AI marketing platform Braze (BRZE.US) reported strong performance but plummeted after hours! Q2 revenue and EPS both exceeded expectations, and full-year guidance has been raised.

The artificial intelligence (AI) marketing platform Braze (BRZE.US) announced second-quarter results that exceeded expectations and raised its full-year performance guidance for fiscal 2027. The financial report indicated that for the second quarter ending July 31, Braze generated revenue of $227.2 million, an increase of 26% year-over-year, surpassing the average analyst expectation of $220.3 million; the net loss narrowed to $18.9 million from $27.9 million in the same period last year, representing a 32% improvement; adjusted earnings per share were $0.19, better than the average analyst expectation of $0.15. Braze attributed the revenue growth primarily to upselling, renewals, and new customers. By segment, subscription revenue rose 21% year-over-year to $207.7 million, exceeding the average analyst expectation of $204.2 million; professional services and other revenue increased 136% year-over-year to $19.6 million, also surpassing the average analyst expectation of $15.93 million. As of the end of the second quarter, Braze had a total of 2,789 customers, up from 2,422 in the same period last year, including 361 customers with annual recurring revenue (ARR) of $500,000 or more. Both the overall customer base and larger customers showed improvements in net retention rates. As of July 31, remaining performance obligations amounted to $1.09 billion, of which $691.1 million is included in current revenue that is expected to be recognized within a year. It is noteworthy that the GAAP gross margin declined from 67.7% to 66.8%, while the non-GAAP gross margin fell from 69.3% to 68.6%. Braze did not provide specific explanations for the decline in gross margins, making the sustainability of this pressure a concern. However, the growth rate of operating expenses was much lower than the revenue growth rateoperating expenses rose 6% year-over-year to $170 million in the second quarter, significantly lower than the 26% year-over-year revenue growth for the quarter. This indicates that despite the decline in gross margins, the company has improved its operating leverage. CEO Bill Magnuson credited the quarter's performance to Braze's role in helping customers achieve substantial returns on investment. He stated that as customers pay more attention to return on investment, the adoption of products such as Braze AI Operator, Braze AI Agent Console, and Braze AI Decisioning Studio is accelerating. Braze also enhanced its AI capabilities, forming a three-year strategic partnership with AWS and strengthening its integration with Databricks Customer Lake. New customer accomplishments include Chime, Wilson Sporting Goods, Foxtel Group, and several international brands. For the third quarter, Braze expects revenue to be between $229 million and $230 million, surpassing the average analyst expectation of $227.5 million; adjusted earnings per share are anticipated to be between $0.13 and $0.14, falling short of the average analyst expectation of $0.16. Braze also raised its full-year guidance. The company now expects fiscal 2027 revenue to be between $910 million and $913 million, up from a previous expectation of $895 million to $899 million, with the average analyst expectation at $898.2 million; it anticipates full-year adjusted earnings per share to be between $0.64 and $0.65, up from the prior expectation of $0.61 to $0.65, with the average analyst expectation at $0.63. However, as of the time of this report, Braze's stock fell nearly 13% in after-hours trading on Tuesday.