After its primary competitor, Sprinklr (CXM, Financial), issued downside Q2 EPS and revenue guidance on Wednesday, expectations were lowered for Braze (BRZE, Financial). Over the past week, BRZE shares dropped by over 10%, reflecting concerns that the choppy enterprise software spending environment affecting CXM would also impact BRZE's Q1 earnings. However, BRZE exceeded expectations, beating Q1 EPS and revenue forecasts, and guided Q2 and FY25 revenue slightly above expectations.
BRZE achieved these solid results despite an uncertain macroeconomic environment. CEO Bill Magnuson noted during the earnings call that there hasn't been any significant improvement in demand, with cautious buying behavior and long decision-making cycles persisting.
- BRZE generated strong revenue growth of 33%, driven by new customers, upsells, and renewals. Total customers increased by 13% year-over-year to 2,102, while dollar-based net retention for the trailing 12 months ended April 30, 2024, was 117%, indicating strong customer retention and increased spending.
Several factors are helping BRZE navigate macro-related pressures:
- Success in winning new deals against legacy marketing providers. Similar to how CrowdStrike (CRWD, Financial) benefits from enterprises consolidating their cybersecurity tools onto CRWD's Falcon Platform, BRZE benefits from companies centralizing their customer engagement and marketing capabilities on BRZE's platform.
- This trend is shown by the strength in BRZE's enterprise business. In Q1, customers with $500,000 or more in ARR grew by 29% year-over-year to 212.
- Industry vendor consolidation leads to market share gains for BRZE. These gains are also driven by new AI features and functionalities, such as AI Copywriting Assistant, adopted by hundreds of BRZE's customers.
- AI Copywriting Assistant, powered by ChatGPT, enables marketers to quickly create new copy and messaging by providing a few details about the topic.
The main takeaway is that BRZE is executing well and appears to be gaining market share in a difficult software spending climate. BRZE is winning on the enterprise side and securing consolidation and replacement deals as corporations seek higher ROI from their marketing and customer engagement investments.
