Braze, Inc. (NASDAQ:BRZE) reported strong Q2 results on September 8, but investors appeared more focused on the company’s outlook. Despite the solid performance, the company’s shares had fallen sharply following the earnings report, declining nearly 20% in the September 9 session.
In its second quarter of fiscal 2027, the company generated $227.2 million in revenue, up 26.2% year-over-year. Braze, Inc. said growth was mainly driven by new customers, along with upsells and renewals from existing customers. Subscription revenue increased 21% to reach $207.7 million.
Non-GAAP net income also improved 26% to more than $21.23 million, or $0.19 per share. Revenue and adjusted earnings were ahead of Wall Street expectations. Analysts were expecting Braze, Inc. to report revenue of slightly more than $220 million and adjusted earnings of $0.15 per share.
The company also showed improvement in its cash generation as it reported record second-quarter cash flow from operations of $24 million and free cash flow of $22 million.
Guidance Becomes the Main Concern
Despite the strong quarter, investors appeared to be more focused on what comes next. Braze, Inc. provided guidance for its third quarter and raised its full-year revenue outlook, while also lifting the lower end of its full-year profitability forecast.
For the third quarter, the company expects revenue to be between $229 million and $230 million, slightly above the analyst consensus of approximately $228 million. However, the company expects non-GAAP net income of $0.13 to $0.14 per share (diluted), which came in below the consensus estimate of $0.16.
The full-year outlook was more encouraging as Braze, Inc. now expects revenue of $910 million to $913 million. This compares with analyst consensus of $899 million. It also forecasts non-GAAP net income of $0.64 to $0.65 per share (diluted), compared with the consensus estimate of $0.63.
This suggests that while the company expects solid growth for the full year, investors may have been looking for stronger near-term earnings guidance. It appears that software stocks like Braze, Inc. continue to face pressure when quarterly results and forecasts do not significantly exceed expectations.
Hedge Fund Interest
Hedge fund interest in Braze, Inc. has declined slightly. According to Insider Monkey‘s database, 26 hedge funds held positions in the stock in the second quarter of 2026, down from 28 in the first quarter.
The stock also has a relatively high level of short interest. As of August 14, short interest stood at 13.72% of the company’s float.
Valuation could be another concern for investors as Braze, Inc. is currently trading at around 50 times forward earnings, more than twice the sector median forward P/E of 23.
Braze, Inc. has delivered impressive Q2 growth, exceeded analyst expectations, and lifted its full-year revenue outlook. However, the weaker-than-expected Q3 earnings guidance and high valuation could make it harder for the stock to gain momentum.
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