Lake Street Capital Markets reduced its price target on Backblaze Inc (NASDAQ:BLZE) to $8.00 from $10.00 and kept a Buy rating, attributing the cut to slower growth in the firm's B2 cloud storage segment. The research note singled out B2 performance as the primary driver of the adjustment.
Backblaze's shares were trading at $3.97, having fallen 47% over the prior six months and hovering close to a 52-week low of $3.83, according to InvestingPro data referenced in company reporting.
For the quarter, B2 growth was 24%, which missed the low end of Backblaze's own guidance of 25%-28%. Management said the shortfall largely reflected timing - several deals closed in December rather than in November as the company had expected. Looking ahead, Backblaze is forecasting full-year 2026 B2 growth of 20% and warned it faces a difficult year-over-year comparison in the second quarter.
On cash flow, Backblaze reported positive adjusted free cash flow for the first time in more than four years. The company nevertheless plans to invest in infrastructure during the first half of 2026, and does not expect another quarter of positive adjusted free cash flow until the third quarter.
Despite the recent free-cash-flow improvement, the company remained unprofitable over the last twelve months with an EPS of -$0.64. Analysts tracking the name project a return to profitability this year, with forecasted EPS of $0.02, according to InvestingPro Tips noted in the company materials.
Backblaze has also expanded its product set with B2 Neo, a white label offering aimed at GPU rental platforms that require cloud storage for AI and machine learning workloads. The company identified the addressable market for that opportunity at $14 billion. Separately, Backblaze disclosed a three-year neocloud agreement with a publicly traded customer valued at $15 million in total contract value; management said that material revenue from that deal will likely be delayed until 2027 due to necessary infrastructure investments and platform tooling required for onboarding.
In response to the updated revenue timing and growth trajectory, Lake Street trimmed its revenue growth forecast to 8% from 10%.
The firm's revision followed a quarter in which Backblaze delivered a meaningful earnings upside: fourth-quarter 2025 earnings per share came in at $0.06, well above an expected $0.01, while revenue was $37.8 million versus an anticipated $37.59 million. Even with those results, analyst responses were mixed.
Needham lowered its price target on Backblaze from $8.00 to $6.00 but maintained a Buy rating, noting that B2 Cloud growth missed guidance and emphasizing the outsized influence of large, variable-usage customers on overall revenue. Meanwhile, Citizens reiterated a Market Outperform rating and an $8.00 price target while observing that shares could face near-term pressure until the B2 business shows signs of reacceleration and investor confidence stabilizes.
Contextual takeaways - Backblaze's quarter combined a positive cash-flow milestone and an earnings surprise with subdued B2 expansion and deferred contract revenue, prompting cautious adjustments from several research shops. Management's infrastructure plans and the timing of onboarding for new neocloud contracts are central to the near-term outlook.