Blaize Holdings, Inc. (BZAI) Earnings Call Transcript & Summary

Hello, and welcome to the Blaize Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Vernice Pozynski, Investor Relations.

Before we begin the prepared remarks, we would like to remind you that earlier today, Blaize issued a press release announcing its third quarter 2025 results. Earnings materials are available on the Investor Relations section of Blaize's website. Today's earnings call and press release reflect management's views as of today only and will include statements related to our competitive position, anticipated industry trends, our business and strategic priorities, our financial outlook and our revenue guidance for the fourth quarter of 2025 and full year 2025, all of which constitute forward-looking statements under the federal securities laws. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. For a discussion of material risks and other important factors that could impact our actual results, please refer to the company's SEC filings and today's press release, both of which can be found on our Investor Relations website. Any forward-looking statements that we make on this call are based on assumptions as of today, and other than as may be required by law, we undertake no obligation to update these statements as a result of new information or future events. Information discussed on this call concerning Blaize's industry, competitive position and the markets in which it operates is based on information from independent industry and research organizations, other third-party sources and management's estimates. These estimates are derived from publicly available information released by independent industry analysts and other third-party sources as well as data from Blaize's internal research. These estimates are based on reasonable assumptions and computations made upon reviewing such data and Blaize's experience in and knowledge of such industry and markets. By definition, assumptions are subject to uncertainty and risks, which could cause results to differ materially from those expressed in the estimates. During this call, we will discuss certain non-GAAP financial measures. These non-GAAP financial measures should be considered as a supplement to and not a substitute for measures prepared in accordance with GAAP. For a reconciliation of non-GAAP financial measures discussed during this call to the most directly comparable GAAP measures, please refer to today's press release.

Good afternoon, everyone, and thank you for joining us today. Q3 was a breakout quarter for Blaize, defined by strong execution, commercial traction and expanded global visibility. We delivered a solid quarter with revenue of $11.9 million, up 499% from Q2. We further expect the Q4 revenue to double from here. To support this acceleration, following the close of Q3, we secured a $30 million investment from Polar Asset Management Partners to scale commercialization and the next-generation chip development as we scale into 2026. Together, these results mark a step forward from validation to scale, demonstrating growing customer adoption and investor confidence in Blaize's strategy and solutions. We strengthened our ecosystem through two new key partnerships. First, we announced a collaboration with Technology Control Company, or TCC. Second, we formalized a partnership with Reach Digital, the digital transformation arm of Reach Group, a subsidiary of International Holding Company or IHC, one of the largest investment holding with market capitalization of $240 billion. Blaize's presence on the global stage continues to expand. We participated in the world's most influential innovation forums, the Milken Institute Asia Summit 2025, the GITEX Global 2025 in the Middle East and the Web Summit 2025 in Europe, each reinforcing Blaize's growing role in shaping the future of efficient and deployable AI. Together, these achievements reflect a company executing with discipline and scale and demonstrate validation of the Blaize hybrid AI platform through active deployments across key industries and geographies. They also validate the next chapter in AI's evolution, a new paradigm we call Practical AI. This marks a turning point for the industry from large models to practical outcomes and from dependence on the cloud to sovereign AI infrastructure that organizations can now own and control. We call this next phase Practical AI, AI that is useful, deployable and sustainable at scale. First, Practical AI is business-driven and outcome focused. It solves problems that improve safety, productivity and efficiency, helping customers optimize costs and create value across sectors such as smart infrastructure, defense and industrial automation. Enterprises are prioritizing energy-efficient, cost scalable inference while governments are investing in sovereign AI infrastructure that they can own and operate end-to-end. Second, it is hybrid by design. It combines heterogeneous compute, our graph streaming processor alongside GPUs and CPUs, giving customers flexibility to choose the right fit hardware for each deployment, balancing performance, cost and efficiency from cloud to edge. Third, it is efficient. Practical AI delivers a clear total cost of ownership advantage, achieving better performance per watt while reducing energy consumption and maintaining responsiveness. Efficiency defines the economics of AI at scale, enabling sustainable and sovereign deployments that work in the real world. Together, these principles, business-driven, hybrid and efficient define what Practical AI means to our customers and partners. Let me highlight a few programs that illustrate our progress. First, Starshine Hybrid AI infrastructure, a $120 million collaboration with initial shipments in Q3 2025 and continuing through 2026. The partnership will focus on building AI infrastructure for smart city development, industrial automation and public services across Asia. Second, TCC, the Saudi Arabia sovereign AI infrastructure announced in September. This partnership positions Blaize as a technology enabler of Saudi Arabia's Vision 2030. TCC is working with us to build hybrid AI infrastructure. Together, we are developing energy-efficient AI systems to accelerate adoption across the Kingdom's public safety and infrastructure sectors. Third, Yotta Smart Infrastructure. Our AI-powered public safety rollout across India continues to advance. We are fulfilling Yotta's purchase order and expect initial deliveries completed this year. Fourth, new partnership with Reach Group announced recently at GITEX Global 2025 strengthens Blaize's position in the Middle East through collaboration on Practical AI solutions and regional infrastructure initiatives. Beyond these programs, we continue to expand our engagement worldwide through workshops with data center providers, sovereign operators and system integrators while advancing proof-of-concept work in next-generation smart radar, facial recognition and vision AI. Together, these initiatives strengthen Blaize's position as a practical sovereign-ready AI platform partner, helping governments and enterprises deploy AI securely, efficiently and at scale. On the technology front, Q3 was about execution. We continued the commercial rollout of the Blaize AI platform, integrating hardware, software and orchestration into one unified stack that simplifies deployment and accelerates time to value. The platform's orchestration layer gives customers flexibility for model packaging, deployment and optimization across diverse environments. In hybrid AI infrastructure, Blaize's GSPs and GPUs work together, complementing each other to boost inference performance and power efficiency. At rack scale, this combined architecture delivers up to 2.4x higher performance per rack and up to 3x better power efficiency, enabling greater performance per watt and lower total cost in real-world deployments. At GITEX Global 2025, we showcased these capabilities in live demonstrations from city safety analytics and incident detection to autonomous mobility, including ruggedized systems that operate reliably in environments up to 70 degrees Celsius. We are also continuing development of our next-generation chip, working closely with ecosystem partners to extend our leadership in low-power programmable AI. Next, we have strengthened our capital position. Earlier this week, we announced a $30 million private placement investment from Polar Asset Management Partners, reinforcing confidence in Blaize's long-term strategy and market opportunity. This new funding provides flexibility to advance commercialization to fulfill customer programs and accelerate next-generation platform. It positions us to accelerate the future silicon development, expand ecosystem partnerships and continue executing with financial discipline. Looking ahead, we expect continued growth momentum in Q4 and into 2026. Our priorities are clear: scale deployments, expand revenue through integrated AI solutions and advance development of our next-generation GSP architecture. In 2026, our focus turns to global expansion of Practical AI, delivering solutions that are efficient, scalable and sovereign capable. We will deepen partnerships to drive adoption across key sectors such as urban AI infrastructure build-out, defense and retail. Our strategy centers on hybrid AI deployments that combine the strengths of Blaize's GSPs and GPUs across heterogeneous environments, enabling secure, energy-efficient and programmable AI infrastructure. Blaize is helping leading this shift towards real-world sustainable and sovereign AI that bridges innovation with impact and turns technology into tangible progress for industries and societies. We reported revenue of $11.9 million for the third quarter, reflecting strong execution and continued growth. With that, I'll turn it over to Harminder to walk through the financial highlights and our outlook for the remainder of the year.

Thank you, Dinakar, and good afternoon, everyone. I'd like to start with a few highlights. We reported $11.9 million of revenue, beating the upper end of our guidance by $400,000. We beat our Q3 adjusted EBITDA loss guidance by $2 million, coming in at $11.1 million. This reflects better-than-expected execution and stronger operating discipline across the business. And we closed a $30 million financing with Polar Asset Management Partners. I will now move on to reviewing our financial performance for the third quarter of 2025 in more detail and provide guidance for the fourth quarter. The results that I'm sharing today demonstrate our shift from customer validation to growth at scale. This quarter, we delivered our strongest quarter yet with revenue of $11.9 million, which was a sequential increase of 499%. I'm pleased to report that revenue surpassed the upper end of our prior guidance range by $400,000. Approximately $10.4 million of the third quarter revenue was driven by the initial shipments of servers under the Starshine contract into the Asia Pacific region, which we expect to collect in full before the end of the year. Gross margin was 15% this quarter compared to 59% in the second quarter of 2025. As I noted in my remarks last quarter, as expected, initial gross margins related to the Starshine contract would be impacted by the higher component of third-party hardware in the system. Going forward, we're working with Starshine software teams to replace most GPUs in these servers with Blaize GSP cards. This is expected to result in lower average selling prices for customers and improved margins for Blaize in the quarters ahead. We continue to fulfill the Europe purchase order and anticipate that the initial approximately $6 million of revenue contribution to complete this year. Let's now turn to our third quarter operating expenses, which I will discuss on a non-GAAP basis to exclude stock-based compensation charges. Research and development costs of $6 million were down slightly from $6.4 million in the second quarter and represented a year-over-year increase of 7%. Sales and general and admin costs totaled $8.5 million, largely flat versus the prior quarter and an increase of $3.6 million year-over-year. Blaize remains disciplined on costs as the business grows. Our third quarter adjusted EBITDA loss was $11.1 million, down $1.8 million sequentially and marginally up from Q3 of last year. This reflects better-than-expected execution and stronger operating discipline across the business. Reported net loss in the third quarter of $26.3 million was lower than the $29.6 million net loss for the second quarter. Both include significant noncash adjustments related to stock-based compensation and fair value charges. The reconciliation between GAAP net loss and adjusted EBITDA is included in our earnings press release. We are very excited about our November 10 announcement of a $30 million private placement financing by Polar. This investment positions Blaize to continue its trajectory of delivering results from contracts in hand, converting pipeline opportunities into new business and advancing its chip road map. We welcome Polar as a long-term anchor investor in Blaize. We have also taken advantage of recent strong trading volumes to exercise our right to sell common stock to B. Riley under the committed equity facility signed in July this year. These initiatives have resulted in a significantly improved cash balance of over $60 million today. And combined with expected inflows from current customer contracts, we believe we're strongly positioned to fund our operations well into the second half of next year. I will now share outlook for Q4 2024. Total revenue for the fourth quarter is expected to be between $21.1 million and $23.1 million, almost doubling our third quarter performance. We anticipate adjusted EBITDA loss to be in the range of $15.6 million to $18.6 million, reflecting the variable nature of next-gen chip costs. The share-based charge and weighted average shares outstanding estimates are provided in our earnings press release. Looking ahead, our pipeline opportunities based on the current generation of silicon remain robust. Approximately $160 million from the Yotta and Starshine deals are expected to support our revenue projections over the next 6 quarters or so. Our partnership with the Kingdom of Saudi Arabia's technology control company is progressing well. We anticipate initial revenues from delivering ruggedized AI boxes capable of operating in harsh high-temperature environments and professional services to begin in 2026. We expect our recently announced partnership with Reach Digital to significantly enhance our profile as a provider of Practical AI solutions. The Blaize Hybrid AI platform is resonating well in the market, and we look forward to providing further updates on customer progress. Let me highlight upcoming events for the financial community. Blaize will be at the Craig-Hallum Alpha Select Conference in New York on November 18 and at the Wells Fargo Annual TMT Summit in California on November 19. We look forward to seeing you at these events. Thank you. And with that, we'll now open the line for questions.

[Operator Instructions] Our first question comes from the line of Alexander Platt with D.A. Davidson. Our first question comes from the line of Kevin Cassidy with Rosenblatt Securities.

Congratulations on the good results and the really strong revenue growth. Tied in with the Starshine project, how many more quarters do you think it will be if you [Technical Difficulty] the third-party hardware?

Kevin, this is Harminder. So your voice was a little cracky, but let me just repeat what I understood you to say -- to ask, which is how many more quarters before we start to shift to a GSP-heavy server. Was that right?

That's right. Just when can gross margins start to expand again?

Yes. So we expect in the early part of -- in the latter part of the second half of next year. So work has been going on with both software teams to create this orchestration layer that allows workloads to seamlessly go across both the GSP and the GPU. So as we start to shift -- as we start -- as that work completes, the servers that will start to shift perhaps in the second quarter onwards will start -- will be -- will have more GSP components in them.

Okay. Great. And I'm always interested in your next-generation silicon. Can you give us any hints on what you're targeting with that? And what will be some of the improvements?

Sure. I can take this. So as you know, we're in the key markets that we're in, majority of the customers, we are actually capturing at the business outcome level. And our software is quite coming to life as well, the whole platformization, orchestration layer. Now what this is helping us is taking all of this customer demand and feedback into the definition of the next-generation chip. Certainly, it will be addressing the existing video image visual workloads, but also we're expanding it outside of this into other areas to help us capture a wider set of workloads. So it is a TAM expansion for us when the silicon comes in. But the good part right now, because we're platformizing and our software is playing a role, it already helps us understand what the customers' needs are. And by adding this next-generation silicon, it further improves our margins. But including things like language models, et cetera, are part of it. Also there are newer kinds of AI that are emerging by being programmable and having the flexibility of our architecture, we're able to address all of that.

And our next question comes from the line of Craig Ellis with B. Riley Securities.

Congratulations on the momentum in the business, guys. I wanted to start, Dinakar, just following up on comments regarding TCC and Reach. Is it possible for you to help us scope the size of those two deals? And if not in their entirety, help us understand how material they might be to 2026?

Sure. Happy to. So the interesting thing is both of these are in the Middle East. So let me address the size of the opportunity, not getting into each opportunity size, but the market is rapidly growing there. There is a lot of thrust for AI solutions and particularly Practical AI solutions that can help their cities become safer, the defense entities and so on. So fortunate to have been working with TCC specifically in the Saudi region. And this is all part of the Vision 2030, where they have a pretty big -- we're collaborating on AI solutions there. And Reach is in UAE. So we have solid partners in both these countries. And each of these, as we solidify the contracts, we will start announcing them to the market. I don't know if Harminder wants to add.

No, no, you covered. I just want to make one very important point. I mean the proof points about Blaize technology and particularly where we are able to exist in very harsh thermal conditions, we were the only solution that was able to still continue to do high-performance compute at the edge up to 75-degree centigrade temperatures at a total -- at a cost of -- you can, of course, put a system together and have lots of extra cooling. And these are the kind of things that are now resonating really well with customers.

Exactly. The temperature-grade testing was done, and we passed in flying colors. And as Harminder mentioned, right, and they picked the hottest month of the year, which is September. So we were literally on the rooftop testing these. So we -- all of those results are helping us get into the commercialization phase, which is the next...

That sounds like it's very compelling proof points for your partners, and it should translate well into what your sales can do in other areas with that deployed. So a follow-up question, given the momentum that you have with each of those partners, should we expect there to be meaningful revenue recognition next year? Or will we be in a planning and deployment phase that would precede sales and activity? Just trying to understand when these start to really tip towards revenue-generating partnerships for you?

So Craig, as I mentioned in my prepared remarks, I certainly expect that the TCC relationship will start to contribute towards 2026. The exact timing of that, of course, will depend on how the deployment -- the solutions are deployed. Reach Digital is a relatively recent engagement. However, what we're starting to see is that as certain solutions are deployed with one customer, I think the pace at which some of those other customers in the same industry or same vertical and how quickly they adopt should accelerate.

That's very helpful. And then just building on that point and going back to Starshine, where we are into development. From early development, what are your customers learning about the advantages of the system? And how is that impacting the pace at which they're choosing to move forward?

So certainly, hybrid AI is very popular, which is how we complement GPUs with Blaize GSP for the best business outcome and better cost and better operational expenses. So this is certainly resonating. Plus Blaize is programmable. And therefore, the workloads that can seamlessly move across GPU and GSP is another advantage. So these are the key learnings, and they're applying it to real problems such as smart infrastructure, agriculture and so on, right? So this relationship is growing well.

May I just add one more comment on that, which is the affordability side. If you have a server, which is full of GPUs, the -- I mean, it's the reason why margins are low, but also the customer affordability is impacted. As we start to replace those with Blaize GSPs, the selling price of that server comes down significantly. And our margins, of course, increase because we don't have to necessarily pass all of that benefit on. And that's where we'll see probably an acceleration of adoption of solutions in the back end of 2026.

It's a very good point. And ROI is one of the things that I've always found quite resonant with the solution that you're providing. Lastly for me, I think the last time we spoke in a forum like this, we were talking about a pipeline that would have been quantified at about $725 million. Is that still the right way to look at the pipeline? And any color on where there might be candidates for conversion as we look across the fourth quarter and into early 2026.

So the pipeline still remains robust. It's -- as you know, it's a living beast. The ones that we expect to convert, we've already talked about. Obviously, we continue to ship on our Starshine contract. We continue to work with -- you'll have seen an announcement that enhances the relationship with Yotta into the Middle East. Whether that hits 2026 and so on will depend on how fast we work together. But we feel very strong that -- confident that the pipeline remains strong, and it's based on currently shipping product and the more deployments that we start to make, then as I said, the conversion should accelerate, and we should add more customers that are not in the pipeline today from those verticals into that pipeline. So we'll talk about that more when we do our annual results next year.

And to your point, the whole ROI is the key metric of what's driving this acceleration. As we engage with one customer and they're seeing the ROI clearly, there's a land and expand within the customer, but also these same solutions are relevant across the entire geography, and we're getting that momentum as well.

Our next question comes from the line of Richard Shannon with Craig-Hallum.