Core Insights - Box (BOX) shares have declined 18.9% over the past 12 months, underperforming the Zacks Internet Software industry's decline of 2.3% and the broader Zacks Computer and Technology sector's return of 24.7% [1] - The decline is attributed to a challenging macroeconomic environment and increased expenses related to cloud infrastructure, sales and marketing, and administration, negatively impacting profitability [1] Financial Performance - For the nine-month period ending October 31, 2025, Box's gross margin remained flat year over year at 81.2% [2] - Operating expenses rose by 9.7% year over year to $635.6 million, driven by a 11.2% increase in research and development, a 7.4% increase in sales and marketing, and a 13% rise in general and administrative expenses [2] - Operating margin contracted by 50 basis points year over year, with expectations of a gross margin of 81% for fiscal 2026, indicating a 20-bps contraction from fiscal 2025 [2] Customer and Partner Dynamics - Box has a strong portfolio and a rich partner base, including OpenAI, Amazon Web Services (AWS), Google, Anthropic, and IBM, which helps maintain its clientele [3] - The company has over 2,000 customers paying at least $100K annually, reflecting a 7% year-over-year increase [3] - The net retention rate for the third quarter of fiscal 2026 was 104%, exceeding management's expectation of 103% [3] Product Innovations - Box is expected to benefit from strong customer demand for Box AI and the growing adoption of its Enterprise Advanced suite [4] - The Box AI platform connects AI models and agents, ensuring data governance and compliance while preventing content sprawl and security risks [4] - Box Extract, a new data extraction solution powered by generative AI, allows enterprises to automate workflows and make quicker decisions using analytical information [5] Strategic Partnerships - Box has entered a multi-year strategic collaboration agreement with AWS to enhance AI capabilities for customers [6] - The partnership focuses on creating new Box AI agents using AWS's advanced AI services [6] - Box has also partnered with Tata Consultancy Services to deliver AI-powered content management solutions [6] Revenue and Earnings Guidance - Box expects fourth-quarter revenues to be approximately $304 million, indicating a 9% year-over-year growth [7] - Fiscal 2026 revenue is projected to be around $1.175 billion, reflecting an 8% year-over-year growth [10] - Non-GAAP earnings for fiscal 2026 are expected to be $1.28 per share, indicating a decrease of 25.2% from fiscal 2025 [11]

Core Insights - Box (BOX) shares have declined by 13.8% over the past six months, underperforming the Zacks Internet Software industry's decline of 3.9% and the broader Zacks Computer and Technology sector's return of 22.3% due to a challenging macroeconomic environment and rising expenses related to cloud infrastructure, sales and marketing, and administration [1][9] Financial Performance - In the trailing nine months ended October 31, Box's gross margin remained flat at 81.2% compared to the previous year, while operating expenses rose by 9.7% year over year to $635.6 million, driven by a 11.2% increase in research and development expenses, a 7.4% increase in sales and marketing expenses, and a 13% increase in general and administrative expenses [2] - The operating margin contracted by 50 basis points year over year during the same period [2] Future Guidance - Box anticipates a gross margin of 81% for fiscal 2026, indicating a contraction of 20 basis points from fiscal 2025, while the operating margin is expected to remain stable at 28% [3] - For the fourth quarter, Box expects revenues of $304 million, reflecting a year-over-year growth of 9% or 8% on a constant-currency basis, with billings growth projected in the low-digit range [8][10] Product and Market Developments - Box is expected to benefit from strong customer demand for Box AI and the growing adoption of its Enterprise Advanced suite, with new use cases involving AI agents enhancing its prospects [4] - The launch of Box Extract, an AI-powered data extraction solution, and Box Automate, a workflow automation solution, are expected to improve enterprise efficiency [5] - Partnerships with companies like OpenAI, AWS, Google, Anthropic, and IBM are enhancing Box's AI ecosystem and driving double-digit revenue growth in the third quarter of fiscal 2026 [6] Customer Metrics - Box has over 2,000 customers paying at least $100K annually, a 7% increase year over year, with a net retention rate of 104% in the third quarter of fiscal 2026, exceeding management's expectations [7] - Billings grew by 12% year over year in the third quarter, and the remaining performance obligation (RPO) increased by 18% year over year to $1.5 billion, with expectations to recognize 55% of RPO over the next 12 months [7]