Why Braze Stock Tumbled by Over 5% on Tuesday

Braze (NASDAQ: BRZE) didn't start the holiday-shortened trading week on a high note. After it published its latest quarterly results that morning, investors aggressively sold the customer engagement software developer's stock. By the end of the day, its shares had fallen by more than 5%.

An estimates-topper

In its second quarter of fiscal 2027, Braze earned just over $227 million in revenue, representing a 26% year-over-year improvement. In its earnings release, the company said this was due mainly to an influx of new customers, combined with upsells and renewals of existing clientele. Of the total, nearly $208 million was subscription revenue, up 21%.

The specialized tech company's net income not under generally accepted accounting principles (non-GAAP, or adjusted) also rose briskly, advancing by 26% to more than $21 million, or $0.19 per share.

Both headline figures sat comfortably above their respective consensus analyst estimates of slightly over $220 million for revenue and $0.15 per share for adjusted net profit.

Investors weren't as concerned with trailing results as they were about future potential, and that's what most affected Braze stock post-earnings.

The company offered guidance for its current (third) quarter and raised its full-year revenue range while increasing the lower end of its profitability estimate. For the former period, it's modeling $229 million to $230 million, against the analyst consensus of just under $228 million. However, its guidance range for adjusted earnings is $0.13 to $0.14 per share, while pundits collectively expect $0.16.

High expectations

This feels rather nitpicky to me, especially considering that Braze's new full-year guidance tops prognosticator estimates. It's forecasting revenue for the period of $910 million to $913 million, and adjusting earnings per share (EPS) of $0.64 to $0.65. The two consensus figures are $899 million and $0.63 per share, respectively.

Software stocks like Braze continue to get punished for not producing blowout quarters and estimates-crushing guidance. Investors who aren't so skittish on the segment should consider this stock's Tuesday sell-off a fine opportunity to get a smart, effective niche operator at a discount.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Braze. The Motley Fool has a disclosure policy.