Backblaze: Unlocking Untapped Value in the Cloud Backup Sector

The cloud backup sector is undergoing a seismic shift, driven by AI workloads, hybrid cloud adoption, and escalating data security demands. Amid this transformation, Backblaze (BLZE) has emerged as a standout performer, yet its valuation remains strikingly disconnected from its growth trajectory. With a 29% year-over-year revenue surge in its B2 Cloud Storage segment and adjusted EBITDA margins tripling to 18% in Q2 2025, the company is poised to capitalize on a $21.62 billion market by 2030 Backblaze Q2 2025 results. For investors, the question is no longer if Backblaze can scale but why its stock trades at a discount to peers despite outpacing the sector.

Strategic Positioning: AI-Driven Growth and Cost Leadership

Backblaze's B2 Cloud Storage segment has become a magnet for AI-driven enterprises, with customers storing 40x more data year-on-year and AI client growth hitting 70%, according to Backblaze's Q2 results. This surge is fueled by B2 Overdrive, a high-performance storage tier optimized for AI training and inference, which has already secured a six-figure contract displacing a hyperscaler Rubrik press release. Unlike AWS and Azure, which bury users in complex pricing tiers and hidden fees, Backblaze offers a transparent model: free egress up to three times stored data, no API charges, and 80–90% lower costs for performance-sensitive workloads, as shown in an independent cost comparison cost comparison.

The company's go-to-market strategy further amplifies its edge. Direct sales bookings doubled in 2025, with net revenue retention for B2 Cloud Storage slipping to 112% but offset by a 30% YoY rise in high-ARR ($50K+) customers, per Backblaze's Q2 disclosure. This upmarket shift-combined with 90% gross retention-suggests Backblaze is winning over enterprises willing to pay a premium for predictable costs and AI-ready infrastructure.

Financial Momentum: Margins and Margin Expansion

Backblaze's financials tell a story of disciplined execution. Q2 2025 saw adjusted EBITDA margins expand to 18% from 9% in 2024, while net losses narrowed to $7.1 million from $10.3 million, according to Backblaze's report. Free cash flow burn for the first half of 2025 halved to $6.0 million, and the company now forecasts free cash flow positivity by year-end-trends also reflected in peer disclosures. These improvements are not just operational-they're structural. By avoiding the capital-intensive data center race of hyperscalers, Backblaze maintains a lean cost base, enabling it to reinvest in AI-specific tools like lifecycle management and versioning, which AWS and Azure monetize as add-ons (independent cost comparisons have documented these differences).

Valuation Disparity: A Mispriced Opportunity

Despite these strengths, Backblaze trades at a P/S ratio of 3.46 and P/ARR of 3.96, per Backblaze's Q2 figures, far below peers. For context, Veeam-recently valued at $15 billion post-IPO-sports a P/S of 8.8x and P/ARR of 8.5x, as noted in the broader cloud backup market report cloud backup market report. Rubrik, with $1.09 billion in ARR, commands a P/S of 10.2x and P/ARR of 12.3x, according to Rubrik's filings. Even Druva, a private company with $273.5 million in revenue, is valued at $2 billion, implying a P/S of 7.1x Druva company profile. Backblaze's metrics suggest it is priced for mediocrity, not the 30%+ B2 growth it now forecasts for Q4 2025.

This disconnect is unsustainable. As the cloud backup market grows at a 24.4% CAGR, per the industry report, investors are beginning to recognize that cost leadership and AI specialization are the new moats. Backblaze's recent $20 million credit facility and $10 million stock repurchase program signal confidence in its trajectory, but institutional adoption lags. For those acting now, the reward is clear: a company with a 16% revenue CAGR, accelerating margins, and a product suite tailored for the AI era, all at a valuation that ignores its potential.

Conclusion: The Inflection Point

Backblaze's ascent is not a flash in the pan. Its B2 Cloud Storage segment is outpacing even the most optimistic sector forecasts, and its strategic focus on AI workloads positions it to capture a disproportionate share of the $21.62 billion market by 2030, as detailed in the market report. Yet the stock remains a niche play, underfollowed by institutions that typically drive multiples. For investors with a 12–18 month horizon, the calculus is simple: Backblaze's current valuation offers a rare combination of growth visibility and margin upside, with the added catalyst of AI-driven demand. The window to act is closing-before the next earnings report turns this "undiscovered" gem into the sector's darling.