Braze beat second-quarter earnings estimates but issued third-quarter EPS guidance below analyst consensus, and shares tumbled about 11% in premarket trading. Raymond James called the drop a buying opportunity, citing the company's plan to accelerate investment ahead of fiscal 2028.
Braze shares dropped about 11% in premarket trading Wednesday after the customer engagement platform's third-quarter earnings guidance fell short of Wall Street estimates. The reaction overshadowed a second-quarter beat on both the top and bottom lines.
Guidance miss overshadows a strong quarter
Braze reported adjusted EPS of $0.19 for the second quarter, beating the analyst estimate of $0.15 by $0.04. Revenue reached $227.2 million, above the $220.23 million consensus and up 26% year-over-year from $180.1 million. However, investors focused instead on third-quarter EPS guidance of $0.13-$0.14, below the analyst consensus of $0.16. The midpoint of $0.135 represents a 15.6% shortfall versus expectations.
Braze's revenue outlook fared better: the company projected third-quarter revenue of $229-230 million, with the midpoint exceeding the $227.8 million consensus. For fiscal 2027, Braze guided to EPS of $0.64-$0.65, above the $0.63 consensus, and revenue of $910-913 million, ahead of the $898.7 million estimate.
Cash flow and customer growth improve
The company generated record second-quarter cash from operations of $24 million and free cash flow of $22 million, compared to $7 million and $3.5 million a year earlier. Adjusted operating income reached $22 million, up from $6 million in the second quarter of fiscal 2026.
Braze's customer base also expanded. The company's customer base grew to 2,789 as of July 31, 2026, up from 2,422 a year earlier. Customers with annual recurring revenue of $500,000 or more increased to 361 from 282 year-over-year. Dollar-based net retention reached 110% for the trailing 12 months, compared with 108% in the prior year.
Raymond James defends the stock
Despite the guidance miss, according to Investing.com, Raymond James analysts wrote that investors should "buy the dip, as Braze remains a secular winner." The firm pointed to Braze's plan to accelerate investment ahead of fiscal 2028 as a long-term positive, arguing shares trade at roughly 2.5 times the firm's calendar-2028 revenue estimate versus about 4 times for the peer group.
Source: Investing.com
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