Braze (BRZE): Evaluating Valuation After Tech Stock Drop on China Tariff Fears

The recent selloff in tech stocks, driven by renewed fears of China-related tariffs under former President Donald Trump's trade war rhetoric, has created a buying opportunity for investors with a long-term horizon. Braze (BRZE), a customer engagement platform in the SaaS sector, has seen its stock price drop by 4.4% in September 2025 amid macroeconomic jitters, according to an IndexBox report, even as the company reported robust revenue growth and profitability milestones. This divergence between fundamentals and market sentiment raises an important question: Is Braze's valuation now attractive enough to justify a contrarian bet in a sector facing broader headwinds?

A Tale of Two Metrics: Growth vs. Valuation

Braze's Q2 2026 results, released in July 2025, underscored its operational resilience. Revenue hit $180.1 million, a 23.8% year-over-year increase, driven by new customer acquisitions, upsells, and the integration of OfferFit, an AI decisioning company, as reported in Braze's Q2 2026 release. Organic revenue (excluding OfferFit) grew 22% YoY to $177 million, while the company posted $6 million in non-GAAP operating income-a first-quarter profitability milestone. These numbers suggest a business that is not only scaling but also improving its margin structure.

Yet Braze's stock price has lagged. As of August 2025, it traded at an EV/Revenue multiple of 3.6x and a P/S ratio of 4.18, per the Multiples.vc valuation page, significantly below the median SaaS industry multiple of 6.0x during the same period. This discount reflects broader market concerns about margin compression and the sustainability of SaaS growth, exacerbated by the China tariff fears that have spooked investors. For context, Twilio trades at 3.5x EV/Revenue, while Klaviyo commands 8.9x, highlighting Braze's undervaluation relative to peers.

Macro-Driven Selloffs and Sector-Wide Repricing

The SaaS sector has experienced a "software penalty" in 2025, with valuations contracting amid rising interest rates and geopolitical risks. According to a report by Aventis Advisors, the median EV/Revenue multiple for SaaS companies fell to 6.0x in July 2025 from 7.3x in January, as investors recalibrated for slower growth and tighter margins. Private SaaS companies are trading at even steeper discounts, with multiples ranging from 4.5x to 5.6x depending on revenue size.

Braze's valuation appears to have been disproportionately impacted by these trends. While the company's dollar-based net retention dipped to 109% in Q2 2025 from 117% in prior periods, according to a Panabee report, its customer base expanded to 2,163, and it maintained a 70.9% non-GAAP gross margin. These metrics suggest a business with durable competitive advantages, yet its stock price has fallen 12.83% over the past 52 weeks, mirroring the sector's broader selloff.

Strategic Tailwinds: AI and First-Party Data

Braze's long-term thesis hinges on its ability to leverage AI and first-party data to compete with legacy marketing clouds. The acquisition of OfferFit and the rollout of the Braze Model Context Protocol (MCP) Server position the company to enhance customer engagement through AI-driven personalization. Analysts note that these innovations could help Braze capture market share from competitors like Adobe and Salesforce, particularly as brands prioritize data privacy and scalable automation.

Moreover, Braze's integration of reinforcement learning technology from OfferFit is expected to boost marketer productivity, a critical differentiator in an era where customer acquisition costs are rising. These strategic moves, combined with its improving profitability, suggest that Braze's current valuation may not fully reflect its future potential.

Risks and Rewards

Investors considering Braze must weigh several risks. The China tariff fears that triggered the selloff remain unresolved, and a trade war could further pressure global supply chains and tech demand. Additionally, Braze's gross margins declined slightly in Q2 2026, from 70.2% to 67.7%, per a StockTitan article, raising questions about its ability to maintain profitability amid rising costs.

Historical data from past earnings events also highlights market sensitivity to profitability metrics. For instance, in Q3 2022, Braze reported revenue above estimates but still saw its stock drop 6.5% in after-hours trading due to negative EPS and ROCE, as noted in a Q3 2022 recap. This underscores how investors may prioritize near-term profitability over growth in volatile environments, a pattern explored in a SaaS earnings analysis.

However, the discount in valuation also presents an opportunity. At a forward-looking EV/Revenue multiple of 4.1x, Braze trades at a steep discount to its historical averages and peers. With 21 Wall Street analysts rating it as a "Moderate Buy" or better and an average price target of $45.10 (44.86% upside from current levels), the stock appears to offer asymmetric risk-reward.

Conclusion: A Contrarian Play in a Discounted Sector

The recent selloff in Braze and the broader SaaS sector has created an inflection point for investors. While macroeconomic and geopolitical risks remain, Braze's strong revenue growth, improving profitability, and strategic AI investments position it as a compelling candidate for long-term capital appreciation. At current valuation levels, the stock offers a rare combination of discounted pricing and durable growth potential-a hallmark of contrarian investing in volatile markets.