to be recognized over the next 12 months.
Stock-based compensation expense decreased to $5.4 million in Q3 2025 from $8.4 million in Q3 2024, primarily due to the timing of award grants. The company capitalized $0.5 million of stock-based compensation for internal-use software development during the quarter.
The company operates in a single reportable segment. The CODM, the CEO, uses consolidated net income (loss) as the key measure of segment profit or loss.