Backblaze Rides AI Storage Demand to $46.7M Quarter as Backup Fades

Backblaze grew revenue 26 percent year over year to $46.7 million in its third 2026 quarter, and 65 percent of that money now comes from AI-focused cloud storage rather than the backup business the company was built on. Cloud storage revenue reached $30.5 million, up 47 percent, while backup revenue fell 2 percent to $16.2 million. The GAAP net loss narrowed to $2.4 million from $3.8 million a year earlier.

The shift is visible in how existing customers spend. Cloud storage net revenue retention came in at 115 percent, meaning customers added more spending over time. Computer backup retention was 94 percent, a slow leak. Co-founder and CEO Gleb Budman framed the quarter as evidence of a durable position: "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."

Who is paying, and how much?

The customer base is tilting toward large accounts. The number of customers contributing more than $50,000 each in annual recurring revenue grew 57 percent year over year to 254. Backblaze also signed four large agreements across AI and core workloads during the quarter.

Budman detailed the deal mix on 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." Three of those were expansions with existing AI builders, and each of the three more than doubled its original commitment within a year. The fourth was a new agreement for a core workload.

Demand from AI customers keeps outrunning even their own plans. Budman said: "Data growth keeps exceeding expectations. Our early AI customer storage needs consistently outpace even their own aggressive forecasts."

The company serves two distinct groups, he explained: AI infrastructure companies that buy a capacity storage tier to offer their own customers, and AI builders that need capacity storage directly. "Customers need to collect, retain, and use more data while getting a better ROI from their infrastructure spending," Budman said.

What is the neocloud strategy costing?

Backblaze runs cloud storage on-premises for neocloud AI infrastructure companies, which requires buying storage hardware in volume. Budman was blunt about the spend: "We are basically increasing the CapEx by something like a factor of 10 over the course of the next year ish. So it is definitely a large increase."

The execution picture is ahead of plan on several fronts. Hardware allocations are secured and shipments are tracking ahead of schedule. Development for the large neocloud announced at the start of the year finished early, and that customer began loading data several months before the early 2027 expectation. CoreWeave has also begun to ramp on the platform.

The CoreWeave relationship is contractual, with committed minimum ramps, and Backblaze sees no signs of risk. CoreWeave should contribute more revenue in the fourth quarter and through 2027, ramping until the middle of next year.

How strong is the cash position?

Operations generated $22.8 million in cash during the nine months ended September 30, 2026, up from $14.2 million a year earlier. Adjusted free cash flow for the period was $1.9 million, against a negative $9.5 million a year ago. Cash, cash equivalents and marketable securities totaled $230.2 million at quarter end.

One unusual demand channel comes from years of publishing disk drive statistics. Budman said visibility from that data drove visits from AI search engines up 230 percent year over year, roughly double the market rate, and those visitors create self-serve accounts or contact sales at more than twice the rate of organic search visitors.

What happens next?

Guidance points to acceleration. Fourth-quarter revenue is projected at $50 million plus or minus $200,000, a 32.3 percent year-over-year increase at the midpoint, with B2 revenue growth expected to reach about 60 percent. Backblaze raised its full-year 2026 outlook by $5 million to $178 million plus or minus $200,000, a 22.1 percent uplift on 2025, and it expects B2 growth above 40 percent in 2027.

CFO Marc Suidan put the long-term prize in context: "The Neo Cloud capacity storage market is expected to be $14 billion by 2031." With committed CoreWeave ramps, early-loading neocloud customers and a tenfold CapEx increase underway, Backblaze is betting its capital and its roadmap that AI capacity storage, not backup, is where the company now lives.