Box, Inc. (BOX) Earnings

Management highlights

### Product Innovation & AI Strategy - Box delivered key new product releases in Q1: the Box Agent (unified AI engine for secure content search, analysis and content generation that respects enterprise security/permission controls) and Box Automate (general availability workflow automation that dynamically routes work across people, AI agents and enterprise systems, a core component of Enterprise Advanced) - Box expanded MCP server support for developers, strengthened ecosystem partnerships with NVIDIA NemoClaw, OpenAI, ServiceNow, and was an early launch partner for new leading AI models including GPT-4.5, GPT-5.0, Claude Opus 3.0, OpenAI Agents SDK, and Gemini 1.5 Flash. Multi-model choice is a core differentiator for Box. - Planned upcoming product investments include expanded Box Agent capabilities for longer/complex tasks, major improvements to Box Extract, new enterprise features for Box Automate, enhanced granular security and access controls for agent content interactions, and improved developer tools for headless/API-based agent usage of Box as an unstructured data file system for AI. ### Go-to-Market & Vertical Strategy - Enterprise Advanced adoption momentum is accelerating, with multiple notable partner-led wins across verticals in Q1, including a financial services provider upgrade, a new EMEA manufacturing logo, a major EMEA automotive conglomerate upgrade, and a multi-thousand seat win at a North American consumer finance company. - Box is focused on vertical-specific go-to-market for Enterprise Advanced across financial services, life sciences, legal, media and entertainment, and the public sector, and is deepening partnerships with leading AI labs, system integrators, and hyperscalers to drive co-sell and joint solution opportunities. - Both commercial and enterprise segments saw consistent healthy demand globally in Q1, with continued strength in commercial business across all regions including EMEA, US, and JAPAC. ### Financial & Capital Strategy - Box delivered its first double-digit year-over-year revenue growth in 12 quarters, with fourth consecutive quarter of accelerating growth, exceeding guidance across all key metrics in Q1. - Box executed on its share repurchase strategy: it repurchased 4.8 million shares for $114 million in Q1 following a $500 million expansion of the repurchase program, with $445 million in remaining capacity as of April 30, 2026. - Q1 generated record free cash flow of $128 million, with operating cash flow of $140 million, up 810% year-over-year.

Guidance

Management provided updated Q2 and full fiscal 27 guidance, with an upward revision to full year revenue and EPS expectations: - Q2 fiscal 27: Revenue expected ~$319 million, 9% year-over-year growth (10% constant currency), with a 170 basis point FX headwind. Billings growth expected in low double digits, with a 140 basis point FX tailwind. Gross margin expected 81% to 81.5%, operating margin expected ~28.5% (100 basis point FX headwind), EPS expected ~39 cents (3 cent FX headwind), weighted average diluted shares expected ~139 million. - Full fiscal 27: Revenue guidance raised by $5 million to ~$1.28 billion, 9% year-over-year growth (10% constant currency); after adjusting for currency movements, this is an $8.5 million increase from prior guidance, with a 90 basis point FX headwind (30 basis points higher than prior expectations). Billings growth expected to be roughly in line with revenue growth, with a 150 basis point FX headwind (50 basis points higher than prior expectations). Gross margin expected 81% to 81.5%, as-reported operating margin expected ~28% (28.7% constant currency, up 20 basis points from prior constant currency guidance offsetting FX headwinds). EPS expected ~$1.56 as-reported ($1.64 constant currency), a 6 cent increase from prior guidance after currency normalization. Weighted average diluted shares expected ~139 million, a 2 million share reduction from prior guidance.

Segment performance

Box does not break out results into formal product segments in this call, but highlights performance for its key offering Enterprise Advanced: Enterprise Advanced has a net retention rate higher than Box's overall 105% net retention rate, and captures a 30% to 40% price premium over Enterprise Plus. Suite customers overall account for 67% of total Q1 revenue, up from 61% year-over-year. Customers paying at least $100 thousand annually grew 11% year-over-year. Total Q1 GAAP (discussed non-GAAP) revenue was $306 million, up 11% year-over-year (10% in constant currency). Q1 billings were $255 million, up 5% year-over-year (13% in constant currency). Q1 gross margin was 81.5%, up 100 basis points year-over-year. Q1 non-GAAP operating income was $85 million, with an operating margin of 27.7% (28.1% constant currency), up 240 basis points year-over-year. Q1 non-GAAP EPS was 37 cents. Ending Q1 remaining performance obligations (RPO) were $1.6 billion, up 12% year-over-year (16% in constant currency), with 55% expected to be recognized over the next 12 months.

Risks & headwinds

Management notes that all forward-looking statements are based on current information, and actual results may differ materially due to risk factors disclosed in Box's SEC filings (including its most recent 10-Q) and earnings release. Key market uncertainties referenced in the call include foreign currency exchange rate volatility that has created larger-than-expected headwinds to reported results, and the early stage of enterprise agentic AI adoption which means full revenue upside from new AI offerings may take time to materialize.

Analyst Q&A

• Q: What stage of adoption is Box seeing for agentic AI, and how is it changing customer usage of Box? /

  A: Adoption of advanced agentic capabilities is still early, leaving significant long-term upside. Key early high-momentum use cases include document extraction for contracts, invoices and financial documents, and automated workflows like client onboarding and RFP processing. Adoption momentum is primarily driving growth via Enterprise Advanced upgrades, plus increased API usage for external agents and early ramp-up of AI unit consumption monetization.

• Q: What is driving the upside to full-year guidance, and how much comes from Q1 outperformance versus pipeline momentum for the rest of the year? /

  A: A portion of the guidance increase came from Q1 outperformance, but the majority of the increase is driven by stronger-than-expected pipeline build and continued momentum for Enterprise Advanced that management has high visibility into for the remainder of the fiscal year.

• Q: What is driving the above-expectation overall net retention rate, and why is Enterprise Advanced's net retention higher than average? /

  A: The increase in overall blended net retention is driven entirely by mix shift toward Enterprise Advanced, which has higher expansion rates than the broader business. Both seat expansion and pricing gains contribute to higher net retention for Enterprise Advanced, with seat expansion being the largest driver of the recent improvement in the blended rate.

• Q: If external agents and front-end UIs from other providers are growing, does Box need to compete for the UI layer to capture value? /

  A: Box is agnostic to all external agent and UI layers, which is core to Box's historical value proposition of storing content in one place accessible from anywhere. External agents increase API and content usage of Box by an order of magnitude, increasing the value of Box's secure, governed content layer. Box benefits from growth of all endpoints; usage of Box rises regardless of where agents or end users interact with content, and direct UI usage remains complementary for collaboration and review.

• Q: Will Box increase investment given strong pipeline, and what is the outlook for M&A? /

  A: Box is already incrementally increasing investment in high-return areas, primarily focused on verticalization of go-to-market (tailoring offerings for specific industries) and expanding partnerships with system integrators and hyperscalers (including new co-sell opportunities with AWS and OpenAI). R&D is also appropriately staffed to support the expanded product road map for AI capabilities.