Backblaze's CEO goes beyond the numbers in the company's latest financial report to examine how the channel plays a key part in their Go-to-Market strategy.

Cloud storage vendor Backblaze just delivered its financial quarterly results, which were strong. Helping drive this growth was the go-to-market transformation they began last year, which helps them better engage larger enterprises as an alternative to hyperscalers for cloud storage.

The metrics showed an increase in revenue of $34.6 million, up 15% year-over-year [YoY]. B2 Cloud Storage revenue was $18.0 million, an increase of 23% YoY. Computer Backup revenue was $16.6 million, an increase of 8% YoY. Net loss was $9.3 million compared to a net loss of $11.1 million in Q1 2024 and the company expects to be adjusted free cash flow positive by Q4.

Gleb Budman, CEO of Backblaze, said that the growth in AI underlies both the company’s strategy and its success.

“If you look at the growth that we have driven with AI, it’s real,” Budman told ChannelBuzz. “We had a 66% growth in the number of AI customers and a 25 times increase in the amount of data from AI use cases. AI was the primary use case driver for us in Q1. from a market reaction perceptive, the fact that we beat guidance on revenue and beat guidance on EBITDA, that’s what the street wants to see. But you know, as a CEO, I’m looking at like what is our execution on the underlying things that drove that, and heavily that was driven by AI which is a decades long industry transformation that is going to benefit us and many others. This is a foundational storage platform for AI. And this was a quarter where you could see that in numbers.”

Budman pointed out the relationship of this to B2 Cloud Storage Overdrive, a high-performance cloud storage solution optimized to meet AI customer demands, which Backblaze just announced.

“That is brand new,” he said. “It’s a new offering that is really targeted at large data sets and large performance needs. The reason we launched it is because we were seeing customers come to us and say, ‘You know I love your platform, and I love the performance, and I could use even more.’ One of our customers said that they saw better performance on Backblaze than they were ever able to achieve out of AWS. And so it’s that kind of feedback and desire that drove us to launch B2 cloud storage overdrive. It is a higher performance throughput offering on our storage platform which is targeted at AI use cases, but also any other high throughput type use cases like HPC and data analytics — anything where the customer needs a lot of data, and they need to have it move quickly.”

Backblaze started out serving a lower point in the market, and Budman said that they have been making strides to overcome this obsolete perception of the company.

“We have people that have been following us for nearly two decades, and they still hang on to who the company was 15-16 years ago. However, if you look at  where we’ve headed, especially in the last few years, it’s really been moving upmarket, larger organizations, larger data sets.  higher performance. And you know, we’ve talked about large scale and upmarket movements.

The company announced they had signed a record Total Contract Value deal.

“We just signed our largest customer for total value,” Budman said. “Multiple millions of dollars. It’s a multi-year contract. In the prior quarter and the quarter before that we signed roughly seven figure deals. So we’ve certainly been closing these larger deals that are orders of magnitude bigger than they were before. And from a performance perspective. we are servicing needs that are very high performance. Plex is a customer. They switched off of one of the hyperscalers. We announced them approximately six months ago. They have millions of customers that are streaming the their content, and they use us as the underlying storage platform for that. We have case studies around different media streaming surveillance. application storage, and obviously AI use cases where customers are getting high performance out of the platform for their use cases.”

Budman pointed to Backblaze’s channel-focused change in strategy as a key element in this growth.

“The go to market transformation really started in earnest in the middle of last year, even kind of like a little bit after that,” he said. “So the middle of last year we hired a Chief Revenue Officer. He brought on a VP of Sales, and  head of partnerships. We then hired a VP Of Demand Gen and we hired a VP of Customer Success just about a month ago. And so we’ve really fleshed out the team to focus on both this upmarket momentum as well as ensuring that we’re upleveling our customer success function. That’ has been kind of a focus of the go to market transformation as well as refactoring how we are doing the marketing side of it. We started that in kind of the middle of last year, with the hire of the Chief Revenue Officer, and then we’ve been kind of full force since then, and  you can see that that go to market transformation is working.”

The growth in B2 Sales is more evidence of this.

“The fact that we have actually accelerated B2 growth is important,” Budman stressed. “The organic growth rate of  2 accelerated over Q3, if you exclude the price increase. And we have painted a picture. We’ve actually shared what we see as the growth outlook for the rest of this year, quarter by quarter growing each quarter, accelerating each quarter and exiting the year at 30% plus growth rate. So that’s that’s the go to market transformation.”

Budman said that this transformation enhances channel partner opportunities.

“On the partnerships and channel side. the reason we brought in a partnerships lead is that we see partnerships as very important to our strategy, and the channel is a key part of that,” he noted. “And so the teams have been working with the channel. pipeline has been growing. We talked about last quarter, the prior quarter, that pipeline had doubled. We didn’t announce publicly anything on that front this quarter, but we are continuing to invest behind and scale them.  We are working deeply with the Channel partners to both bring them leads  and support them in supporting their customers, working with them to help across the different use cases.

MSPs are increasingly a focus

“Their customers often need backup archiving and disaster recovery,” Budman said. “They need protection from ransomware. It is a category of things that people talk about as cyber resilience. Cyberresilience is something that Channel partners and MSPs often are responsible for helping their customers with and so we enable them to succeed in those things. And so we work closely with them on that front. And we have a team engaged with them.

AI and cyber resilience. are two key things that we’re helping both customers and partners with. And there’s a lot of value for the partners in this because we’re solving great use cases. They can often offer our services even at list price. We’re about 80% less expensive than Amazon, Google and Microsoft. And there’s a lot of value for the partners in this because we’re solving great use cases. They can often offer our services even at list price. We’re about 80% less expensive than Amazon, Google Microsoft. And so if they’re offering these services, they can take significant margin while offering services at a lower price than other competitors and other companies. And so they provide more value to the customers, and have more of a business for themselves.”

Budman said that in Q4 of this year, the company will be adjusted free cash flow positive.

“That is an important key metric in part, because it means again, we don’t have to raise money. We can just run the business.”

Budman summed up on an upbeat note.

“Despite the economy, despite the macro situations, we are doing two things at the same time,” he said. “We are accelerating B2 revenue growth. And at the same time we are becoming increasingly profitable to where we’ll be adjusted free cash flow positive in Q4. So we’re improving both the top line with B2 growth and the bottom line on the Overall Company’s free cash flow usage.”