Backblaze walked into this print as a high growth, loss making cloud storage stock with a mixed reputation on profitability. It walked out with the market bidding the stock up about 27% in a single day. That jump reflects one thing above all: Q2 showed a sharp improvement in cash economics, with adjusted earnings before interest, tax, depreciation and amortization margin landing at 30% on US$42.7m of revenue.

For a company framed around long term revenue growth rather than profits, that kind of margin performance is the headline from this quarter.

Is Backblaze now priced for a profitable future, or has the 27% jump left the stock ahead of its fundamentals? Compare the revenue story against the current market valuation in the valuation analysis for Backblaze.

Q2 2026 Earnings Summary

• Revenue, Q2 2026 vs Q2 2025: US$42.713m vs. US$36.298m (up about 18%)
• Net Income, Q2 2026 vs Q2 2025: loss of US$5.089m vs. loss of US$7.097m (loss narrowed)
• Basic EPS, Q2 2026 vs Q2 2025: loss of US$0.0837 per share vs. loss of US$0.1276 per share (loss per share narrowed)
• Adjusted EBITDA Margin, Q2 2026 vs Q2 2025: 30% vs. about 18% (margin improved by roughly 1,200 basis points)

Prefer clear charts instead of another dense earnings recap? See Backblaze's full financial picture, including how its cash flow and profitability trends fit together in our company report for Backblaze.

Backblaze bull case: AI storage milestones hit

The bullish story on Backblaze is that B2 becomes a durable AI storage platform with better unit economics as scale builds. Q2 gives that view real proof points. B2 ARR reached US$113m with 39% YoY growth and Q2 B2 revenue growth ran at 34% YoY, which lines up with the idea that AI and upmarket workloads are becoming a bigger engine. The CoreWeave contract moved from story to backlog with roughly US$313m added to RPO and four deals above US$500k closed, three tied to AI. Adjusted EBITDA margin at 30% and total gross margin at 63% suggest the price rise on May 1 and hardware efficiency gains are flowing through. Churn from the price increase was said to be lower than expected, which speaks directly to pricing power, not just volume growth.

Bear case: concentration and capital strain not resolved

The bear view is that Backblaze leans too hard on a few AI customers, faces intense pricing pressure, and needs heavy capex to keep up. Q2 does not remove those issues. Management highlights CoreWeave as the largest ever contract and RPO growth is dominated by that single deal, which amplifies concentration risk if ramp timing or pricing change. Guidance points to capex at 55% to 65% of 2026 revenue and rising in H2 into 2027 to meet commitments. Management also flags that new infrastructure will pressure gross margin by several hundred basis points as depreciation steps up before full utilization. Computer backup is described as a slowly declining line of business even though Q2 was slightly better than internal expectations. The raised EBITDA margin guide helps the bear case on dilution and cash strain, but it does not eliminate it.

After a 26.94% one-day move, heavy capex commitments and reliance on large AI contracts raise a simple question: Review our independent risk analysis for Backblaze which shows 3 important warning signs

Stay Ahead With Simply Wall St

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.