Key Takeaways
- Shares of Braze tumbled 11% on Wednesday following Q2 earnings that surpassed analyst expectations
- The company delivered $227 million in revenue, marking 19% year-over-year growth and exceeding the $220 million forecast
- Earnings per share on an adjusted basis reached $0.19, topping the consensus estimate of $0.15
- Investor disappointment stemmed from underwhelming remaining performance obligations (RPO) expansion
- Full-year revenue growth outlook was upgraded to roughly 23% year-over-year
Shares of Braze traded at approximately $30.31 on Wednesday, declining nearly 11% despite delivering second-quarter financial results that exceeded analyst projections but disappointed investors on critical forward-looking indicators.
The customer engagement platform reported adjusted profits of $0.19 per share alongside revenue totaling $227.2 million. Wall Street analysts had anticipated earnings of $0.15 per share with revenue of $220 million, according to FactSet data.
Top-line growth registered at 19% compared to the year-ago period, while organic revenue climbed 24% year-over-year. However, that organic expansion rate represented a deceleration from the 27% growth recorded in the preceding quarter.
The company’s non-GAAP operating margin reached 9.7%, significantly exceeding the analyst consensus of 8.1% and improving from 5.0% in the prior quarter. Management also elevated its margin outlook for fiscal 2027.
Notwithstanding the earnings beat, shares sold off aggressively. The primary concern centered on weaker expansion in remaining performance obligations, a forward-looking indicator that reveals how much contracted revenue the company expects to recognize in upcoming quarters.
AI Revenue Potential Remains Unrealized
William Blair analyst Arjun Bhatia maintained his Outperform rating while noting the selloff was “largely due to lighter RPO quarterly growth while investors wait for the AI monetization catalyst to play out.”
Braze’s artificial intelligence capabilities are seeing increased customer adoption, but this engagement hasn’t yet materialized into meaningful revenue acceleration. This disconnect between product uptake and financial results is fueling investor anxiety.
Mizuho maintained its Outperform stance and $32 price target. The investment firm highlighted robust bookings fueled by competitive displacement wins and successful upselling efforts as bright spots in the quarterly performance.
Canaccord increased its price objective to $37 from its previous target while keeping a Buy recommendation. Needham affirmed its Buy rating with a $50 price target, emphasizing revenue growth in the low-to-mid twenties percentage range alongside strengthening operational performance.
Citizens maintained a Market Outperform rating with a $35 valuation target.
Outlook Improved, Though Short-Term Expenses Pressure Margins
Management elevated its fiscal 2027 revenue growth forecast to approximately 23% year-over-year, representing an upgrade from the previous guidance of roughly 21%.
Nevertheless, the company’s fiscal third-quarter operating margin projection fell short of analyst expectations. Leadership attributed this to expenses associated with its Forge customer conference and investments in expanding sales team capacity.
The stock has experienced significant turbulence throughout the year. Shares plummeted more than 50% between January and late February before recouping the majority of those losses as widespread concerns about software sector disruption subsided.
According to Mizuho’s InvestingPro assessment, the stock appears undervalued when measured against Fair Value estimates, with the company’s market capitalization standing at roughly $3.41 billion.
The combination of disappointing Q3 margin guidance and softer RPO performance proved sufficient to eclipse what was otherwise a strong quarterly report for Braze.
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