Key Takeaways
- Braze shares plummeted 11% Wednesday following Q2 earnings that surpassed analyst projections
- The company delivered $227 million in revenue, marking 19% annual growth and exceeding the $220 million consensus forecast
- Adjusted earnings per share reached $0.19, topping the $0.15 analyst estimate
- Investor concerns centered on disappointing remaining performance obligations (RPO) expansion
- Management increased full-year revenue growth outlook to roughly 23% year-over-year
Shares of Braze traded near $30.31 Wednesday, declining approximately 11% despite the customer engagement platform reporting second-quarter financial results that exceeded analyst expectations across multiple metrics but disappointed on future revenue indicators.
The software company posted adjusted earnings of $0.19 per share alongside revenue totaling $227.2 million. Wall Street analysts had projected earnings of $0.15 per share on revenues of $220 million, according to FactSet data.
Total revenue climbed 19% compared to the year-ago period, while organic revenue advanced 24% annually. However, that organic growth rate represented a deceleration from the 27% expansion recorded in the preceding quarter.
The company’s non-GAAP operating margin reached 9.7%, significantly outpacing the 8.1% analyst consensus and showing improvement from the 5.0% margin achieved last quarter. Management also increased its fiscal 2027 margin outlook.
However, the earnings beat couldn’t prevent a sharp decline in the stock price. The primary concern centered on weaker-than-anticipated expansion in remaining performance obligations, a critical forward-looking indicator that reflects committed future revenue streams.
AI Revenue Generation Remains Elusive
William Blair analyst Arjun Bhatia maintained his Outperform rating while noting the stock’s negative reaction stemmed “largely due to lighter RPO quarterly growth while investors wait for the AI monetization catalyst to play out.”
While Braze’s artificial intelligence capabilities are seeing increasing adoption among customers, this engagement hasn’t yet driven meaningful revenue acceleration. This disconnect between product adoption and financial performance is creating investor uncertainty.
Mizuho analysts maintained their Outperform rating alongside a $32 price objective. The investment firm highlighted robust bookings fueled by competitive victories and successful cross-selling initiatives as quarterly bright spots.
Canaccord elevated its price target to $37 from a lower previous level while maintaining a Buy recommendation. Needham affirmed its Buy rating with a $50 target, emphasizing growth in the low-to-mid 20% range coupled with strengthening operational performance.
Citizens JMP Securities sustained a Market Outperform rating with a $35 price objective.
Raised Outlook Offset by Short-Term Expense Concerns
Management elevated its fiscal 2027 revenue growth projection to approximately 23% year-over-year, representing an increase from previous guidance calling for roughly 21% expansion.
Despite the improved top-line outlook, fiscal third-quarter operating margin guidance fell short of analyst expectations. Company executives attributed the margin pressure to expenses associated with the Forge user conference and investments in expanding sales team capacity.
The shares have experienced significant turbulence throughout the year. The stock collapsed more than 50% between January and late February before recouping most of those declines as broader concerns about artificial intelligence disruption in the software sector subsided.
According to Mizuho’s InvestingPro analysis, the stock appears undervalued compared to its Fair Value calculation, with the company’s market capitalization standing at approximately $3.41 billion.
The combination of third-quarter margin guidance that missed expectations and softer RPO performance proved sufficient to overshadow what was otherwise a strong quarterly performance from Braze.
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