Braze Inc (BRZE) Q2 FY2025 Analysis Report

Executive Summary

For the fiscal second quarter of 2025, Braze Inc demonstrated a continued focus on expanding its customer engagement platform amidst a challenging macroeconomic environment. The company reported total revenue of approximately $146 million, driven mainly by subscription services, with international markets contributing over 45% of total sales. Despite ongoing investments in R&D and marketing, Braze maintained a solid cash position of nearly $79 million and marketable securities valued at approximately $425 million. The net loss of around $23 million reflects strategic spending on growth initiatives, while the adjusted gross margin remains healthy at approximately 70%. The company’s balance sheet shows stable assets and manageable liabilities, positioning Braze for future growth with cautious attention to operational efficiencies and market risks.

Key Metrics

Management Discussion and Analysis (MD&A)

During the second quarter of 2025, Braze continued to invest heavily in product innovation and global market expansion. Revenue growth of 26% YoY was fueled by a 27% increase in subscription revenue, reflecting increased customer adoption and retention. The international segment contributed approximately 45% of total revenue, underscoring the company’s expanding footprint outside North America. Despite elevated operating expenses, primarily in sales, marketing, and R&D, Braze managed to improve operating cash flow significantly, aided by disciplined cost management and improved working capital. The company’s gross margin remained robust at around 70%, indicating effective cost control over its services. The net loss decreased notably from the prior year, highlighting the progress toward operational efficiency and revenue leverage.

Income Statement Analysis

Revenue for Q2 FY2025 reached approximately $146 million, up 26% from $115 million in the same period last year, driven mainly by subscription growth. Gross profit improved by 28%, reaching over $102 million, with gross margins stabilizing around 70%, reflective of the scalable nature of the platform. Operating expenses increased due to strategic investments in sales, marketing, and R&D, totaling around $130 million, up from $115 million last year. Despite higher expenses, loss from operations narrowed, and net loss decreased to approximately $23 million, compared to $32 million in Q2 FY2024. Earnings per share (basic/diluted) improved to -$0.23 from -$0.33, indicating progress but still reflecting ongoing investments in growth.

Balance Sheet Analysis

As of July 31, 2024, Braze’s total assets stood at approximately $826 million, with cash and cash equivalents of $79 million and marketable securities valued at $425 million. Accounts receivable decreased slightly to $71 million, consistent with normal collection cycles, while deferred revenue increased to about $212 million, signaling strong future revenue streams. Total liabilities remained stable at $372 million, with current liabilities around $298 million. Stockholders’ equity improved marginally to $454 million, supported by retained earnings and additional paid-in capital. The company maintains a solid liquidity position with a current ratio exceeding 2:1, and manageable leverage levels, positioning it well for sustained growth.

Cash Flow Analysis

Cash flows from operating activities generated approximately $31 million, a substantial improvement driven by better net income and working capital management. Investing activities primarily included purchases of marketable securities worth $142 million and capital expenditures of around $10 million, mainly in software development and infrastructure. Financing activities contributed around $4 million from stock option exercises and employee stock purchase plans. The company’s free cash flow position has improved, supporting ongoing investments and strategic initiatives.

Ratios & DuPont Analysis

Key ratios for Q2 FY2025 include a net margin of approximately -15.8%, reflecting ongoing investments; ROA around -11.4%; and ROE approximately -12.9%. Asset turnover remains healthy at 0.35, indicating efficient utilization of assets, while the equity multiplier is approximately 1.82, highlighting moderate leverage. The DuPont analysis underscores the company’s focus on revenue growth and expense discipline to mitigate profitability challenges during its growth phase.

Risk Factors

Major risks include market competition from both established players and emerging startups, regulatory challenges related to data privacy and security, macroeconomic uncertainties affecting customer budgets, and operational risks related to scaling infrastructure globally. Additionally, fluctuations in foreign exchange rates and potential delays in product development or customer adoption could impact future results. The company actively monitors these risks and invests in compliance, security, and operational resilience to mitigate their impact.

Notes & Additional Commentary

Recent one-time items include a charitable donation of shares valued at approximately $1.4 million and a significant increase in RSU grants, vesting over four years, reflecting talent retention strategies. Unusual items such as asset write-offs and adjustments in contingent consideration were minimal. The ongoing strategic investments in product innovation and market expansion are expected to support long-term growth despite current losses. The company remains committed to operational efficiency and sustainable revenue growth.

Investment Implications

In the short term, Braze’s strong revenue growth and improved cash flow position it as a promising player in the customer engagement SaaS space, offering potential for upside as it scales profitability. However, continued high operating expenses and net losses suggest caution, emphasizing the importance of monitoring margin improvements and cash burn. Long-term, Braze’s expanding international presence, diversified product offerings, and technological investments position it for sustainable growth, albeit with risks from competitive pressures and macroeconomic factors. A balanced approach is recommended, with focus on revenue quality and execution efficiency.