Last Update 07 Mar 26

Fair value Decreased 17%

BLZE: Profit Execution And Neocloud Deal Will Support Future Upside

Backblaze's updated analyst price target signals a meaningful reset, with our fair value estimate moving from $10.06 to $8.34 as analysts factor in lower expected revenue growth, a slightly higher discount rate, and reduced future P/E assumptions, despite incremental improvement in profit margin expectations.

Analyst Commentary

Recent Street research around Backblaze clusters around a single theme: expectations for growth and valuation have reset lower, even as execution on profitability and larger deals draws some cautious optimism.

Bullish Takeaways

Bullish analysts highlight that recent quarters included an upside print on revenue and adjusted EBITDA, which they view as a signal that management is controlling costs and delivering against current guidance.
Several research notes point to strong adjusted EBITDA margins, including a record 27.6% margin in Q4, as evidence that the business model can support improved profitability even with mixed revenue trends.
Some analysts see value in the signing of the largest deal in the company’s history with a publicly traded “neocloud” provider. They view it as validation of the B2 Cloud offering and a potential support for longer term revenue contribution.
Bullish analysts also respond positively to management’s updated philosophy and operational changes. They suggest these shifts could help execution and free cash flow, which can be important inputs into valuation frameworks such as discounted cash flow and P/E multiples.

Bearish Takeaways

Bearish analysts focus on lowered growth expectations, with commentary around an anticipated 8% growth rate and guided slowdown to 8% year over year growth. This feeds directly into lower price targets and less generous revenue multiples.
There is concern about pressure on profitability quality, with references to roughly 200 basis points of gross margin pressure that could limit upside to earnings based valuation metrics if sustained.
Several notes flag softer outlooks for fiscal year 2026 and mixed revenue trends in both B2 Cloud Storage and Computer Backup. This raises questions around the durability and visibility of the growth story.
Higher capital expenditures and contracting software sector multiples are cited as reasons for caution, as they may weigh on free cash flow and compress valuation ranges. Some bearish analysts have moved to Hold ratings and are waiting for what they view as a better risk reward entry point.

What's in the News

Backblaze introduced Advanced Installer and the Backblaze Command Line Interface (bz CLI) for Computer Backup, aimed at giving IT teams more control over configuration, automation, and policy enforcement across large or distributed device fleets (Key Developments).
The Advanced Installer allows administrators to standardize and lock backup schedules, exclusions, security preferences, and notifications across endpoints, with support for deployment tools such as Jamf, Kandji, Addigy, and other MDM and RMM platforms (Key Developments).
The new bz CLI lets IT teams adjust backup settings, update policies, and pull configuration and reporting data via scripts after deployment, using structured JSON and a command-based workflow on both macOS and Windows (Key Developments).
Backblaze announced B2 Neo, a cloud object storage offering for neocloud platforms that is intended to support data-heavy AI and machine learning workloads, with throughput capability up to 1 terabit per second and integration as a white label storage layer for partners (Key Developments).
The company launched Backblaze flethrower, a startup program that provides qualifying early stage companies with B2 Cloud Storage credits and access to Backblaze experts, focusing on data-intensive use cases such as AI, media, gaming, SaaS, backup, and disaster recovery without strict sales-driven program requirements (Key Developments).

Valuation Changes

Fair Value: Reset from $10.06 to $8.34, representing a meaningful step down in the implied equity value per share.
Discount Rate: Increased from 9.62% to 10.00%, reflecting a slightly higher required return in the updated model.
Revenue Growth: Reduced from 10.57% to 9.32%, indicating more conservative expectations for future revenue expansion.
Profit Margin: Adjusted from 7.64% to 7.77%, reflecting a small upward move in long-term profitability assumptions.
Future P/E: Reduced from 59.65x to 53.27x, indicating a more restrained valuation multiple on projected earnings.

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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 14.3% 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 -31.7% to the average US IT industry of 6.4% in 3 years.
If Backblaze's profit margin were to converge on the industry average, you could expect earnings to reach $13.0 million (and earnings per share of $0.19) by about September 2028, up from $-43.6 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 77.6x on those 2028 earnings, up from -10.9x today. This future PE is greater than the current PE for the US IT industry at 32.4x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.13%, as per the Simply Wall St company report.

Backblaze Future Earnings Per Share Growth

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 $11.3 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 $8.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $204.8 million, earnings will come to $13.0 million, and it would be trading on a PE ratio of 77.6x, assuming you use a discount rate of 9.1%.
Given the current share price of $8.4, the analyst price target of $11.3 is 25.7% 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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