BLZE

Analyst Note: BLZE (Backblaze, Inc.)

Date: 2026-06-20 Current Price: $8.19

1. Structural Readiness

• Conservative Entry: Not yet actionable. Requires a confirmed breakout above the resistance level defined by the coil structure.
• Breakout Level: Not yet defined/fired.
• Current Price: $8.19.
• Extension: Not applicable (price is within the forming range, not extended above a breakout).
• ATR Context: Current ATR is 6.9% (Very High). This indicates elevated volatility, which increases the risk of whipsaws during the forming phase but also suggests significant potential for a large move once the breakout fires.

2. Thesis Layer

• Thesis Classification: TACTICAL / SETUP-LED.
• Analysis: As of 2026-06-20, there is no named secular thesis attached to this specific setup in the current context. The investment case is not driven by a broad macro narrative (e.g., "The AI Infrastructure Boom" as a primary thesis driver for this specific trade) but rather by the quality of the technical setup and the immediate business fundamentals.
• Judgment Criteria: The conviction must be derived strictly from the setup quality (the forming coil structure) and the strength of the business fundamentals (ARR growth, margin expansion, AI adoption) as reported by management. Do not invent a macro thesis to justify the position; the setup itself is the primary driver.

3. The Business

• Core Operations: Backblaze operates a cloud storage platform providing data storage and protection services. The company manages approximately 5 billion gigabytes of data across more than 175 countries (Evidence E10, E14).
• Business Model: The company operates a dual-model approach:
• B2 Cloud Storage: Serving enterprise and developer customers.
• Computer Backup: Serving individual consumers.
• *Customer Base:* As of late 2025, the company had over 500,000 customers total, split between approximately 400,000 in Computer Backup and 120,000 in B2 Cloud Storage (Evidence E15). The customer base is highly diversified, with no single customer accounting for more than 10% of revenue (Evidence E19).
• Recent Performance (as of May 2026):
• ARR Growth: Annual Recurring Revenue (ARR) reached $158 million, an increase of more than $5 million sequentially. B2 revenue grew 28% year-over-year (Evidence E2).
• Upmarket Progress: The company ended the quarter with 187 customers contributing over $50,000 in ARR, up 51% year-over-year (Evidence E1).
• AI Integration: More than one-third of new bookings are now coming from AI-related workflows, with the number of AI customers growing 76% year-over-year (Evidence E6). A specific deal closed in 11 days at nearly $1 million of ARR, highlighting the speed of adoption in the AI infrastructure space (Evidence E7).
• Guidance & Margins:
• Management raised full-year revenue guidance to $161.5 million – $163.5 million (up $5 million from the prior midpoint) (Evidence E3).
• Full-year adjusted EBITDA margin guidance was raised by 400 basis points to 23% – 25% (up from 19% – 21%) (Evidence E5).
• Q2 revenue is expected to be $39.8 million – $40.2 million (Evidence E4).
• Pricing Strategy: Effective May 1, 2026, the company implemented pricing changes, including an increase in pay-as-you-go storage pricing and the elimination of API transaction fees (Evidence E11).
• Investment Outlook: Management expects R&D investments to increase in absolute dollars to integrate AI and enhance platform functionality (Evidence E13). However, the company explicitly states it does not expect to be profitable for the foreseeable future due to these scaling investments (Evidence E18).

4. Archetype and Conviction

• Archetype: Growth Leader / Margin Inflector.
• *Fit:* The company demonstrates strong top-line growth (28% B2 growth, 51% upmarket customer growth) while simultaneously improving unit economics (EBITDA margin expansion from ~20% to ~24%). The rapid adoption of AI workflows (76% YoY growth in AI customers) suggests a structural shift in the business mix toward higher-value, infrastructure-constrained use cases.
• Valuation & Financial Spine:
• The company remains in a net loss position, with losses of $25.6 million for the year ended Dec 31, 2025 (Evidence E17).
• The "financial spine" is currently supported by strong cash flow generation (implied by the EBITDA margin expansion) rather than GAAP profitability.
• Conviction Stack:
• Thesis Strength: Moderate (Tactical, no external macro thesis).
• Evidence Quality: High. Management has provided specific, quantified guidance on ARR, customer counts, and margins, with a clear track record of raising guidance (Evidence E3, E5).
• Structural Quality: The "forming" coil indicates a healthy consolidation phase, but the Very High ATR (6.9%) suggests significant volatility risk. The setup is not yet "confirmed."
• Rerating Potential: High, contingent on the breakout. The combination of margin expansion (23-25% EBITDA) and AI-driven growth (1/3 of new bookings) provides a strong fundamental narrative for a multiple expansion *if* the technical breakout occurs.
• Risk: The "very high" volatility (ATR 6.9%) is a double-edged sword; it offers large moves but increases the probability of a false breakout or a deep pullback before the trend establishes.

5. Invalidations, Strengths, and Gaps

• Strengthening: A confirmed breakout above the resistance level (firing the coil) combined with continued ARR growth and margin expansion would confirm the setup.
• Gaps in Evidence:
• Cash Position: While EBITDA margins are improving, the specific cash runway or burn rate details for 2026 are not explicitly detailed beyond the net loss figures.
• Competitive Landscape: While the Neocloud market size is cited ($400B by 2031), specific competitive dynamics or market share data relative to hyperscalers (AWS, Azure, Google) are not quantified in the provided evidence.

PRIVATE ANALYST CALL

Judgment: Speculative Confidence: medium Key evidence: ARR grew 28% YoY in B2 with 187 customers over $50k ARR (up 51% YoY); EBITDA margin guidance raised 400 bps to 23-25%; AI customers growing 76% YoY with 1/3 of new bookings. Key risks: Very high ATR (6.9%) indicates elevated volatility and whipsaw risk; company remains unprofitable with no expectation of near-term profitability; forming coil has not yet fired a breakout signal. Sizing hint: Position size should be reduced relative to a confirmed breakout setup to account for the "forming" state and high volatility. Expected path: Management expects continued R&D investment and AI integration to drive growth; if the breakout fires, the setup transitions to confirmed active with potential for a trend continuation. Expected horizon: 3 to 6 months for the setup to resolve (breakout or invalidation).