Box raises FY 2026 revenue guidance to $1.175B as Enterprise Advanced deals double and AI adoption accelerates

Earnings Call Insights: Box, Inc. (BOX) Q2 2026

MANAGEMENT VIEW

* CEO Aaron Levie reported "a strong second quarter with results above our guidance, reflecting continued growth in customer adoption of Box AI and our advanced workflow capabilities." He highlighted revenue growth of 9%, RPO growth of 16%, and operating margins of 29%. Levie noted that "EPS of $0.33, $0.02 above the high end of our outlook." He emphasized accelerated adoption of Enterprise Advanced and described several notable customer wins, including a U.S. law firm, a Fortune 500 hospitality chain, and a global industrial automation company, all leveraging Box’s AI capabilities for workflow automation and data extraction.
* Levie detailed new product updates, stating, "In Q2, we announced all new updates to Box AI capabilities, including the general availability of Box's new enhanced extract agent and the beta launch of Box's MCP server." He also announced integration and partnerships with OpenAI, Anthropic, Snowflake, AWS, and Salesforce to broaden the AI ecosystem available to customers.
* Levie shared that Mark Wayland, current CRO, is retiring, and Jeff Newsom, formerly of Google Cloud, has joined as Chief Revenue Officer, bringing "over 2 decades of experience leading sales organizations in enterprise software, cloud infrastructure and AI."
* CFO Dylan Smith stated, "Q2 marked another quarter of strong execution as we exceeded guidance for all metrics and delivered both double-digit short-term RPO growth and a sequential improvement in our net retention rate." Smith further highlighted that "Q2 revenue of $294 million...accelerating growth was up 9% year-over-year and up 7% in constant currency."

OUTLOOK

* Smith guided Q3 revenue to be in the range of $298 million to $299 million, representing approximately 8% year-over-year growth. Q3 billings are anticipated to grow by approximately 10%. Q3 gross margin is expected to be approximately 81%, with non-GAAP operating margin at approximately 28%. Q3 non-GAAP EPS is expected in the range of $0.31 to $0.32.
* For the full fiscal year ending January 31, 2026, Smith raised revenue expectations to $1.170 billion to $1.175 billion, representing approximately 8% year-over-year growth. FY '26 non-GAAP EPS is now expected to be in the range of $1.26 to $1.28. He noted, "This represents an increase of $0.03 versus our prior expectations and an increase of $0.06 adjusting for currency movements since our previous guidance."

FINANCIAL RESULTS

* Box delivered Q2 revenue of $294 million, up 9% year-over-year. Remaining performance obligations (RPO) reached $1.5 billion, up 16%. Suites customers accounted for 63% of revenue, up from 58% a year ago. Net retention rate improved to 103% from 102% in Q1. Gross margin was 81.4%, with gross profit of $239 million. Operating income was $84 million and operating margin stood at 28.6%. Free cash flow generated was $36 million, and cash flow from operations was $46 million. The company repurchased 1.2 million shares for approximately $40 million.

Q&A

* Steven Lester Enders, Citi: Asked about attributing billings momentum to Enterprise Advanced. CFO Smith explained it's "hard to parse out exactly how much is coming from enterprise advanced and Enterprise Plus... those are really the core drivers given the demand for AI."
* Enders followed up on pipeline dynamics and deal sizes. CEO Levie responded that "the deals are now getting bigger in segments maybe where we wouldn't have even seen as larger deals," citing expanded use cases enabled by Enterprise Advanced.
* Lucky Schreiner, D.A. Davidson: Inquired about net seat growth and its drivers. Smith confirmed that "it really is the use cases and types of users and departments now that have really high-value use cases on Box because of both Enterprise Advanced as well as Enterprise Plus."
* Schreiner also asked about upgrades straight to Enterprise Advanced. Smith stated, "when you have a straight upgrade... we tend to see... a rough doubling, sometimes a little more, a little less... versus that 20% to 40% uplift when going from Enterprise Plus to Enterprise Advanced."
* Taylor Anne McGinnis, UBS: Asked about the impact of early renewals on outperformance and momentum into the second half. Smith said, "all having a roughly similar size impact, a few million dollars each in terms of the outperformance," and noted a prudent outlook for the second half due to "a pretty challenging environment."
* Matt Balik, Bank of America: Asked about evolving use cases for metadata extraction in Enterprise Advanced. Levie highlighted customers "running AI agents on that data to extract the critical details" and automating related workflows, with further capabilities to be announced at BoxWorks.
* Christopher Quintero, Morgan Stanley: Referenced a report on Gen AI pilot failures and asked about Box's early AI adoption success. Levie emphasized Box’s "hyper targeted" approach and platform, stating, "our solution out of the box really kind of derisks most of the reasons why AI projects will fail in an enterprise."
* Quintero also inquired about public sector momentum. Levie noted that "Box AI has an approved service with FedRAMP High support" and described positive momentum with federal agencies.
* Brian Christopher Peterson, Raymond James: Sought clarification on doubling of Enterprise Advanced deals. Levie confirmed "the number of Enterprise Advanced deals that doubled" and described strong growth across new logos and upsells.

SENTIMENT ANALYSIS

* Analysts' tone was largely positive, focusing on AI adoption and growth in Enterprise Advanced, but also displayed caution regarding pipeline sustainability, seat growth, and early renewals.
* Management’s sentiment was confident during prepared remarks, using language such as "we are incredibly excited about the opportunity ahead of us" (Levie), but adopted a more prudent tone in Q&A, particularly when discussing guidance and the operating environment.
* Compared to the previous quarter, management’s confidence in AI-led momentum appeared stronger, though caution regarding macroeconomic challenges persisted. Analysts maintained a constructive, yet probing, stance on sustainability and execution.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for FY '26 revenue increased by $5 million, with Q2 revenue growth accelerating to 9% from 4% in Q1. Operating margin improved to 28.6% from 25.3%. Net retention rate advanced to 103% from 102%. Suites customers now represent a larger portion of revenue. The tone of management shifted from cautious optimism in Q1 to increased confidence in Q2, underpinned by strong Enterprise Advanced momentum and AI-driven deal expansion. Analysts' focus shifted from billings timing and early renewals in Q1 to deeper questions on AI use case evolution and margin sustainability in Q2.

RISKS AND CONCERNS

* Management acknowledged ongoing macroeconomic uncertainty and a "pretty challenging environment" as a reason for prudence in guidance. Smith highlighted FX headwinds and noted, "there's still a lot of moving pieces out there." Analyst questions reflected concerns on pipeline sustainability, the impact of early renewals on billings, and evolving use cases for AI. Management’s mitigation strategy centers on expanding high-value AI-driven workflows, broadening platform integrations, and maintaining disciplined cost controls.

FINAL TAKEAWAY

Box closed Q2 2026 with accelerating revenue growth, improved operating margins, and stronger net retention, driven by rapid adoption of Enterprise Advanced and AI-powered solutions. Management raised full-year revenue and EPS guidance, signaled confidence in continued momentum, and highlighted new partnerships and leadership changes to support scale. The company remains focused on executing its AI-first strategy, expanding high-value customer use cases, and maintaining disciplined financial management amid a dynamic operating environment.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/box/earnings/transcripts]

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