Box barely beats the Street’s expectations and nervous investors back away

Shares of the cloud content management firm Box Inc. headed lower in extended trading today after it barely scraped past Wall Street’s earnings and revenue targets in its first quarter.

The company reported adjusted earnings of 37 cents per share, coming in just ahead of the analyst consensus estimate of 36 cents. Meanwhile, revenue for the period rose 11%, to $305.9 million, edging past the Street’s forecast of $304 million. All told, Box reported net income of $17.7 million in the quarter, up from just $8.1 million in the year-ago period.

Chief Executive Aaron Levie (pictured) said more enterprises are turning to the premium version of Box’s Intelligent Context Management platform to unlock the value of their unstructured data for artificial intelligence workloads. “Customers are adopting Enterprise Advanced to manage and connect their organization’s unique content to AI agents, allowing them to securely build intelligent workflows, automate work, and accelerate decision-making at scale,” he said.

The fact that Levie sees AI as a growth driver for Box has done little to ease investor’s fears that large language models may be about to eat the company’s lunch, though. This year, the shares of software firms including Box have come under intense pressure. The concern is that, as AI becomes more capable, there’s less need for enterprise workers to interact with the underlying software platforms. They’ll simply be able to tell autonomous AI agents what they want to do, and everything will be automated. Some even believe that agents could replace legacy software altogether, simply by building their own platforms, though many think that’s unlikely.

Similar to other software makers, Box has responded to this pressure by leaning on AI too. AI is now at the front and center of its content management platform, with the company launching multiple agentic AI offerings that can help to automate mundane data-related tasks.

During the quarter, the company announced a new version of Box Agent, which is a unified AI engine that leverages third-party reasoning models to search, analyze, synthesize and organize critical data and generate new content. It also launched a new offering called Box Automate in general availability. It’s an enterprise-grade agentic workflow tool centered around content that aims to dynamically route work across people, enterprise systems and Box Agents to accelerate enterprise productivity.

Box said these new AI offerings have helped to drive a little more momentum, and the company is upping its full-year revenue forecast as a result. It said it’s now looking for total sales of $1.28 billion in fiscal 2027, up from a previous forecast of $1.275 billion. Wall Street is still eying full-year revenue of $1.27 billion.

Box’s results make it clear that AI capabilities can help to float almost any kind of boat, for it’s now posting growth of above 10% on a consistent basis, said Holger Mueller of Constellation Research. While that’s still a tad pedestrian, it’s better than what the company was doing a couple of years ago, he added. “Good cost management helped the company to quadruple its earnings per share,” he said of its increased profitability.

The challenge for Box now is that it’s caught in a kind of “hamster wheel,” because it’s finding itself forced to keep on delivering innovation in document-related processes to offset the commoditization of simpler file services, Mueller explained. “If you consider its innovation speed and partnership activity, Box is punching well above its weight, but investors may be asking how long can the company keep doing that,” the analyst said. “If Box can keep it up, it could further accelerate its revenue growth. But there’s also the question of the threat posed by AI agents to document management. If not the “SaaSpocalypse,” maybe we’ll see a “docalypse” instead.”

For the current quarter, the forecast was mixed. Box anticipates earnings of 39 cents, just shy of the Street’s forecast of 40 cents per share in earnings. On the other hand, it’s also looking for revenue of $319 million at the midpoint of its guidance range, ahead of the Street’s $316.8 million target.

The results and forecast did little to excite investors, and Box’s stock slipped 2% in late trading. In the year to date, the stock has declined 14%, some way off the pace of the broader S&P 500 Index, which has gained just over 9% so far this year.

Photo: Robert Hof/SiliconANGLE