Last Update 08 Jun 26

BLZE: Margin Execution Will Drive Future Upside Despite Mixed Research Views

Analysts have raised the Backblaze price target by a few dollars to reflect updated views on risk, profitability, and future P/E assumptions, following recent research that included target increases of $2.50 and $3, as well as a downgrade.

Analyst Commentary

Bullish Takeaways

Bullish analysts lifting price targets by $2.50 and $3 are signaling more confidence in how Backblaze can execute on its business plan relative to prior expectations, even while keeping an eye on risk and profitability.
The updated targets reflect a view that current valuation and assumed future P/E levels better align with the company’s potential earnings power, rather than requiring a major rerating from here.
Supportive research suggests that, if Backblaze continues to deliver on its operational goals, the stock could justify the revised targets under the refreshed P/E assumptions used in their models.

Bearish Takeaways

The recent downgrade shows that not all analysts are comfortable with the risk profile at today’s valuation, even after incorporating updated assumptions into their work.
Bearish analysts appear more cautious on the balance between growth ambitions and profitability, questioning whether execution will be consistent enough to support higher P/E assumptions.
The mixed views, with both target increases and a downgrade, underline that there is meaningful disagreement on how quickly Backblaze can convert its business model into earnings that fully support the raised targets.

What's in the News

Backblaze issued new earnings guidance for the second quarter of 2026, with revenue expected in a range of US$39.8 million to US$40.2 million. (Source: Company guidance)
The company raised full year 2026 revenue guidance to a range of US$161.5 million to US$163.5 million, compared with prior guidance of US$156.5 million to US$158.5 million. (Source: Company guidance)
One of Backblaze’s original Storage Pod 1.0 chassis is being preserved in the Computer History Museum’s permanent collection, highlighting the company’s early role in low cost, high density cloud storage hardware. (Source: Company announcement)
Backblaze partnered with StorageReview to host 314 trillion digits of pi on Backblaze B2 Cloud Storage, making more than 130 terabytes of data available to the public in 200 gigabyte chunks. (Source: Company announcement)
The company completed a share repurchase tranche, buying back 256,549 shares in total, representing 0.45% of shares, for US$1.98 million under the buyback announced on 7 August 2025. (Source: Company buyback update)

Valuation Changes

Fair Value: Model fair value remains unchanged at $9.34 per share in the latest update.
Discount Rate: The discount rate has risen slightly from 8.91% to 9.06%, indicating a modestly higher required return in the model.
Revenue Growth: The assumed long term revenue growth rate is effectively unchanged at about 10.35%.
Net Profit Margin: The long term profit margin assumption is broadly stable at about 7.81%.
Future P/E: The future P/E assumption has risen slightly from 54.44x to 54.67x, reflecting a small adjustment in the earnings multiple used in the valuation work.

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Key Takeaways

Surging AI-driven data demand and innovative high-value products are accelerating revenue growth, expanding margins, and improving customer acquisition and retention.
Strategic enterprise focus, enhanced security features, and transparent pricing are boosting direct sales momentum, customer mix, and long-term profitability.
Declining legacy revenue, competitive pressures, reliance on volatile AI demand, and regulatory risks threaten long-term growth, margins, and market diversification.

Catalysts

About Backblaze

A storage cloud platform, provides businesses and consumers cloud services to store, use, and protect data in the United States and internationally.What are the underlying business or industry changes driving this perspective?

The explosive increase in AI workloads is driving a step-function expansion in Backblaze's addressable market; AI customer data stored grew 40x year-over-year, and 3 of their top 10 customers are now AI companies, positioning B2 Cloud as a direct beneficiary of surging global data creation and accelerating secular demand-likely resulting in accelerated multi-year revenue growth.
Ongoing product innovation, such as the launch of B2 Overdrive (with 250% higher pricing and strong initial uptake among multi-petabyte AI and high-performance users), answers increasing market needs for secure high-throughput storage and supports both top-line growth and potential gross margin expansion as higher-value products gain share.
The transparent, value-oriented, and predictable pricing model is increasingly resonating with enterprises frustrated by hidden or unpredictable charges at hyperscalers, which should drive further customer acquisition and increase retention-contributing to organic revenue growth and improving net revenue retention rates.
Strategic upmarket shift, partner expansion, and successful go-to-market transformation are evidenced by a 30% year-over-year increase in >$50K ARR customers and four consecutive quarters with a 7-figure customer, setting the stage for continued direct sales momentum, better customer mix, and improved operating leverage to bolster future earnings and margins.
Heightened attention to data security and compliance is generating additional revenue opportunities via new AI-powered features (Anomaly Alerts, Legal Hold, etc.) and deepening enterprise adoption, with these capabilities expected to improve customer stickiness and drive incremental margin-accretive upsell/expansion.

Backblaze Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Backblaze's revenue will grow by 10.3% annually over the next 3 years.
Analysts are not forecasting that Backblaze will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Backblaze's profit margin will increase from -15.0% to the average US IT industry of 7.8% in 3 years.
If Backblaze's profit margin were to converge on the industry average, you could expect earnings to reach $15.7 million (and earnings per share of $0.22) by about June 2029, up from -$22.4 million today.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 55.3x on those 2029 earnings, up from -20.3x today. This future PE is greater than the current PE for the US IT industry at 17.6x.
Analysts expect the number of shares outstanding to grow by 6.19% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.06%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

The Computer Backup segment, a significant portion of Backblaze's legacy revenue, is in secular decline as consumer demand shrinks and device usage changes; management expects low to mid-single digit quarterly declines ahead, which could put long-term pressure on total revenue growth and customer diversification.
Net revenue retention (NRR) rates are trending downward for B2 Cloud Storage (down to 112% from 126% YOY and from 117% sequentially), with management noting this was partly due to lapping prior price increases, indicating limited ability to generate meaningful expansion revenue or price increases in the medium term and a stabilization, not acceleration, of expansion trends-potentially limiting long-term earnings growth.
The company's growth resurgence in B2 was heavily influenced by a few large AI customers and a "big ramp-up" in AI workloads; while management is optimistic about AI, this exposes Backblaze to volatility and concentration risk if AI storage demand slows or migrates to larger hyperscalers and multi-cloud incumbents, which could compress revenue and margins.
The cloud storage industry remains intensely competitive and commoditized, with hyperscale providers (like AWS, Azure, Google) able to engage in price wars and squeeze gross margins for smaller vendors; Backblaze's focus on low-cost value is a competitive advantage today, but over the long run, sustained downward pricing pressure can erode profit margins and impede operating leverage.
Secular enterprise trends such as the shift to edge computing, self-managed or hybrid storage, and evolving data privacy regulations (GDPR/CCPA) could dramatically limit Backblaze's addressable market or create compliance overhead, resulting in higher operating expenses, profitability challenges, or restricted revenue growth in geographically regulated markets.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $9.34 for Backblaze based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.9, and the most bearish reporting a price target of just $6.5.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $201.4 million, earnings will come to $15.7 million, and it would be trading on a PE ratio of 55.3x, assuming you use a discount rate of 9.1%.
Given the current share price of $7.6, the analyst price target of $9.34 is 18.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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