Backblaze, Inc. (BLZE): SWOT Analysis [Nov-2025 Updated]

You're trying to figure out if Backblaze, Inc. (BLZE) can truly compete with the hyperscalers, and the answer is yes, but it's a race against time. The good news is the B2 Cloud Storage engine is firing, driving operational leverage with Q3 2025 Adjusted EBITDA margin hitting a strong 23%, plus they're landing big AI/HPC deals. But honestly, the flat $16.5 million Computer Backup revenue is a weight, and the drop in Net Revenue Retention to 106% from 118% is a flashing yellow light. We need to map out if the AI opportunity can outrun the retention risk and the threat of an Amazon Web Services (AWS) price war.

Backblaze, Inc. (BLZE) - SWOT Analysis: Strengths

Cost-Efficient Cloud Storage (B2)

You're watching your cloud bill balloon, and honestly, the hyperscalers (like Amazon Web Services or Google Cloud Platform) make their pricing deliberately confusing. Backblaze B2 Cloud Storage offers a clear, compelling alternative that directly attacks the Total Cost of Ownership (TCO) problem. An independent Enterprise Strategy Group (ESG) report from June 2025 validated that B2 delivers up to 3.2x lower TCO compared to legacy cloud storage providers. That's a massive difference, especially for data-intensive operations.

This cost advantage isn't just theoretical. It translates to concrete savings, helping you keep more capital for innovation, not infrastructure. You can see the key savings validated in the 2025 ESG report right here:

• Up to 56% lower monthly storage cost.
• Up to 100% lower cost of downloads and transactions (API calls and egress).
• Up to 92% less time and effort to manage data.

Strong Operational Leverage

Backblaze is showing real discipline in turning its cost advantage into profitability. The focus on operational leverage-getting more profit from each dollar of revenue-is defintely paying off. In the third quarter of 2025 (Q3 2025), the company hit an Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of $8.4 million, which translates to a 23% margin of revenue. Here's the quick math: that margin nearly doubled year-over-year, improving significantly from 12% in Q3 2024.

This shows the business model for B2 Cloud Storage is fundamentally sound and scalable. The company is also on track to be free-cash-flow positive in Q4 2025, a critical milestone for any growing tech company. B2 Cloud Storage revenue itself grew 28% year-over-year in Q3 2025 to $20.7 million, proving the core growth engine is accelerating.

AI/HPC Momentum with B2 Overdrive

The biggest opportunity right now is Artificial Intelligence (AI) and High-Performance Computing (HPC), and Backblaze is seizing it with its B2 Overdrive solution. This is a high-performance tier designed specifically for the massive data throughput AI workloads need. This strategic product launch is already securing significant enterprise deals.

The company is moving upmarket and winning big contracts. In Q2 2025, they signed their first six-figure B2 Overdrive customer-a generative AI video company that migrated from a hyperscaler due to high egress fees. In Q3 2025, they secured a new six-figure deal with an AI startup focused on large-scale vision language models, plus another seven-figure expansion with an existing customer in the surveillance space. This momentum shows B2 Overdrive is a vital differentiator.

Transparent Pricing Model

The biggest strength is the pricing structure itself, which is designed to prevent vendor lock-in, a major pain point for you and other large data users. Backblaze uses a simple, predictable model that is easy to budget for. The base pay-as-you-go storage cost is just $6/TB per month.

The key feature here is the free egress (data retrieval). Every customer gets free egress up to 3x their average monthly storage amount. For example, if you store 100TB, you get 300TB of data retrieval free each month. Egress exceeding this generous limit is a predictable $0.01/GB, which is a fraction of the cost charged by competitors. This 3x free egress, plus unlimited free egress to many CDN and compute partners, makes it easy to move your data around, eliminating the cloud toll booth that keeps you stuck with the big providers.

Backblaze, Inc. (BLZE) - SWOT Analysis: Weaknesses

Stagnant core business: Computer Backup revenue was flat at $16.5 million in Q3 2025

The biggest structural weakness for Backblaze is the stagnation of its original, core business: Computer Backup. This segment, which primarily serves consumers and small businesses, delivered only $16.5 million in revenue in the third quarter of 2025, which was flat year-over-year (YoY). This flat performance is a persistent headwind, as the Annual Recurring Revenue (ARR) for Computer Backup also remained flat at $65.4 million. This means the company is essentially dragging an anchor of zero-growth revenue, forcing the high-growth B2 Cloud Storage segment to carry the entire load for overall company expansion.

The market for simple endpoint backup is mature and highly competitive. Honestly, growing this segment is defintely becoming a much harder, margin-compressed proposition.

Declining retention metrics: Overall Net Revenue Retention (NRR) dropped to 106% in Q3 2025 from 118% a year prior

A more concerning trend is the material decline in Net Revenue Retention (NRR). NRR is a critical metric for a subscription business; it measures how much revenue grew from your existing customer base, including upsells and net of churn (customer attrition). The overall NRR dropped significantly to 106% in Q3 2025, down from 118% in Q3 2024. This shows that existing customers are spending less on a net basis than they were a year ago, or that churn is rising faster than expansion.

This decline wasn't isolated to the stagnant Computer Backup segment, which saw its NRR fall from 109% to 101%. The high-growth B2 Cloud Storage segment, the future of the company, also experienced a sharp drop in NRR, falling from 128% in Q3 2024 to 110% in Q3 2025. A 110% NRR is still good, but a nearly 18-point drop in a year signals a slowdown in expansion revenue (upsell) that needs immediate attention from the sales and product teams.

Growth target miss: B2 Cloud Storage grew 28% in Q3 2025, falling short of the internal 30% goal

While B2 Cloud Storage revenue grew a strong 28% YoY to $20.7 million in Q3 2025, it landed at the low end of the company's internal outlook range of 28% to 30%. This miss, even by a small margin, is a clear weakness because the market is pricing the stock based on the acceleration of B2, not the flat performance of Computer Backup.

Here's the quick math: missing the aspirational 30% growth target suggests that the sales cycle for larger, more strategic B2 deals is taking longer than planned. The company is actively moving upmarket to capture larger customers, and that shift naturally introduces lumpiness and longer close times, which impacts quarterly growth consistency.

Customer variability risk: Revenue fluctuations from large customers, especially in the AI segment

Backblaze is increasingly reliant on a small number of high-spending customers, particularly in the Artificial Intelligence (AI) segment, which introduces concentration risk. The company highlighted a new seven-figure expansion deal with an existing AI-powered video surveillance customer in Q3 2025. This is great for growth now, but it means a single customer's decision-to scale down, move data, or go bankrupt-could materially impact quarterly results.

The risk is two-fold:

• Lumpy Revenue: Large deals, like the new six-figure deal with an AI start-up, are non-linear, meaning revenue can fluctuate wildly quarter-to-quarter based on when a few big contracts close or expand.
• High Egress Risk: AI companies often demand high-speed data access for compute (like GPUs). If a large customer finds a better price-performance ratio elsewhere or changes its compute strategy, the risk of a high-volume data egress event (a customer pulling their data out) is real, which would cause a sudden, sharp drop in B2 revenue.

You need to model out the impact of a churn event from one of the top five B2 customers. What this estimate hides is the potential for a single seven-figure customer to cause an NRR drop far below 100% in a given quarter.

Backblaze, Inc. (BLZE) - SWOT Analysis: Opportunities

Monetize AI/HPC Workloads: B2 Overdrive Targets High-Performance, Data-Intensive Use Cases

The explosive growth of Artificial Intelligence (AI) and High-Performance Computing (HPC) is the single biggest near-term opportunity for Backblaze. This isn't a theoretical market; it's already driving significant revenue. In the second quarter of 2025, the number of AI customers grew 70% year-over-year, and the volume of data stored by these customers increased by a staggering 40x over the same period.

The company launched B2 Overdrive in Q1 2025, a high-throughput solution specifically engineered for these data-intensive use cases. This product delivers up to 1 Tbps throughput and, crucially, offers unlimited free egress (data retrieval fees) to any destination, directly challenging the high-cost models of hyperscalers. Backblaze is already seeing traction, having signed its first six-figure B2 Overdrive customer in early Q3 2025. The global cloud storage market is massive, estimated to reach $161 billion in 2025, and B2 Overdrive positions Backblaze as a compelling, cost-effective alternative for the most data-hungry segment of that market.

Here's the quick math on the B2 Overdrive value proposition:

• B2 Overdrive starts at $15 per terabyte per month for storage.
• It offers up to 1 Tbps sustained throughput.
• The core advantage is unlimited free egress to any destination, eliminating a major cost pain point for AI/ML companies.

Achieve Cash Flow Positivity: On Track to be Adjusted Free Cash Flow Positive in Q4 2025

The path to sustainable profitability is a clear opportunity that will fundamentally improve the company's financial stability and valuation multiple. Management has consistently reaffirmed that Backblaze remains on track to be adjusted free cash flow positive in Q4 2025. This milestone is the result of a focused effort on operational efficiency and accelerating B2 Cloud Storage growth.

The financial transformation is already showing results. The Adjusted Free Cash Flow margin improved dramatically to -8% in the first half of 2025, a significant gain from -16% in 2024. Furthermore, the Adjusted EBITDA margin reached 23% in Q3 2025, nearly doubling the 12% reported a year prior. This isn't just cost-cutting; it's operating leverage kicking in as the higher-margin B2 segment grows faster than the overall business. The full-year 2025 revenue guidance was raised to between $145.0 million and $147.0 million, showing confidence in this trajectory.

Expand Through Partnerships: Deep Integrations with Compute and Edge Providers

Backblaze's 'Open Cloud' strategy, which relies on deep partnerships with compute and edge providers, is a powerful opportunity to scale without the massive capital expenditure of a hyperscaler. The company offers unlimited free egress when downloading data to or through a growing list of key partners, effectively turning B2 into the default object storage layer for a multi-cloud strategy.

Key partnerships, such as those with Vultr and Fastly, create a compelling, integrated solution. The Vultr partnership, for instance, pairs cost-effective B2 storage with high-performance compute across Vultr's 30+ global data centers, enabling enterprises to deploy applications rapidly while controlling costs. This network of partners, including Cloudflare, CoreWeave, and Digital Ocean, allows customers to avoid vendor lock-in and the exorbitant egress fees that plague traditional cloud providers, which can save them up to 80% on application storage and network costs.

International B2 Expansion: Grow B2's Annual Recurring Revenue (ARR) Beyond the US

While the US remains a strong market, the opportunity to scale B2 Cloud Storage globally is substantial. The B2 Cloud Storage Annual Recurring Revenue (ARR) reached $80.7 million in Q2 2025, growing 29% year-over-year, and the focus is now on replicating this success internationally.

The strategic expansion is happening both directly and through the partner ecosystem. The partnership with Vultr, which has 30+ global locations, provides an immediate, established global footprint for B2's storage. Also, the company is investing in expanding its data center presence, such as the significant expansion in the US-East region in Q3 2025, which not only supports US growth but also provides geographically diverse options for global enterprises. This expansion is critical because many data-rich industries, like media and entertainment, and AI, are inherently global and require low-latency access to data in various regions. The company's full-year 2025 B2 growth is expected to exit the year between 25% and 28% year-over-year, which will continue to drive the overall ARR higher, making international markets a key component of sustaining that growth rate.

Here is a summary of the B2 Cloud Storage growth trajectory in 2025:

Backblaze, Inc. (BLZE) - SWOT Analysis: Threats

Hyperscaler price wars: Amazon Web Services (AWS) and Microsoft Azure could drop storage prices to squeeze competitors.

The biggest long-term threat is the potential for an aggressive, sustained price war from the hyperscalers-Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. Backblaze's core competitive advantage is its predictable, low-cost model, but the giants can afford to operate at a loss longer than smaller players can.

We saw this play out in April 2025 when Amazon S3 Express One Zone, a high-performance storage class targeting similar workloads as Backblaze B2, announced massive price reductions. They cut storage prices by 31%, PUT request prices by 55%, and GET request prices by an astonishing 85%. This move directly challenges Backblaze's superior price-performance narrative, especially for high-transaction, AI-driven workloads.

While an independent analysis still shows Backblaze B2 Cloud Storage is up to 3.2x more cost-effective overall, these targeted cuts from AWS and Azure's competitive Hot tier pricing of around $0.018 per GB force Backblaze to continually defend its market position. It's a game of inches, and the hyperscalers have deeper pockets.

Macroeconomic pressure: Customers may delay cloud migration or optimize storage costs, slowing B2 adoption.

The current macroeconomic climate is forcing businesses to scrutinize every line item, and cloud storage is an easy target for cost optimization. This pressure is already visible in Backblaze's financial metrics, particularly in customer expansion rates (Net Revenue Retention or NRR).

For the third quarter of 2025, the total NRR dropped to 106%, a significant decline from 118% in Q3 2024. The core B2 Cloud Storage NRR fell from 128% to 110% over the same period. This tells you customers are still growing their data footprint with Backblaze, but they are expanding at a much slower pace than they were last year, which is a clear sign of budget tightening and storage optimization.

Also, the Computer Backup segment revenue was flat year-over-year at $16.5 million in Q3 2025. Flat growth in an inflationary environment is defintely a contraction in real terms, suggesting new customer acquisition or expansion has stalled in the legacy business.

Stock market volatility: Shares fell over 27% post-Q3 earnings despite beating guidance, indicating investor skepticism.

The market's reaction to Backblaze's Q3 2025 results highlights a deep-seated investor skepticism about its growth and valuation trajectory. The company delivered a strong beat on the bottom line, reporting Non-GAAP earnings per share (EPS) of $0.03, which significantly surpassed the analyst estimate of a $0.12 loss per share. Adjusted EBITDA also soared to $8.4 million (or 23% of revenue).

But here's the quick math on the market's focus: Revenue of $37.2 million narrowly missed the analyst consensus of $37.7 million, and the full-year revenue guidance of $145.4 million to $146.0 million was slightly below consensus. The market punished the revenue miss and the NRR slowdown. Consequently, the stock plunged 44% in the week following the November 6, 2025, earnings release. That's a brutal correction, even for a small-cap tech stock.

This volatility creates a capital-raising risk. The company's valuation is fragile, making secondary offerings for growth capital more dilutive and expensive.

Security and compliance risk: A major breach could severely damage trust in a backup and storage provider.

For a cloud backup and storage company, trust is the only product that truly matters. A single, major security breach or compliance failure could be an existential event, instantly evaporating customer confidence and driving massive churn.

While Backblaze has strong foundational security-it is SOC 2 Type 2 compliant and won a 2025 Cloud Computing Security Excellence Award for its B2 Object Lock feature-no system is perfect. A vendor risk report from November 2025 gave the company a strong security rating of 920/950, but it still flagged critical configuration risks.

• Failure to use secure cookies, increasing the risk of third-party interception.
• Content Security Policy (CSP) implemented unsafely, which raises the risk of Cross-Site Scripting (XSS) attacks.

These are technical vulnerabilities that, if exploited, could severely damage the brand's reputation, especially among the larger enterprise customers who are the target for B2 Cloud Storage growth. You can't be a high-trust data vault with known, exploitable flaws.