BRZE · Research
Braze shows cash profit but pays in stock, and Salesforce now sets the exit
Braze grew revenue 26.16% last quarter and generated $24.21M of operating cash, yet it lost $18.12M on an operating basis because stock pay ran at $36.33M. Owner free cash flow has been negative every year.
1. Summary
- Q2 fiscal 2027 revenue was $227.23M, up 26.16% from $180.11M, with subscription revenue of $207.7M [1][2].
- Operating loss was $18.12M while operating cash flow was $24.21M and free cash flow $21.74M, our calculation [1][2].
- Stock pay was $36.33M in the quarter and $147.05M over the trailing year, 17.63% of revenue, our calculation [1].
- Trailing owner free cash flow is negative $66.84M, better than negative $85.66M in fiscal 2026, our calculation [1][3].
- Salesforce agreed to buy Braze for all cash at about $5.66B of enterprise value, expected to close in Salesforce's fiscal 2028 [4][5].
- Our view: watch. The base case is 1.37x with a mixed gate, and the takeover caps what holders can earn from here.
2. Thesis
Braze is the system that decides which message a consumer app sends, on which channel, and when. Its software runs inside customers' apps through its SDKs and reached 8.0B monthly active users in January 2026 [3].
The bull case was that this connection, plus first-party engagement data, would let Braze move from charging for messages to charging for results. The bear case was that stock pay would keep owner cash negative long enough for a larger platform to absorb the category.
The second case arrived as a buyer.
| Gate test | Read |
|---|---|
| Owns the record | Partly. Braze stores engagement events and profiles, but customers' warehouses stay the record and Braze exports to them [3] |
| Owns the connection | Yes. Its SDKs sit inside customer apps and sites across email, push, SMS, WhatsApp and in-app channels [3] |
| Prices close to outcomes | Partly. Fees are set by monthly active users and message volume, not by results [2][3] |
| R&D on the gate | Yes. Trailing R&D is 21.63% of revenue, aimed at the data platform and decisioning, our calculation [1][3] |
Gate score: 2 of 4 pass, two partial. That is a mixed gate.
What invalidates it: the merger fails and stock pay stays above 15% of revenue, which would leave owner free cash flow negative into fiscal 2028 [1][4].
3. Product
Braze sells one cloud platform in four layers: data, decisions, orchestration and channels [3]. Customers buy it as a subscription with an upfront commitment for message volume, a set number of monthly active users, platform access and add-on products [2].
Data. The Braze Data Platform takes in first-party customer data in real time from SDKs inside apps and websites, from cloud data warehouses, and now from large models through the Model Context Protocol and ChatGPT applications [3]. Braze built its own stream processing system so a click or purchase can change the next message within moments [3].
Data flows out through Braze Currents to warehouses on AWS, Azure and Google Cloud, to customer data platforms such as Segment and mParticle, and to analytics tools such as Amplitude, and through direct sharing with Snowflake [3]. That openness helps adoption but means Braze rarely owns the record.
Decisions. This is where superintelligence enters the product. Decisioning Studio, built on the OfferFit acquisition of June 2025, uses reinforcement learning to choose the offer, timing and channel for each consumer and keeps testing as it goes [3].
Operator is an assistant inside the platform that helps marketers build campaigns faster, and Agent Console lets brands deploy agents that act on customer data [2]
4. Operations
Revenue mix. Subscription revenue was 91.38% of Q2 revenue, our calculation, and professional services rose to $19.6M from $8.3M [2]. In fiscal 2026, 54.88% of revenue came from the United States and 45.12% from abroad, our calculation, with no other country above 10% [3].
Delivery and cost. Braze hosts on third-party clouds, chiefly AWS, with Rackspace also named, and offers hosting in the US, EU, Australia, Japan and Indonesia [3]. Cost of revenue is mostly cloud hosting, messaging delivery providers and support staff, and it rises with customer usage [1][3].
GAAP gross margin slipped to 66.83% from 67.67%, our calculation, as services and lower-margin channel volume grew [1][2].
Selling. Braze sells through a direct sales force across North America, South America, Europe, the Middle East and Asia-Pacific, a joint venture in Japan and resellers in some markets [3]. It uses a land-and-expand model: customers add channels, products, business units and regions over time [3]
5. Valuation
We value Braze at the cash consideration, since the shares now trade on the deal. Equity value is about $5.40B on 113,584,427 cover-page shares and enterprise value about $5.23B after $166.77M of cash and equivalents, our calculation [1][4].
That is 6.27x trailing revenue and 65.19x free cash flow of $80.20M, our calculation [1]. Owner free cash flow is negative, so there is no owner multiple and no anchor-based value.
House method requires three positive owner years for a base value, and Braze has none [1][3].
Five-year view, our calculations. We start from trailing revenue of $834.24M and an owner free cash flow margin of negative 8.01% [1][3]. Growth, margins and exit multiples below are our assumptions, not company guidance.
| Case | Revenue growth per year | Owner FCF margin in year 5 | Year 5 revenue | Year 5 owner FCF | Exit multiple | Implied EV | vs today's EV |
|---|---|---|---|---|---|---|---|
| Bear | 12% | 8% | $1.47B | $117.62M | 20x | $2.35B | 0.45x |
| Base | 18% | 15% | $1.91B | $286.28M | 25x | $7.16B | 1.37x |
| Bull | 23% | 20% | $2.35B | $469.73M | 30x | $14.09B | 2.70x |
The base case lands in the hold range on value, but the gate is mixed, so the call is watch. The table matters less than usual: if the deal closes, holders receive the fixed cash price and none of the base or bull upside.
6. Financial update
Braze raised its fiscal 2027 revenue guide to $910.0M to $913.0M, about 23.48% growth at the midpoint, our calculation [2][3]. Part of that growth comes from OfferFit, bought for $181.9M of net cash in June 2025, so organic growth is lower and not disclosed [1].
Remaining performance obligations reached $1,092.5M, up 26.71%, with $691.1M due within a year, our calculation [2]. Operating loss narrowed to $18.12M from $38.75M [1].
Operating cash flow was $24.21M against $7.0M a year earlier [2]. Cash, restricted cash and marketable securities totaled $413.9M with no borrowings [1][2].
Investment income fell to $2.81M from $4.0M as balances were drawn for OfferFit and the buyback [1].
7. Risks
- Deal risk. Closing needs antitrust and foreign investment approvals and a shareholder vote. The outside date is Oct 19, 2027, extendable twice by 90 days for regulatory approval [5]. Salesforce owes a $300M fee if regulators block it; Braze owes $191.39M if it takes a better offer [5].
- Stock pay. If the deal breaks, owner free cash flow stays negative, and the standalone thesis rests on stock pay falling faster than revenue grows [1].
- Pricing. Fees tied to users and message volume could shrink if agents reach consumers through channels Braze does not deliver [3].
- Concentration on clouds. Braze depends on AWS and messaging carriers, and any outage hits delivery directly [3].
8. Catalysts and conclusion
- Merger proxy and shareholder vote, date unconfirmed [5].
- HSR waiting period expiry, date unconfirmed [5].
- Q3 fiscal 2027 results, expected in early December, unconfirmed [2].
Our view: watch. Braze proved it can generate operating cash, but it has paid for that cash with stock worth more than the cash itself. Salesforce is paying for the connection and the decisioning layer, not the owner economics.
With the outcome fixed by a cash deal, there is no new entry to make; we would revisit only if the merger breaks, and then on owner free cash flow.
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