TLDR
- Q1 2026 revenue grew 19.6% to $162.1 million, beating estimates.
- Adjusted EPS hit $0.07, exceeding analyst expectations.
- Free cash flow was nearly $23 million; net income over $7 million.
- Customer count reached 2,342; large customers rose 24%.
- Shares dropped over 16% to $30.30 due to macro and churn concerns.
Braze Inc. (NASDAQ:BRZE) shares plunged more than 16% to $30.30 midday on June 6 despite reporting strong fiscal Q1 2026 results.
The company announced earnings on June 5, showing a 19.6% year-over-year revenue increase to $162.1 million, exceeding the $158.7 million Wall Street estimate. Adjusted EPS came in at $0.07, topping expectations of $0.05 and up from a loss of $0.05 a year ago.
Still, investors reacted negatively as macroeconomic headwinds, churn in enterprise segments, and weakness in APAC markets raised concerns about sustained growth momentum.
📣 We’re off to a strong start in FY26!
Braze had a $648 million quarterly revenue run rate with 20% YoY growth—a testament to the power of our platform and the people behind it.
Thank you to our team, customers, and partners 💪
🔗 Read more: https://t.co/TTdLZy8TJD#Braze… pic.twitter.com/sYHSXqGL0S— Braze (@Braze) June 5, 2025
Customer Growth and Retention Metrics Improve
Braze continues to expand its customer base. Total customers rose to 2,342, up by 46 sequentially and 240 year-over-year. The number of large customers with annual recurring revenue above $500,000 climbed 24% to 262.
Dollar-based net retention stood at 109% overall and 112% for large customers. This highlights Braze’s continued success in upselling and expanding among its existing base, particularly in larger enterprise accounts.
Profitability and Margin Improvements
The company posted its fourth consecutive quarter of non-GAAP net income profitability, reporting over $7 million in net income. Free cash flow reached nearly $23 million, while cash from operations totaled $24 million.
Gross margin improved to 69.3% from 67.9% a year ago. Non-GAAP operating margin rose over 900 basis points year-over-year, reflecting tighter cost control across departments. Braze spent $64 million on sales and marketing, $25 million on R&D, and $21 million on G&A expenses—all expressed as a percentage of revenue.
OfferFit Acquisition and Guidance Update
Braze successfully closed its acquisition of OfferFit, bolstering its AI capabilities. However, the integration is expected to temporarily pressure margins, leading to a short-term deviation from its operating income framework.
For Q2 FY2026, Braze expects revenue between $171 million and $172 million. Full-year revenue guidance now stands at $702 million to $706 million, showing confidence in continued top-line growth.
Challenges Cloud Positive Momentum
Despite upbeat guidance, management flagged concerns such as elevated churn in the enterprise segment and prolonged deal cycles due to switching costs. Regional softness in Southeast Asia also weighed on investor sentiment.
Performance metrics show BRZE struggling to gain investor confidence. Year-to-date, the stock is down 27.6%. Its five-year return sits at -65.2%, far underperforming the S&P 500’s 87.4% gain during the same period. While the company shows operational strength, external headwinds remain a key challenge moving forward.
