Braze Inc. Stock: Drops Over 16% Despite Strong Q1 26 Earnings Beat

Free illustrations of Crash

Image Source: Pixabay


Key Takeaways

  • Q1 2026 revenue grew by 19.6% to $162.1 million, beating estimates.
  • Adjusted EPS hit $0.07, exceeding analyst expectations.
  • Free cash flow was nearly $23 million, while net income over $7 million.
  • Customer count reached 2,342, and large customers rose by 24%.
  • Shares dropped over 16% to $30.30 on Friday due to macro and churn concerns.

Braze Inc. (BRZE) shares plunged more than 16% to around $30.30 on June 6 despite reporting strong fiscal Q1 2026 results.

(Click on image to enlarge)

Image Source: Yahoo! Finance

The company announced earnings on June 5, showing a 19.6% year-over-year revenue increase to $162.1 million, exceeding the $158.7 million Wall Street estimate. Adjusted EPS came in at $0.07, topping expectations of $0.05 and up from a loss of $0.05 a year ago.

Still, investors reacted negatively as macroeconomic headwinds, churn in enterprise segments, and weakness in APAC markets raised concerns about sustained growth momentum.


Customer Growth and Retention Metrics Improve

Braze continues to expand its customer base. Total customers rose to 2,342, up by 46 sequentially and 240 year-over-year. The number of large customers with annual recurring revenue above $500,000 climbed 24% to 262.

Dollar-based net retention stood at 109% overall and 112% for large customers. This highlights Braze’s continued success in upselling and expanding among its existing base, particularly in larger enterprise accounts.


Profitability and Margin Improvements

The company posted its fourth consecutive quarter of non-GAAP net income profitability, reporting over $7 million in net income. Free cash flow reached nearly $23 million, while cash from operations totaled $24 million.

Gross margin improved to 69.3% from 67.9% a year ago. Non-GAAP operating margin rose over 900 basis points year-over-year, reflecting tighter cost control across departments. Braze spent $64 million on sales and marketing, $25 million on R&D, and $21 million on G&A expenses—all expressed as a percentage of revenue.


OfferFit Acquisition and Guidance Update

Braze successfully closed its acquisition of OfferFit, bolstering its AI capabilities. However, the integration is expected to temporarily pressure margins, leading to a short-term deviation from its operating income framework.

For Q2 FY2026, Braze expects revenue between $171 million and $172 million. Full-year revenue guidance now stands at $702 million to $706 million, showing confidence in continued top-line growth.


Challenges Cloud Positive Momentum

Despite upbeat guidance, management flagged concerns such as elevated churn in the enterprise segment and prolonged deal cycles due to switching costs. Regional softness in Southeast Asia also weighed on investor sentiment.

Performance metrics show Braze has been struggling to gain investor confidence. Year-to-date, the stock is down 27.6%. Its five-year return sits at -65.2%, far underperforming the S&P 500’s 87.4% gain during the same period. While the company shows operational strength, external headwinds remain a key challenge moving forward.


More By This Author:

Uber Eyes Stablecoins As Solution To International Payment Friction
Ethereum Foundation Bold DeFi Plan Hints At Major Ecosystem Shift
XRP News: European Central Bank Launches Digital Euro Pilot With XRP Ledger And White Network
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Or Sign in with