What Management Said

Read the full Q2 2026 transcript ↗

Please refer to the Investor Relations section of our website at investors.braze.com for more information and a supplemental presentation related to today's earnings announcement. GAAP, included in our earnings release under the Investor Relations section of our website. We delivered great second quarter results, generating $180 million of revenue, up 24% year-over-year and 11% from the prior quarter. I'm also pleased to announce that we recently passed $700 million of committed annual recurring revenue, demonstrating continued strong demand for the ROI delivered by the Braze customer engagement Platform.

We also continued to drive efficiency in our business, delivering $6 million of non-GAAP operating income, $17 million of non-GAAP net income, and $4 million of free cash flow in the quarter. We've now posted three straight quarters of positive non-GAAP operating income and free cash flow, as well as five straight quarters of positive non-GAAP net income. As Bill stated, we reported a strong second quarter with revenue increasing 24% year-over-year to $180 million, driven by a combination of existing customer contract expansions, renewals, and new business. Excluding the $2.8 million contributed by OfferFit for the two months of Q2, organic revenue grew 22% to $177 million.

contributed 45% of our total revenue in the second quarter, down approximately 60 basis points sequentially and in line with the prior year quarter. While we are not providing specific guidance for the trailing 12-month DBNR, we are encouraged by the recent in-period stabilization and look forward to updating you on this metric in the coming quarters. Non-GAAP gross profit in the quarter was $125 million, representing a non-GAAP gross margin of 69.3%. This compares to a non-GAAP gross profit of $103 million and non-GAAP gross margin of 70.9% in the second quarter of last year.

What went well
  • Braze generated $180 million of revenue in fiscal Q2 2026, up 24% year-over-year and 11% from the prior quarter, and recently passed $700 million of committed annual recurring revenue.
  • The company delivered $6 million of non-GAAP operating income, $17 million of non-GAAP net income, and $4 million of free cash flow, marking three straight quarters of positive non-GAAP operating income and free cash flow and five straight quarters of positive non-GAAP net income.
  • Total customer count grew 259 year-over-year and 80 sequentially to 2,422, while customers spending $500,000 or more annually rose 27% year-over-year to 282.
  • The OfferFit acquisition, closed June 2nd, got off to a strong start, with the company tallying post-acquisition OfferFit wins in each of its Americas, EMEA, and APAC regions at full deal-desk pricing.
  • In-quarter dollar-based net retention stabilized over the prior seven months, increasing modestly from slightly below 107% in Q1 to slightly above 107% in Q2, and management raised full-year revenue and operating income guidance.
  • The enterprise legacy replacement cycle remained a robust source of new business, with takeaways from legacy marketing clouds and continued vendor consolidation supporting strong competitive win rates.
What went wrong
  • Non-GAAP gross margin declined to 69.3% from 70.9% a year earlier, driven primarily by higher premium messaging volumes.
  • Trailing dollar-based net retention of 108% remained below year-ago levels, reflecting elevated downsell activity earlier in the cycle, though management noted the decline was only one point versus the prior quarter.
  • Free cash flow fell to $4 million from $7 million a year earlier, including roughly $6.9 million in cash payments related to the OfferFit acquisition.
  • Switching costs continued to act as a drag on enterprise deal cycles in a demand environment where companies remain focused on cost optimization.

Guidance Changes

MetricPeriodCurrent guidance
RevenueQ3 FY2026$183.5M-$184.5M (~21% YoY at midpoint) (New)
Non-GAAP operating incomeQ3 FY2026$3.5M-$4.5M (~2% margin at midpoint) (New)
OfferFit revenue contributionFY2026~$11M-$12M (~2% uplift to YoY growth) (Reiterated/on pace)

Performance Breakdown

MetricYoYNote
Revenue +24% to $180M Existing customer contract expansions, renewals, and new business; organic revenue grew 22% to $177M excluding $2.8M OfferFit contribution
Non-GAAP gross margin 69.3% vs 70.9% Higher premium messaging volumes, partially offset by technology stack cost optimization and personnel efficiencies
Non-GAAP operating income $6M (3.4% margin) vs $4M (2.9%) Disciplined investment and improved go-to-market efficiency while absorbing two months of OfferFit expenses
Non-GAAP net income $17M ($0.15/sh) vs $9M ($0.09/sh) Includes a one-time $8M benefit from a deferred tax liability valuation allowance reduction tied to the OfferFit acquisition
$500K+ ARR customers +27% to 282 Strong large customer additions, including two net new from the OfferFit transaction
Total RPO +25% to $862M Contract renewals, upsells, and new customer contracts; includes ~$12M from OfferFit
Current RPO +27% to $558M Renewals, upsells, and new contracts; includes ~$10.5M from OfferFit

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Downsell activityPersistent headwind on net retention in prior quartersBeginning to attenuate, came in better than anticipated in Q2Improving
OfferFit / AI decisioning integrationSource of uncertainty around close and onboardingIntegration performing extremely well with sharply accelerating pipelineImproving
BrazeAI adoptionFull spectrum of AI features deployed over yearsRapid adoption across the feature set, closing the usability gapImproving
Demand environmentChallenging, opportunity-scarceStill challenging with switching-cost drags, but strong execution and record pipelineStable
Premium messaging channelsCountry-by-country SMS contractingFlexible credits model driving higher adoption of premium channels across more countriesImproving

Q&A Summary

What changed with the demand environment and your appetite to lean into Braze, given the beat and raise?
Management said there was no meaningful change in the macro or demand environment, but execution has been strong globally with historically high competitive win rates and attenuating downsell activity. Better visibility on downsells, the OfferFit integration tracking well, and Ed McDonnell's onboarding being behind them gave confidence to raise profitability guidance.
What are you hearing from customers on OfferFit and what ACV uplift do you see?
Braze tallied post-acquisition OfferFit wins in all three regions at full deal-desk pricing; these remain enterprise deal cycles with six-figure price tags. The full OfferFit offering is priced around $300,000 annually, and management expects high attach rates at the high end of the customer base, with more product details to come at Forge.
How do you plan to scale the OfferFit business and drive margin expansion there?
On gross margin, OfferFit mixes in with no dilution today and management sees opportunity to eventually exceed Braze's average gross margin as delivery operations mature. On operating income it mixes in slightly negatively, so the company is aggressively pursuing synergies while remaining disciplined.
What areas exceeded expectations and how were guide assumptions adjusted?
Downsell came in better than anticipated and demand was strong across geographies, industries, and products. Management called out about one point of overachievement tied to harder-to-predict items: better-than-anticipated revenue reserves from timely customer payments and slightly higher overages.
Where are you on ZIRP-era customer renewals and will there be more this year?
Management declined to untangle that further, pointing instead to the overall improving trajectory of downsell activity and the stabilization in in-quarter dollar-based net retention.
Are internal AI use and low-cost labor arbitrage moving the needle on margins?
Most of the leverage is coming from cost-optimized locations; internal use of AI tooling is still in early days and not yet materially replacing human capacity.

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Q2 2026 call
Reported 2025-09-04 · figures from the Braze, Inc. Q2 2026 earnings call.

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