The AI marketing platform Braze (BRZE.US) experienced a sharp drop after the good market! Q2 revenue and EPS both exceeded expectations and raised annual guidelines

The Zhitong Finance App learned that the artificial intelligence (AI) marketing platform Braze (BRZE.US) announced better-than-expected results for the second fiscal quarter, while also raising the full-year results guidance for the 2027 fiscal year. Financial reports show that in the second fiscal quarter ending July 31, Braze achieved revenue of US$227.2 million, up 26% year over year; net loss was US$18.9 million, which was 32% narrower than the net loss of US$27.9 million in the same period last year; and adjusted earnings per share of $0.19, better than analysts' average expectation of $0.15.

Braze said revenue growth was mainly driven by up-sales, contract renewals, and new customers. By business, subscription revenue increased 21% year over year to US$207.7 million, better than analysts' average forecast of US$204.2 million; professional services and other revenue increased 136% year over year to US$19.6 million, better than analysts' average forecast of US$15.93 million.

By the end of the second fiscal quarter, Braze had 2,789 customers, up from 2,422 in the same period last year, including 361 customers with annual recurring revenue (ARR) of $500,000 or more. Whether it's the overall customer base or larger customers, the net retention rate has improved. As at 31 July, the amount of remaining performance obligations reached $1.09 billion. Of this amount, $691.1 million is current revenue, and revenue is expected to be recognized in less than a year.

It is worth mentioning that GAAP gross margin fell from 67.7% to 66.8%, while non-GAAP gross margin fell from 69.3% to 68.6%. Braze did not specify the reason for the decline in gross margin, so the continuation of this pressure remains a matter of concern.

However, operating expenses grew much slower than revenue growth — operating expenses for the second fiscal quarter increased 6% year over year to US$170 million, which was far less than the 26% year-on-year increase in revenue for the quarter. This indicates that despite a decrease in gross margin, the company's operating leverage effect has improved.

CEO Bill Magnusson attributed this quarter's results to Braze's role in helping customers achieve a significant return on their investment. He said that as customers pay more attention to return on investment, applications of products such as BrazeAI Operator, BrazeAI Agent Console, and BrazeAI Decision-Making Studio are being promoted at an accelerated pace.

Braze has also enhanced its artificial intelligence capabilities, reached a three-year strategic partnership with AWS, and strengthened integration with Databricks CustomerLake. New customer results include Chime, Wilson Sporting Goods, Foxtel Group, and several international brands.

For the third fiscal quarter, Braze expects revenue of US$229 million to US$230 million, better than analysts' average expectations of US$227.5 million; adjusted earnings per share are expected to be $0.13 to $0.14, which falls short of analysts' average expectations of $0.16.

Braze also raised its full-year results guidance. The company currently estimates revenue for the 2027 fiscal year to be US$910 million to US$913 million, with the previous forecast of US$895 million to US$899 million, and the average analyst forecast was US$898.2 million; the adjusted earnings per share for the full year were US$0.64 to US$0.65, previously estimated at US$0.65, and the average analysts' expectation was US$0.63.

However, as of press time, Braze's US stocks plummeted nearly 13% after the market on Tuesday.