Backblaze leaves backup behind as cloud storage takes off

Backblaze cloud storage is going great guns while its original backup business is backing down.

Revenues in its third 2026 quarter were up 26 percent Y/Y to $46.7 million with 65 percent of that due to AI-focussed cloud storage, $30.5 million, up 47 percent, and just 35 percent attributed to backup storage, $16.2 million, down 2 percent. There was a GAAP net loss of $2.4 million, less than the year-ago $3.8 million loss.

Co-founder and CEO Gleb Budman said: “Q3 2026 was another strong quarter … We added a record number of net new B2 self-serve customers, four times as many as in the same period last year. The number of customers contributing more than $50,000 each in ARR grew 57 percent year over year to 254. We also signed four large agreements across AI and core workloads. As AI customers scale, we are solidifying Backblaze’s role as the capacity tier for AI infrastructure companies and AI builders.”

Financially, Backblaze is getting stronger. Cash flow from operations during the nine months ended September 30, 2026 was $22.8 million, compared to $14.2 million a year ago. Adjusted free cash flow during this nine months was $1.9 million, compared to the year ago -$9.5 million. Cash, cash equivalents, and marketable securities totaled $230.2 million at the end of the quarter.

The net revenue retention rate (NRR) for computer backup storage was 94 percent as the incoming flow of dollars from customers lessened. Conversely the cloud storage NRR was 115 percent as the incoming dollar flow increased.

Cloud storage is booming for Backblaze. Budman said in the earnings call: ”We again closed 4 deals over $500 thousand in ARR, a sign of the value we deliver to the largest data users. … We had 3 expansions with existing AI builders showing how customers often start small and grow, and 1 brand new agreement for a core workload. … Each of those 3 increased their total commitment to more than double its original level within a year.”

He said: “Data growth keeps exceeding expectations. Our early AI customer storage needs consistently outpace even their own aggressive forecasts.”

"Customers need to collect, retain, and use more data while getting a better ROI from their infrastructure spending. Our high performance capacity tier helps them do both. As we have discussed, we serve 2 groups. AI infrastructure companies to whom we provide a capacity storage tier for their customers and AI builders who need capacity storage for themselves.”

Backblaze runs its cloud storage on-premises for Neocloud AI infrastructure companies. Budman said: “We have secured the necessary hardware allocations to fulfill our requirements and shipments are tracking ahead of schedule. Our team also finished development ahead of plan for the large neocloud we announced at the start of the year, and that customer began loading data several months ahead of our early 2027 expectation. Additionally, CoreWeave continues to be a great partner and has begun to ramp on our platform.”

This business model means Backblaze has to spend money on buying storage kit. Budman said: “We are we are basically increasing the CapEx by something like a factor of 10 over the course of the next year ish. So it is it is definitely a large increase.”

He says AI builders discover Backblaze more readily because of its years of publishing disk drive statistics; “This visibility resulted in visits from AI search engines growing 230% year over year. Roughly double market rate. And those visitors create a self serve account or contact sales at more than twice the rate of visitors from organic search.”

Its revenue outlook for the fourth quarter is positive, $50million +/- 200K, a 32.3 percent Y/Y increase at the mid-point. Backblaze expects B2 revenue growth to accelerate to approximately 60 percent year over year in the quarter, and it has a 40 percent-plus growth outlook for B2 in 2027.

Backblaze has raised its full year 2026 outlook by $5 million to $178 million +/- 200K, a 22.1 percent uplift on 2025 revenues.

It expects CoreWeave to contribute more to its revenues in the fourth quarter and into 2027, ramping all the way through the middle of next year. This is a committed contract with committed minimum ramps and Backblaze does not see any signs of risk or concern. And it’s seeing a lot of Neocloud storage potential, CFO Marc Suidan saying: “The Neo Cloud capacity storage market is expected to be $14 billion by 2031."