Core Viewpoint - Box's recent earnings report shows a mixed performance with a decline in earnings year over year, but revenues have increased, indicating potential growth opportunities despite recent stock underperformance [1][2]. Financial Performance - Box reported Q2 fiscal 2026 non-GAAP earnings of 33 cents per share, a 25% decline year over year, but exceeded the Zacks Consensus Estimate by 6.45% [2]. - Total revenues reached $294 million, surpassing the consensus mark by 1.21%, with a 9% year-over-year increase on a reported basis and 7% on a constant-currency basis [2]. - Billings for the quarter were $265 million, reflecting a 3.3% year-over-year increase on a reported basis and 6% on a constant-currency basis [3]. - The company's net retention rate improved to 103%, up 100 basis points year over year [3]. Remaining Performance Obligations - Box's remaining performance obligations (RPO) totaled $1.5 billion, marking a 16% year-over-year increase on both reported and constant-currency bases [4]. - Short-term RPO was $812 million (up 12% year over year), while long-term RPO was $664 million (up 21% year over year) [4]. Operating Metrics - The non-GAAP gross margin for Q2 was 81%, contracting by 20 basis points year over year but expanding by 100 basis points sequentially [5]. - The non-GAAP operating margin was 28.6%, which expanded by 20 basis points year over year and 400 basis points sequentially [5]. Cash Flow and Share Repurchase - As of July 31, 2025, cash and cash equivalents were $758 million, an increase from $689.7 million as of April 30, 2025 [6]. - Box generated $46 million in cash from operations in Q2, down from $127.1 million in the previous quarter, and recorded a non-GAAP free cash flow of $35.7 million [6]. - The company repurchased approximately 1.2 million shares for $40 million, with about $112 million remaining under its current buyback capacity [7]. Guidance - For Q3 fiscal 2026, Box expects revenues between $298 million and $299 million, indicating an 8% year-over-year increase [8]. - For fiscal 2026, Box anticipates revenues between $1.16 billion and $1.175 billion, also reflecting an 8% year-over-year increase [9]. Market Position and Estimates - Since the earnings release, there has been a downward trend in estimates, with the consensus estimate shifting by 197.06% [10]. - Box has a subpar Growth Score of D, but a strong Momentum Score of A, resulting in an aggregate VGM Score of D [11]. - The stock holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [12]. Industry Comparison - Box operates within the Zacks Internet - Software industry, where competitor Zoom Communications has seen a 2.5% gain over the past month, reporting revenues of $1.22 billion with a year-over-year change of +4.7% [13]. - Zoom's expected earnings for the current quarter indicate a +2.9% change from the year-ago quarter, with a Zacks Rank 1 (Strong Buy) [14].

Core Insights - Box reported second-quarter fiscal 2026 non-GAAP earnings of 33 cents per share, a decline of 25% year over year, but exceeded the Zacks Consensus Estimate by 6.45% [1] - Total revenues reached $294 million, surpassing the consensus mark by 1.21%, with a 9% year-over-year increase on a reported basis and 7% on a constant-currency basis [1][8] Q2 Financial Performance - Billings for the quarter were $265 million, reflecting a 3.3% year-over-year increase on a reported basis and 6% on a constant-currency basis [2] - 63% of revenues were generated from Suite customers during the second quarter [2] - The net retention rate was 103%, up 100 basis points year over year [3] - Remaining performance obligations (RPO) totaled $1.5 billion, a 16% increase year over year, with short-term RPO at $812 million (up 12%) and long-term RPO at $664 million (up 21%) [3] Operating Metrics - Non-GAAP gross margin for Q2 was 81%, contracting by 20 basis points year over year but expanding by 100 basis points sequentially [4] - Non-GAAP operating margin was 28.6%, which expanded by 20 basis points year over year and 400 basis points sequentially [4] Balance Sheet and Cash Flow - As of July 31, 2025, cash and cash equivalents were $758 million, up from $689.7 million as of April 30, 2025 [5] - The company generated $46 million in cash from operations in Q2, down from $127.1 million in the previous quarter [5] - Non-GAAP free cash flow for the quarter was $35.7 million [5] Share Repurchase - In Q2, Box repurchased approximately 1.2 million shares for $40 million, with roughly $112 million remaining under its current buyback capacity [6] Guidance - For Q3 fiscal 2026, Box expects revenues between $298 million and $299 million, indicating an 8% year-over-year increase [9] - For fiscal 2026, expected revenues are between $1.16 billion and $1.175 billion, also indicating an 8% year-over-year increase [10] - Non-GAAP operating margin for both Q3 and fiscal 2026 is expected to be 28% [9][10] - Non-GAAP earnings for Q3 are projected to be between 31-32 cents per share, and for fiscal 2026, between $1.26 and $1.28 per share [9][10]