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Every New Dollar of Backblaze Revenue Needs $2 of Drives and Servers

Backblaze’s margins have never been higher and B2 growth has re-accelerated to 47%, yet the stock is 59% below its August high after October’s AI-infrastructure sell-off. The catch is the cash: each new dollar of ARR needs about $2 of drives and servers, bought from makers that have raised prices per TB by 28%, and we expect free cash flow of -$38M in 2027. We initiate at Neutral with a Dec-27 price target of $10 (+19%).

By K2 Research TeamNov 7, 2026PDF · 8 pages
Every New Dollar of Backblaze Revenue Needs $2 of Drives and Servers

Backblaze’s margins have never been higher and B2 growth has re-accelerated to 47%, yet the stock is 59% below its August high after October’s AI-infrastructure sell-off. The catch is the cash: each new dollar of ARR needs about $2 of drives and servers, bought from makers that have raised prices per TB by 28%, and we expect free cash flow of -$38M in 2027. We initiate at Neutral with a Dec-27 price target of $10 (+19%).

What’s inside

  1. More data, dearer drives: initiating Neutral on Backblaze, Dec-27 PT $10
  2. Forty per cent, once
  3. What AI adds, and what it does not
  4. Drive Stats buys goodwill, not supply
  5. CoreWeave: a sixth of 2028, not the cause of October
  6. Results days: large, two-way and not worth chasing
  7. The economics of a terabyte
  8. What today’s price assumes, and where we differ from the Street
  9. Price target calculation and key risks
  10. Three ways to value CoreWeave
  11. What would make us wrong?
  12. Signposts

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Reddit Didn’t Sink Alphabet, Its $51bn Capex Quarter Did
Equity researchPDF · 10 pp

Reddit Didn’t Sink Alphabet, Its $51bn Capex Quarter Did

Alphabet lost about $500bn of market value on 29 October on its own 3Q26 print; Reddit reported after that close and fell about 30% the next day. What the market sold was cash flow: capex of $51.4bn exceeded operating cash flow of $42.3bn, and 2027 capex will rise significantly. Search still grew 12% on 8% more paid clicks. We initiate at Neutral with a Dec-27 price target of $310.

K2 Research TeamNov 5, 2026
Neoclouds Fell Up to 17% This Week, and Beta Explains Nearly All of It
Equity researchPDF · 9 pp

Neoclouds Fell Up to 17% This Week, and Beta Explains Nearly All of It

All four neoclouds fell more than the Nasdaq-100’s 4.8% after Microsoft’s and Alphabet’s capex misses, from SpaceX (-7.2%) to IREN (-17.0%), and beta explains each move to within 3pp. We reiterate Overweight on Nebius (PT $207, now +34% upside) and IREN (PT $37), and Underweight on SpaceX (PT $90) and CoreWeave (PT $44).

K2 Research TeamNov 1, 2026
Alphabet’s $500bn One-Day Fall Came From Its Own Results
Equity researchPDF · 9 pp

Alphabet’s $500bn One-Day Fall Came From Its Own Results

Alphabet lost about $500bn of value on 29 October, falling 12.6% on its own 3Q26 results before Reddit had even reported: Search grew 12% against about 15% expected and paid clicks slowed to 8%. We initiate Neutral on Alphabet (PT $305) and Overweight on Reddit (PT $130).

K2 Research TeamOct 31, 2026