Braze's Q2 Earnings: A Glimpse into Sustained Growth and Competitive Edge in Customer Engagement

Braze’s recent financial performance underscores its resilience and strategic agility in the customer engagement sector. For its fiscal second quarter of 2025 (Q2 2025), the company reported revenue of $145.5 million, a 26.4% year-over-year increase compared to $115.1 million in Q2 2024 [1]. This growth was driven by new customer acquisitions, upsells, and renewals, with subscription revenue alone reaching $140.0 million—a 26.7% jump from the prior year [1]. Notably, Braze achieved its first quarter of non-GAAP operating income profitability, transitioning from a $7.6 million loss in Q2 2024 to a $4.2 million profit [1].

The company’s dollar-based net retention rate (DBNR) for all customers stood at 114% for the trailing 12 months as of July 31, 2024 [1], a metric that reflects strong customer loyalty and expansion revenue. However, by Q2 2026 (fiscal second quarter of 2026, ending July 31, 2025), the DBNR dipped to 108% for all customers, though it remained robust at 111% for customers with annual recurring revenue (ARR) exceeding $500,000 [2]. This suggests that while Braze’s core enterprise clients remain highly engaged, the broader customer base may face margin pressures.

Strategic Momentum and Market Positioning

Braze’s long-term positioning in the customer engagement sector is bolstered by its focus on AI-driven innovation. The company launched the Braze Data Platform and Braze for Startups in Q2 2025, expanding its offerings to cater to diverse customer needs [1]. Additionally, the acquisition of OfferFit in Q2 2026 enhanced its marketing automation capabilities, enabling hyper-personalized customer journeys [2]. These moves position Braze to compete more effectively against industry giants like Twilio and Salesforce, both of which have also prioritized AI integration.

Twilio, for instance, reported a 12% year-over-year revenue increase in Q1 2025, driven by its Communications segment [2]. However, Braze’s 20% revenue growth in Q1 2026 (fiscal first quarter of 2026) outpaced Twilio’s performance, highlighting its ability to scale in a competitive landscape [3]. Braze’s international expansion further strengthens its appeal, with 46% of its Q1 2026 revenue derived from international markets [3].

Risks and Challenges

Despite its progress, Braze faces headwinds. Free cash flow declined to $3.5 million in Q2 2026 from $7.2 million in the prior year [2], raising questions about the sustainability of its growth investments. Additionally, while the company raised its full-year 2026 revenue guidance to $717–$720 million (up from $702–$706 million) [2], this reflects a moderation in growth expectations compared to its Q2 2025 guidance of $582.5–$585.5 million [1].

Long-Term Outlook

Braze’s ability to balance innovation with profitability will be critical. Its first-quarter 2026 non-GAAP EPS of $0.15, which exceeded estimates by 400% [2], signals improving operational efficiency. However, investors must monitor customer acquisition costs and retention rates, particularly as competitors like Adobe and Salesforce continue to invest heavily in AI-driven customer engagement tools.

In conclusion, Braze’s Q2 earnings demonstrate a company on an upward trajectory, with strong revenue growth, strategic product advancements, and a loyal customer base. While challenges such as free cash flow constraints and competitive pressures persist, its focus on AI and global expansion positions it well for long-term success in the evolving customer engagement sector.

Source:
[1] Braze Reports Fiscal Second Quarter 2025 Results [https://investors.braze.com/news/news-details/2024/Braze-Reports-Fiscal-Second-Quarter-2025-Results/default.aspx]
[2] Braze Revenue Jumps 24% in Fiscal Q2 [https://www.nasdaq.com/articles/braze-revenue-jumps-24-fiscal-q2]
[3] Braze, Inc. [https://www.datainsightsmarket.com/companies/BRZE]