Braze (NASDAQ:BRZE), a leading customer engagement software provider, is set to release its Q3 earnings report after market hours tomorrow. Following a strong Q2 performance, investors are eager to see if Braze can sustain its growth trajectory in a competitive market. This preview analyzes Braze’s recent performance, analyst expectations, and industry trends to provide insights into the upcoming earnings announcement.
Q2 Recap and Q3 Expectations
In Q2 2024, Braze exceeded analysts’ revenue expectations by 3%, posting $145.5 million in revenue, a 26.4% year-over-year increase. The company also provided strong EPS guidance for Q3, surpassing analyst estimates and delivering a solid beat on EBITDA. Braze’s customer base expanded by 61, reaching a total of 2,163 clients.
For Q3, analysts project a more moderate revenue growth of 19.5% year-over-year, reaching $148.2 million. This slowdown compared to the 33.1% growth in Q3 2023 reflects the broader economic environment and potential market saturation. Analysts anticipate an adjusted loss of -$0.01 per share. Consensus estimates have remained relatively stable over the past month, indicating confidence in Braze’s ability to meet expectations. Historically, Braze has consistently outperformed Wall Street forecasts, beating revenue estimates by an average of 3.9% over the past two years.
Peer Performance and Industry Trends
Examining Braze’s competitors in the sales and marketing software sector offers further context. Upland Software (NASDAQ:UPLD) reported a 10% year-over-year revenue decline in Q3, meeting expectations. Sprout Social (NASDAQ:SPT), however, exceeded estimates with a 20% revenue increase. Following their earnings releases, Upland’s stock surged 15.9%, while Sprout Social experienced a 13.8% decline, highlighting the market’s sensitivity to performance relative to expectations.
The sales and marketing software segment has witnessed positive investor sentiment recently, with average share prices rising 8.1% over the past month. Braze has outperformed the sector, gaining 18.1% during the same period. The current average analyst price target for Braze stands at $51.72, significantly higher than its current share price of $42.19. This suggests continued optimism regarding the company’s long-term prospects.
Looking Ahead
Braze’s Q3 earnings report will provide crucial insights into the company’s ability to navigate a changing economic landscape and maintain its competitive edge. Key areas to watch include customer acquisition, average revenue per user (ARPU), and guidance for future quarters. While the projected revenue growth slowdown raises some concerns, Braze’s consistent history of exceeding expectations and the positive momentum in the broader sector offer potential for a positive surprise. The earnings call will likely address the impact of emerging technologies, such as generative AI, on the customer engagement landscape and Braze’s strategic positioning to capitalize on these trends.
In conclusion, Braze enters its Q3 earnings announcement with a track record of strong performance and positive investor sentiment. However, the anticipated deceleration in revenue growth warrants close attention. The results and subsequent management commentary will be crucial in determining whether Braze can maintain its momentum and justify its premium valuation.
