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Despite topping Q2 EPS and revenue expectations and achieving its first profitable quarter on a non-GAAP net income basis in its history, customer engagement and marketing platform provider Braze (BRZE) is crashing lower. Similar to competitor Sprinklr (CXM), which released its Q2 earnings report on Tuesday, BRZE issued underwhelming Q3 and FY25 guidance, amplifying concerns that the same macro-related headwinds that are afflicting CXM and other peers, like Salesforce (CRM) and HubSpot (HUBS), are taking a greater toll on the company.

• The root issue that's sending BRZE spiraling lower revolves around slowing growth and the company's plan to keep its foot on the gas in terms of investing in its brand and business. In Q2, revenue growth slowed to 26.4% from the low-30% level that BRZE had generated over the past five quarters. Further, the midpoint of its Q3 revenue guidance of $147.5-$148.5 mln indicates that growth will slow further, dipping just below the 20% mark.
• Amid this downtrend in its growth rate, BRZE has no intention of scaling back its operations and playing defense. To the contrary, CEO Bill Magnuson commented during the earnings call that out of difficult environments arise opportunities to create competitive moats and long-term differentiation from its competitors. Accordingly, the company will continue to invest in its global teams and products, while improving its system performance.
• With growth concerns in general mounting, BRZE's more ambitious spending plans are likely spooking investors. While the company did lift its FY25 EPS guidance higher to $0.06-$0.07 from its prior outlook of $(0.10)-$(0.06), most of that increase simply incorporates the EPS upside that BRZE posted in Q2. 
• By no means, though, is BRZE's business falling off a cliff, as the stock's plunge today might suggest. In particular, the company is having success on the enterprise side, as its $500,000+ ARR customers increased by 28% yr/yr to 222. A significant factor driving the large customer increase is the strong upsell activity as customers adopt more channels, deploy more use cases, and add new business segments and geographies to the mix.
• From a broader perspective, BRZE is well-positioned to continue capitalizing on an ongoing vendor replacement cycle and the consolidation of customer management tools among enterprises. As new AI advancements emerge, the company believes that corporations will place even greater emphasis on customer engagement tools as they look to capitalize on those AI technologies.

The main takeaway is that BRZE delivered solid Q2 results, but with investors shifting to a "sell first, ask questions later" mindset, the company's underwhelming guidance and slowing growth has sparked a nasty selloff.