Braze's Q2 2026 Earnings Call: Contradictions in Sales Hiring, DBNR, OfferFit Integration, and Demand Environment

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $180M, up 24% YOY and 11% sequentially
• EPS: $0.15 non-GAAP diluted EPS, up from $0.09 in the prior year
• Gross Margin: 69.3%, compared to 70.9% in the prior year
• Operating Margin: 3.4% non-GAAP, compared to 2.9% in the prior year

Guidance:

• Q3 revenue: $183.5M–$184.5M (~21% YOY).
• Q3 non-GAAP operating income: $3.5M–$4.5M (~2% margin midpoint); includes FORGE/event expenses.
• Q3 non-GAAP net income: $6.5M–$7.5M; EPS: $0.06–$0.07 on ~113.5M diluted shares.
• FY26 revenue: $717M–$720M (~21% YOY); OfferFit adds ~2 pts of growth (8-month contribution in FY, full quarter in Q3).
• FY26 non-GAAP operating income: $24.5M–$25.5M (~3.5% margin midpoint; +350 bps vs FY25).
• FY26 non-GAAP net income: $45.5M–$46.5M; EPS: $0.41–$0.42 on ~112M diluted shares.

Business Commentary:

* Strong Financial Performance: - Braze reported revenue of $180 million for the fiscal second quarter 2026, up 24% year-over-year and 11% from the prior quarter. - Growth was driven by solid bookings across verticals, improved efficiencies, and the integration of OfferFit solutions.

• Customer Base Expansion:
• Total customer count increased by 80 sequentially and 259 year-over-year to 2,422.

• The expansion in customer base was supported by strong performance in enterprise replacement cycles and vendor consolidation trends.

• AI and Product Advancements:

• The integration of OfferFit's AI decisioning engine is expected to enhance customer engagement strategies, contributing to growth.

• Braze's AI roadmap aims to deliver more relevant customer experiences and grow market share through advanced AI capabilities.

• Operating and Financial Efficiency:

• Braze achieved non-GAAP operating income of $6 million and non-GAAP net income of $4 million for the quarter.
• Improved profitability was due to increased efficiency in operations, cost optimization, and successful integration of OfferFit.

Sentiment Analysis:

• “Revenue…$180 million, up 24% YOY and 11% sequentially.” “We recently passed $700 million of committed ARR.” “Three straight quarters of positive non-GAAP operating income and free cash flow.” “CRPO…$558 million, up 27% YOY and 7% sequentially.” Guidance raised: FY26 revenue $717–$720M (~21% YOY) and FY26 non-GAAP operating margin ~3.5% (+350 bps). “In-period DBNR has stabilized…Q2 slightly above Q1.” OfferFit integration and cross-sell on pace (~2 pts FY growth).

Q&A:

• Question from Brent Bracelin (Piper Sandler/Stephens): What changed in demand to beat and raise, and how can you drive higher growth and operating leverage?
  Response: Demand is broadly stable; improved execution and high win rates plus moderating downsell and clearer OfferFit integration/visibility support stronger growth and profitability.

• Question from Seti Pendegree (Mizuho): How is OfferFit resonating with customers and what ACV uplift should we expect?
  Response: Early enterprise wins across all regions; six-figure deals with high expected attach; full OfferFit priced ~$300K annually; FY contribution on track at ~$11–$12M (~2 pts growth).

• Question from Seti Pendegree (Mizuho): How will you scale OfferFit and its impact on margins?
  Response: OfferFit is neutral to gross margin today with room to exceed Braze over time; slight near-term operating margin dilution, but synergies and disciplined investment should expand margins.

• Question from Taylor McGinnis (Raymond James): How is usage trending for your AI products and what reinforces Braze’s defensibility?
  Response: Broad adoption across AI features (recommendations, RL, GenAI); AI lowers complexity and boosts marketer productivity, enhancing Braze’s differentiation; more on composable intelligence at FORGE.

• Question from Taylor McGinnis (Raymond James): What drove the Q2 outperformance and how did that inform guidance?
  Response: Lower-than-expected downsell and broad demand strength; one-time tailwinds from better revenue reserves and higher overages (~1 point of upside) also helped; visibility improved for H2.

• Question from Ryan MacWilliams (Barclays): Are customer behaviors changing in the AI era, and does it improve your market position?
  Response: Braze’s outcome-based, automation-first design suits AI-native workflows; AI amplifies ROI and accessibility for small teams; switching costs remain a drag, but first‑party engagement fundamentals are strong.

• Question from Tyler Radke (Citi): What explains better reserve dynamics and improving retention metrics?
  Response: Healthier customers are prioritizing timely payments; retention benefits from broad SKU adoption; MAU growth trails revenue; credits-based messaging continues to perform well.

• Question from Yun Kim (Loop Capital): Any trends by messaging channel and will OfferFit boost specific channels?
  Response: Premium channels (e.g., WhatsApp/RCS) grew, especially ex-U.S., aided by flexible credits; rising use of landing pages/content cards; OfferFit often starts with email but optimizes across channels and even paid media.