Backblaze (BLZE) shares closed Tuesday at $11.66, up 43.6% ($3.54), following the announcement of a significant contract with CoreWeave valued at approximately $335 million. The stock continued to trade higher in premarket Wednesday, reaching $12.06, as investors digested the implications of the deal for the cloud storage company.
Deal Details and Valuation
The contract, which covers Backblaze's B2 Cloud Storage services, is worth about 4.2 times the company's projected 2025 B2 Cloud Storage revenue. However, the market's response has been measured: with roughly 60 million shares outstanding as of March 31, the $213 million increase in market capitalization represents only about 63 cents for every dollar of the deal's stated value. This discount reflects investor caution regarding costs, timing, and the potential dilution from warrants granted to CoreWeave.
Warrants and Dilution
According to an SEC filing, CoreWeave received warrants to purchase up to 4.19 million Backblaze shares at $7.60 each—a price below Tuesday's close. If fully vested and exercised, these warrants could represent up to roughly 7% of Backblaze's outstanding shares as of the end of March. The warrants vest over five years, with additional tranches tied to CoreWeave meeting storage usage targets.
Strategic Importance
The deal positions Backblaze as a key supplier of hard-disk drive (HDD) based storage for CoreWeave's AI object storage platform. HDD storage is cheaper and suited for high-volume data, as opposed to faster flash memory. Backblaze CEO Gleb Budman emphasized that "storage is the foundation every AI workflow is built on," while CoreWeave VP Nick Hoover highlighted Backblaze's reputation for reliable, scalable HDD storage. The contract includes initial order forms spanning five and seven years, with the $335 million estimate based on expected storage consumption and other terms.
Financial Context
Backblaze's B2 Cloud Storage segment is a key growth driver, with first-quarter revenue jumping 24% year-over-year to $22.4 million. Total revenue rose 12% to $38.7 million, though the company reported a net loss of $6.1 million. Adjusted EBITDA improved to $10.1 million. The CoreWeave deal provides access to a major buyer investing heavily in AI infrastructure, following a similar $1.17 billion contract between CoreWeave and Vast Data last year.
Analyst Reactions
Several analysts upgraded Backblaze following the news. Craig-Hallum raised its rating to Buy and increased its price target from $6.50 to $16. William Blair upgraded to Hold with an $11 target, while Needham maintained its Buy rating and $14 price target. Analyst Jason Ader at William Blair called the win "meaningful validation" for Backblaze's HDD-based storage in AI infrastructure.
Risks and Outlook
Despite the rally, risks remain. Actual payments on the contract could fall short of the $335 million estimate, and exercised warrants would dilute existing shareholders. Slower-than-expected capacity ramp-up, declining AI storage demand, or rising data-center costs could erode the gains from Tuesday's surge. Investors will be watching for updates on usage and revenue recognition in coming quarters.
