Braze (BRZE)

Customer engagement platform Braze (NASDAQ:BRZE) reported revenue ahead of Wall Street’s expectations in Q4 CY2025, with sales up 27.9% year on year to $205.2 million. On top of that, next quarter’s revenue guidance ($205 million at the midpoint) was surprisingly good and 3.9% above what analysts were expecting. Its non-GAAP profit of $0.10 per share was 27.5% below analysts’ consensus estimates.

Company Overview

With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ:BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.

Whether or not companies market their products through social media, all businesses need to meet customers where they are; and increasingly, that is social media. As more and more people use a greater number of social media platforms, social media management software become more valuable to their customers.

Braze competes with legacy marketing cloud platforms like Adobe Experience Cloud and Salesforce Marketing Cloud, as well as customer engagement specialists such as Airship, Iterable, Klaviyo, CleverTap, and MoEngage. As customer engagement evolves, Braze also increasingly competes with customer data platforms and specialized messaging providers.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Braze grew its sales at an exceptional 37.5% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Braze’s annualized revenue growth of 25.1% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Braze reported robust year-on-year revenue growth of 27.9%, and its $205.2 million of revenue topped Wall Street estimates by 3.5%. Company management is currently guiding for a 26.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is above average for the sector and suggests the market is forecasting some success for its newer products and services.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Braze’s billings punched in at $238.3 million in Q4, and over the last four quarters, its growth was fantastic as it averaged 28% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects.

Braze reported 2,609 customers at the end of the quarter, a sequential increase of 81. That’s a little worse than last quarter but in line with what we’ve observed in past quarters, suggesting the company still has decent sales momentum despite the weaker quarter.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

It’s relatively expensive for Braze to acquire new customers as its CAC payback period checked in at 65.9 months this quarter. The company’s slow recovery of its sales and marketing expenses indicates it operates in a competitive market. A silver lining is that once it acquires its customers, they typically don’t leave and increase their spending - a sign of high switching costs.

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Braze’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 109% in Q4. This means Braze would’ve grown its revenue by 8.5% even if it didn’t win any new customers over the last 12 months.

Braze has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.

For software companies like Braze, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Braze’s gross margin is worse than the software industry average, giving it less room than its competitors to hire new talent that can expand its products and services. As you can see below, it averaged a 67.1% gross margin over the last year. Said differently, Braze had to pay a chunky $32.85 to its service providers for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Braze has seen gross margins decline by 1.6 percentage points over the last 2 year, which is poor compared to software peers.

Braze produced a 65.5% gross profit margin in Q4, down 3.8 percentage points year on year. Braze’s full-year margin has also been trending down over the past 12 months, decreasing by 2 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs.

Braze’s expensive cost structure has contributed to an average operating margin of negative 19.6% over the last year. This happened because the company spent loads of money to capture market share. As seen in its fast revenue growth, the aggressive strategy has paid off so far, and Wall Street’s estimates suggest the party will continue. We tend to agree and believe the business has a good chance of reaching profitability upon scale.

Analyzing the trend in its profitability, Braze’s operating margin might fluctuated slightly but has generally stayed the same over the last two years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Braze generated a negative 13.8% operating margin.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Braze has shown weak cash profitability relative to peers over the last year, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 7.9%, below what we’d expect for a software business.

Braze’s free cash flow clocked in at $13.89 million in Q4, equivalent to a 6.8% margin. The company’s cash profitability regressed as it was 2.7 percentage points lower than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, leading to temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts predict Braze’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 7.9% for the last 12 months will increase to 9.9%, giving it more flexibility for investments, share buybacks, and dividends.

We were impressed by how significantly Braze blew past analysts’ billings expectations this quarter. We were also glad its revenue guidance for next quarter exceeded Wall Street’s estimates. On the other hand, its EPS guidance for next quarter missed and its customer growth decelerated. Overall, this print was mixed but still had some key positives. The stock traded up 11.5% to $20.34 immediately after reporting.

Updated: March 24, 2026 at 4:16 PM EDT

Before investing in or passing on Braze, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

In our opinion, Braze is a good company. First off, its revenue growth was exceptional over the last five years. And while its operating margins reveal poor profitability compared to other software companies, its splendid ARR growth shows it’s securing more long-term contracts and becoming a more predictable business.

Braze’s price-to-sales ratio based on the next 12 months is 2.3x. Looking at the software space right now, Braze trades at a compelling valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $39.60 on the company (compared to the current share price of $20.34), implying they see 92.7% upside in buying Braze in the short term.