EPS of $0.02 decreased by 83.3% from previous year
Gross margin of 78.0%
Net income of 8.19M
""This is the year of AI Agents and the ability to drive automation around any kind of workflow with AI, and Box will be building out the leading capabilities to help our customers do this with their enterprise content at scale."" - Aaron Levie
Box delivered a solid start to FY2026 (Q1) with revenue of $276.3 million, up 4% year over year and 5% in constant currency, supported by strong RPO expansion (+21% YoY to $1.5 billion) and billings growth (+27% YoY to $242 million). Gross margin expanded modestly to 80.5% while non-GAAP operating margin stood at 25.3% (GAAP margin substantially lower at ~2.3% given operating income of $6.34 million). Management highlighted a secular AI-first upgrade cycle, with Enterprise Advanced momentum, broader adoption of Box AI Agents, and a growing partner ecosystem as primary drivers of future growth. The quarter featured meaningful AI-related product announcements, FedRAMP High authorization for government use, and strategic partnerships (Microsoft Copilot, IBM watsonx, Google Agentspace, Salesforce Agentforce, Slack AI, ServiceNow AI, Zoom). Free cash flow reached $118 million, cash and equivalents plus short-term investments totaled ~$792 million, and Box repurchased ~$50 million of stock. For FY2026, Box raised revenue guidance to $1.165–$1.17 billion (roughly +7% YoY and ~6% in constant currency) with ~9% billings growth and an ~81% gross margin. Non-GAAP diluted EPS guidance is $1.22–$1.26 for the year, and Q2 guidance implies continued solid top-line progression with expected FX tailwinds and some early-renewal timing effects. Box remains focused on leveraging AI to drive higher value per seat, expand Enterprise Advanced deals, and scale an open AI model ecosystem around Box content.
Key Performance Indicators
Revenue
276.27M
QoQ: -1.16% | YoY:4.39%
Gross Profit
215.60M
78.04% margin
QoQ: -2.33% | YoY:4.45%
Operating Income
6.34M
QoQ: -64.66% | YoY:-64.80%
Net Income
8.19M
QoQ: -95.78% | YoY:-52.42%
EPS
0.02
QoQ: -98.29% | YoY:-83.33%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $276.3 million, +4% YoY, +5% CC.
Gross margin: 80.5%, up 0.3pp YoY; note: prior-year benefit of ~100bp from data center equipment sales in Q1 last year.
Gross profit: $215.6 million, +5% YoY.
Operating income: $6.34 million, GAAP margin ~2.29%; non-GAAP operating margin: 25.3% (adjusted basis); after adjustments (DC equipment, leap year, FX) the margin would be up ~90bp YoY.
EBITDA: $22.74 million; EBITDA margin 8.23%.
Financial Highlights
Selected Q1 FY2026 metrics and YoY/QoQ context:
- Revenue: $276.3 million, +4% YoY, +5% CC.
- Gross margin: 80.5%, up 0.3pp YoY; note: prior-year benefit of ~100bp from data center equipment sales in Q1 last year.
- Gross profit: $215.6 million, +5% YoY.
- Operating income: $6.34 million, GAAP margin ~2.29%; non-GAAP operating margin: 25.3% (adjusted basis); after adjustments (DC equipment, leap year, FX) the margin would be up ~90bp YoY.
- EBITDA: $22.74 million; EBITDA margin 8.23%.
- Net income: $8.19 million; net income margin ~2.97%; GAAP EPS includes non-cash items; non-GAAP EPS: $0.30, $0.04 above the high end of guidance (FX +$0.01, tax impact -$0.12).
- RPO: $1.5 billion, +21% YoY, +17% CC.
- Billings: $242 million, +27% YoY, +17% CC; Q1 benefited by early renewals (~$7 million), contributing to an ~400bp uplift; FX tailwind ~700bp versus prior expectations.
- Net retention rate: 102%, up from 101% YoY; annualized churn: 3%.
- Customers with ≥$100k annual revenue: ~1,940, up 8% YoY; Suites revenue share: 61% (vs. 56% a year ago).
- Free cash flow: $118 million; cash flow from operations: $127 million; cash and cash equivalents/restricted cash/short-term investments: ~$792 million; share repurchases: 1.6 million shares for ~$50 million; remaining buyback capacity: ~$152 million.
- Balance sheet liquidity and leverage: Total assets $1.64B; total liabilities $1.43B; total stockholders’ equity $214.6M; total debt $724.96M; net debt ~$35.3M; cash position supports ongoing buybacks and capex needs.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
276.27M
4.39%
-1.16%
Gross Profit
215.60M
4.45%
-2.33%
Operating Income
6.34M
-64.80%
-64.66%
Net Income
8.19M
-52.42%
-95.78%
EPS
0.02
-83.33%
-98.29%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key insights from Box management during the Q1 FY2026 earnings call, grouped by theme:
- Strategy and AI momentum: Box is pursuing an AI-first transformation to become the leading Intelligent Content Management Platform, emphasizing AI Agents across the Box content stack and interoperability with multiple AI ecosystems. Aaron Levie underscored the strategic focus: “This is the year of AI Agents and the ability to drive automation around any kind of workflow with AI, and Box will be building out the leading capabilities to help our customers do this with their enterprise content at scale.” Box’s AI strategy is reinforced by ecosystem partnerships and product releases (Grok/OpenAI integration, Box AI Agents for Microsoft 365 Copilot, IBM watsonx Orchestrate, Google Agentspace, Salesforce Agentforce, Slack AI, ServiceNow AI Fabric, Zoom AI Companion).
- Enterprise Advanced GTM and pricing: Dylan Smith highlighted continued Enterprise Advanced momentum and pricing improvements in the 20%–40% uplift window, with solid pipeline growth even in Q1 (seasonally weak). There is a focus on expanding the partner ecosystem to drive large-scale deployments and compliance-enabled solutions for regulated industries.
- AI adoption, product execution, and customer wins: Management pointed to a broad set of AI-driven use cases across industries (contracts, invoices, research data, marketing assets) and cited real-world deployments: universities upgrading to Enterprise Advanced; an investment advisory firm expanding AI model usage via Box AI Studio; and a financial services firm moving from on-prem to Box for data security and retention.
- Financial discipline and cash returns: Box reported strong cash generation (FCF $118M, OCF $127M) and ongoing capital return through buybacks; FX tailwinds supported Q2 and FY26 guidance; Box reiterated a disciplined capital allocation strategy and maintained a favorable balance sheet (net debt ~ $35M).
- Guidance and macro considerations: Box tightened its FY26 outlook with a narrow band around revenue, billings, and margins, acknowledging macroeconomic uncertainty and IT spend volatility, while preserving upside optionality if AI adoption accelerates. The company expects a roughly 120bp FX tailwind for FY26 and notes that Boxworks timing shift to Q3 will reallocate approximately $3M of expenses between quarters.
"This is the year of AI Agents and the ability to drive automation around any kind of workflow with AI, and Box will be building out the leading capabilities to help our customers do this with their enterprise content at scale."
— Aaron Levie
"The biggest driver that we saw in Q1 was really around the adoption of customers looking to adopt our AI capabilities, both with Enterprise Plus and now more and more with Enterprise Advanced, even though we're early days."
— Dylan Smith
Forward Guidance
Outlook and assessment:
- Q2 FY2026 guidance: Revenue $290–$291 million (~8% YoY, ~6% CC); gross margin ~81%; non-GAAP operating margin ~28%; non-GAAP EPS $0.30–$0.31 (FX tailwind ~ $0.02); weighted-average diluted shares ~150 million. These targets reflect continued AI-driven demand for Enterprise Advanced and Box AI capabilities, offset by early renewal dynamics and macro-driven conservatism.
- Full-year FY26 guidance: Revenue $1.165–$1.17 billion (~7% YoY, ~6% CC); gross margin ~81%; non-GAAP operating margin ~28% (FX tailwind ~40bp through the year); non-GAAP EPS $1.22–$1.26 (FX tailwind ~ $0.07). Management notes macro uncertainty and capex/IT spend variability as key risks but maintains a constructive long-term view on AI-enabled content workflows.
- Assessment: The guidance aligns with a cautious but constructive stance on IT budgets amid macro volatility, while leveraging AI-first growth catalysts. The FY26 trajectory assumes continued Enterprise Advanced adoption, expanding AI-driven use cases, and a broad partner ecosystem to accelerate reach. The potential upside hinges on faster-than-expected AI deployment, higher seat-based expansion through pricing and cross-sell, and stronger-than-expected international growth, particularly in Japan.
- Monitoring priorities for investors: (1) Pace of Enterprise Advanced adoption and AI unit volume growth; (2) RPO conversion to revenue and duration mix; (3) FX tailwinds/hedges and their impact on margins; (4) Customer churn and net retention trajectory toward 103%; (5) International expansion dynamics and regulatory/compliance tailwinds (FedRAMP/US government opportunities); (6) Boxworks timing and cost discipline in the second half of FY26.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
BOX Focus
78.04%
N/A
N/A
N/A
GDDY
63.10%
20.70%
1.10%
29.07%
FFIV
81.70%
26.80%
5.14%
22.02%
GEN
80.30%
43.10%
9.19%
21.43%
CCCS
73.50%
-4.25%
-0.86%
-76.89%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Box sits at the intersection of enterprise content management and AI-enabled workflow automation. The Q1 FY2026 results validate the core thesis: a high-margin SaaS platform that can monetize AI-enabled content use-cases through price-led seat expansion and enterprise-wide upsells (Enterprise Advanced). The core growth drivers are the AI Agents initiative, expanding go-to-market partnerships, and a broad ecosystem that enables working with Box content across multiple AI stacks. The balance sheet is robust, with ample cash flow and a substantial buyback runway, providing downside protection and capital return flexibility.
- Investment stance: Positive. Box demonstrates durable revenue growth with a high visibility backlog (RPO $1.5B) and strong gross margins, while investing in AI platform capabilities that should compound revenue growth over the next several years.
- Key catalysts to watch: continued Enterprise Advanced adoption, acceleration of AI unit consumption, the impact of foreign exchange tailwinds on international revenue, and the successful execution of BoxWorks’ roadmap. Risks include macro-driven IT spend slowdowns and competition; investors should monitor quarterly billings volatility driven by early renewals and the pace of AI-related cost efficiency savings.
Key Investment Factors
Growth Potential
High potential from AI-driven product expansion (Box AI Agents, Deep Research, metadata extraction, and cross-platform interoperability) and Enterprise Advanced upsell. RPO of $1.5B with 55% of RPO expected to be recognized in the next 12 months indicates strong booking velocity and revenue visibility. Suites customers represent 61% of revenue, signaling effective upsell into higher-value bundles. International exposure (~1/3 of revenue, with Japan as a key contributor) provides multi-regional growth potential. The AI ecosystem strategy (OpenAI, Nvidia, IBM, Google, Salesforce, etc.) positions Box as a centralized content layer across diverse AI stacks, supporting broad applicability of Box content in AI workflows.
Profitability Risk
Macro sensitivity in IT spending; early renewals may be volatile and influence quarterly billings; FX variability and potential headwinds for non-US revenue; competition from hyperscalers and legacy ECM players; dependency on the continued cost declines in AI inference to preserve margin; regulatory risk around data privacy and security in AI-enabled workflows; execution risk in scaling the AI platform and maintaining security/compliance across a broad partner network.
Financial Position
Robust liquidity and cash generation. End of Q1 cash and equivalents plus short-term investments: ~$792M; total debt ~$725M; net debt ~ $35M. Free cash flow of $118M, operating cash flow of $127M, and a buyback program with $152M remaining capacity provide ample capital return flexibility. High gross margin (~81%) and non-GAAP operating margin target (~28%) support durable profitability as Box expands AI capabilities. A shift of expenses with Boxworks (Q3) indicates cost discipline and planning efficiency.
SWOT Analysis
Strengths
AI-first strategy with Box AI Agents and extensive ecosystem partnerships (Microsoft Copilot, IBM watsonx, Google Agentspace, Salesforce Agentforce, Slack AI, ServiceNow AI Fabric, Zoom).
Strong gross margin and scalable GAAP/Non-GAAP profitability framework; 81%+ gross margin target for FY26.
Robust cash generation and balance sheet (FCF $118M, OCF $127M; cash ~$792M; net debt ~$35M).
Significant RPO backlog ($1.5B) and increasing billings, signaling revenue visibility and durable contract economics.
FedRAMP High authorization enabling government use, expanding addressable market in regulated sectors.
High customer stickiness with 102% net retention and 3% annualized churn.
Weaknesses
Reliance on AI compute cost declines; margin trajectory could be challenged if AI costs don’t decline as expected or if usage expands faster than efficiency gains.
Macro sensitivity to IT budgets and potential delays in enterprise spending; Q2/Q3 guidance includes conservative assumptions related to macro uncertainty.
Early renewals can introduce quarterly volatility in billings and timing risk to recognized revenue.
Opportunities
Expansion of Enterprise Advanced adoption across geographies and industries, driving larger per-customer ARR and higher pricing power.
Open ecosystem of AI models and agents across multiple platforms enhances customer lock-in and cross-sell opportunities.
International growth, with international revenue accounting for roughly one-third of total revenue, and Japan as a key contributor.
Increased demand for AI-enabled content workflows in regulated industries (life sciences, banking, government, healthcare).
Threats
Intense competition from large cloud incumbents and ECM players expanding AI capabilities.
Regulatory changes or data governance concerns impacting AI use-cases and data access controls.
Macro headwinds could impact new bookings, especially in non-US markets; FX volatility remains a factor.