Box, Inc. (NYSE:BOX) Q1 2027 Earnings Call Transcript

Box, Inc. (NYSE:BOX) Q1 2027 Earnings Call Transcript May 26, 2026

Box, Inc. beats earnings expectations. Reported EPS is $0.37, expectations were $0.36.

Operator: Good afternoon, and welcome to Box’s First Quarter Fiscal 27 Earnings Conference Call.

Cynthia Hiponia: I am Cynthia Hiponia, Vice President, Investor Relations. On the call today, we have Aaron Levie, Box’s Co Founder and CEO and Dylan Smith, Box Co Founder and CFO. Following our prepared remarks, we will take your questions. Today’s call is being webcast and will be available for replay on our Investor Relations website. Supplemental slides are now available on the– On this call, we will be making forward looking statements, including our second quarter and full fiscal year 2027 financial guidance and our expectations regarding our financial performance for fiscal 27 and future periods, including gross margins, operating margins, operating leverage, future profitability, net retention rates, remaining performance obligations, revenue and billings, and the impact of foreign currency exchange rates, and our expectations regarding the size of our market opportunity including the growing opportunity driven by the increasing role of unstructured data and AI agents in the enterprise, our planned investments, future product offerings, growth strategies, the timing and market adoption of and benefits from our new products, solutions, and pricing models, our ability to address enterprise challenges, including enabling organizations to automate critical workflows and deliver value for our customers.

The benefits from our deepening partnerships with leading AI labs and system integrators expectations regarding accelerating revenue growth, expanding profitability and long term shareholder value and our capital allocation strategies, including potential repurchase of our common stock. These statements reflect our best judgment based on factors currently known to us, and actual events or results may differ materially. These statements reflect our best judgment based on factors currently known to us and actual results or events may differ materially. Please refer to our earnings press release filed today and the risk factors and documents we filed with the SEC including our most recent 10 Q for information on risk and uncertainties that may cause actual results to differ materially from statements made on this earnings call.

These forward looking statements are being made as of today, May 26, 2026, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, during today’s call, we will discuss non GAAP financial measures. These non GAAP financial measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. You can find additional disclosures regarding these non GAAP measures, including reconciliations with comparable GAAP results in our earnings press release and in the related supplemental slides which can be found on the IR page of our website. Unless otherwise indicated, all references to financial measures are made on a non GAAP basis. Finally, please see our earnings deck posted on our IR website for a more detailed look at our Q2 and full year 2027 guidance.

Thank you. With that, let me turn the call over to Aaron.

Aaron Levie: Thanks, Cynthia, and thank you all for joining the call today. We had a very strong start to f y 27, reflecting continued adoption of our intelligent workflow solutions with Enterprise Advanced and the Box AI platform. In Q1, we delivered our first double digit year over year revenue growth rate in over 12 quarters. Revenue growth of 11 percent year over year or 10 percent in constant currency, billings growth of 5 percent year over year or 13 percent in constant currency, and operating margins of 28 percent all exceeded our guidance. Enterprise customers are increasingly adopting Enterprise Advanced, which brings together our most powerful intelligent workflow capabilities, such as the Box agent, Box Extract, Box Automate, Box Apps, and more.

As Enterprise Advanced has been in the market for a full year, we are very pleased with the customer trends we are seeing. In Q1, our Enterprise Advanced net retention rate was higher than our overall net retention rate of 105%. Enterprise Advanced also continues to capture our price premium of 30 to 40 percent over Enterprise Plus. Demonstrating the recognized value we are bringing to customers. Overall, this quarter continues to prove our unique value to Box customers. As they migrate their infrastructure and applications toward an agentic future. Box is increasingly being deployed as the platform for enterprises to manage their unstructured data for AI agents, and as a platform for automating their critical enterprise workflows. Some examples of our enterprise advanced wins in the quarter included a lending and financial services solutions provider, upgraded from Enterprise Plus to Enterprise Advanced, to centralize and organize the trust and estate related documents within Box and leverage Box AI to extract key metadata from unstructured legal documents.

With this upgrade, Box becomes the trusted content layer powering their adviser and client facing workflows, unlocking advanced security governance, and the full Box AI capability set as they scale. Representing a new logo win in EMEA, European manufacturing company adopted Enterprise Advanced to securely manage and share critical documents, streamline collaboration between global teams and partners, and reduce friction in complex workflows. That means faster decision making, improved operational efficiency, and a stronger foundation for innovation. Box will help them move away from fragmented systems toward a more unified, secure content layer. Giving them better visibility, governance, and control over their information. Over the past quarter, I have had the distinct pleasure of being able to personally connect with well over 100 enterprises in various industries and geographies.

What every single 1 of them have in common is they want the ability to leverage AI to accelerate their product execution be able to better serve customers, find new market opportunities, produce better campaigns, drive operational efficiency, and more. But in these conversations, 1 of the biggest challenges that comes up is that enterprises need the ability to securely connect AI agents to their most important enterprise context. Most of which rests in unstructured data. This unstructured data contains the most valuable information for agents to work with. Whether it is key contracts, research materials, HR policies, marketing assets, product road map decisions, financial documents, or anything else in the organization. Getting agents to be able to successfully work with this information, process it at scale, and be able to connect to it, securely remains 1 of the biggest challenges for any AI strategy in an organization.

Decades of legacy fragmented or on premises content management infrastructure is holding organizations back from being able to truly get the full value from AI. This is where Box comes in. And what we are building with our intelligent content management platform. And in a world where there are hundreds of times more agents than people in an enterprise, the importance of getting the right information to agents becomes paramount. Agents need to be securely enabled, tied to a business process, grounded in enterprise information, governed properly, and more. We are building the company and platform that can help our customers transform how they work with their enterprise content in the era of agents. And as the role of unstructured data grows in importance due to AI agents, our opportunity and TAM does as well.

In Q1, we had another quarter of great execution on our product road map, delivering both the new Box Agent and Box Automate. The Box Agent acts as a unified AI engine across Box, leveraging the latest advanced reasoning models, and Box’s agentic harness. To securely search company files, analyze and synthesize critical data, and generate new content all while respecting Box’s enterprise grade security governance and permission controls. You can use the Box agent to transform company content and expertise that any employee can interact with. Use the Vox agent to process large amounts of documents, whether it be for an M&A data room or large set of contracts. And generate new content from existing corpus of information, like responding to RFPs or generating sales presentations on the fly.

Next up, in Q1, we announced the general availability of Box Automate. Our new workflow automation solution that dynamically routes work across people, Box AI agents, and enterprise systems. With end to end automation to replace fragmented workflows and unlock enterprise productivity at scale. Customers can deploy custom Box agents across any workflow to create new content driven processes that complete completely reimagine how work gets done. Powering use cases like client onboarding, contract intelligence, brand asset approvals, life sciences R&D workflows, and more. This is 1 of our biggest releases yet and is a core part of the Enterprise Advanced story. Additionally, we expanded MCP app support in the Box MCP server and Box CLI agents and developers to leverage.

We also strengthened important technology partners and continued to expand our ecosystem, including work with NVIDIA’s NemoClaw, and OpenAI and Box AI agents and ServiceNow’s AI Agent Fabric. We were proud to be an early launch partner for leading model and agent platforms such as GPT-4.5 and 5.0, Claude Opus 3.0, the OpenAI Agents SDK, and Gemini 1.5 Flash which just recently was released in May. Providing customers with choice across AI models remains a critical part of our differentiation, and value proposition. So customers can ensure they can take advantage of any leading AI model with their content. Now in Q2 this year and beyond, we are continuing to invest in our innovation that helps organizations accelerate knowledge work, unlock intelligence from content, and transform workflows with AI agents.

We are expanding the capabilities of Box agents to support more sophisticated and longer running tasks, richer content creation, and greater customization. We are also advancing Box Extract with major improvements designed to simplify a extraction template creation enable more advanced use cases with better evaluation capabilities, and more. We are also continuing to invest in VoxAutomate with new enterprise features that help power agent driven workflows by combining structured deterministic processes with the flexibility of AI agents, and connected to the latest new features coming in Vox apps we are working to deliver complete agentic intelligent workflow solutions for enterprises of all sizes. Next, our long term focus on security and governance remains a major focus for us.

As organizations deploy both Box agents and external agents from systems like Claude for Work or OpenAI, that interact with Box content, protecting access to information becomes incredibly important. As agents become the largest user of software and data in an enterprise, organizations need robust ways of ensuring agents are only using the right data they need to work with. And any risk of malicious use of data or rogue agents must be detected and prevented. We are building on our leadership position in content security, with more granular access controls to help enterprises govern how external agents interact with content. Safeguards around sensitive data, and improve visibility into potentially concerning agent activity. We are also building on our agent guardrails, we can ensure that enterprises can limit how agents use their organization’s content.

Finally, given the growing increase in headless software experiences, where AI agents interact with enterprise applications and data through APIs, rather than traditional user interfaces, we are investing in a best in class developer experience so developers and agents can use Box effectively as a file system for AI. This includes faster onboarding, better insights, improved SDKs, new MCP capabilities, and broader support for agentic development. We are also continuing to deepen our partnerships and integrations with leading agent development platforms including the OpenAI Agents SDK, Claude Agents SDK, LangChain, and many others. Now turning to go to market, we are seeing growing success in the rollout of Enterprise Advanced. Which enables enterprises to transform how they work with their content and AI.

To deliver the full value of our platform, we are also focused on bringing solutions to market across key verticals like financial services, life sciences, legal, media and entertainment, the public sector, and more. We will continue to drive agentic solutions throughout fiscal 2027 and beyond with a deep focus on adding value through AI. Targeting industry specific workflows, enabling Box to be leveraged as a headless platform for unstructured data within agents, and strengthening our offerings through partners, Our partner ecosystem remains a major focus for Box, as we bring the full value of Box to our customers, their specific industries. To do this, we are working to ensure that Box is going to market with the leading frontier AI labs, system integrators, and hyperscalers.

For instance, AWS’s official announcement on bringing on OpenAI, as a model partner, Box was named as a partner with both organizations for agentic document workflows. Also, in the recent Claude for Legal Solutions announcement, Box was 1 of the key partners highlighted for management of enterprise content across the solution. Which built on our previous inclusion the Claude for financial services launch. The system integrator ecosystem also remains a core focus of ours. And in Q1, we continued to gain momentum in our partner led wins with Enterprise Advanced, Working with our partner VersaFile, we expanded our relationship with a major EMEA based automotive engineering, and industrials conglomerate that upgraded from Business Plus to Enterprise Advanced and added seats.

This deal also represented an early box solutions win driven by prebuilt SAP oriented integrations. The customer also purchased additional AI units to support extract driven workflows for business processes such as invoice management, contract life cycle management, and esignature consolidation, while enabling future use cases like digital asset management. Working with Slalom, a leading North American consumer finance company, selected Box for a multi thousand seat enterprise advanced deployment as part of a larger digital transformation project anchored on the Salesforce Financial Services Cloud, Box is replacing a fragmented legacy stack of document management systems, e-signature, and doc generation tools that had created complex compliance risk and operational drag across its regulated lending workflows.

Now as we look ahead, we believe this is a defining moment for Box. Enterprise content sits at the center of every enterprise’s agentic strategy. And our opportunity is to power how an enterprise connects their content securely to their people, agents, and applications. With the innovation we are delivering across both our headless platform and application layers, combined with our depth in data security, governance, and compliance, we are expanding the market in front of us and deepening the value we provide to customers. We remain focused on execution, disciplined investment, and delivering long term accelerating growth as we build the leading intelligent content management platform for the AgenTic era. Now let me turn the call over to Dylan.

Dylan Smith: Thanks, Aaron, and good afternoon, everyone. Q1 was a very strong start to the year, highlighted by record Q1 bookings. We delivered our fourth consecutive quarter of the accelerating revenue growth achieved a double digit growth rate for the first time since fiscal 23, and exceeded our guidance across all metrics. We have made significant progress against the financial strategy we outlined in March at our Financial Analyst Day. Accelerating revenue growth, driving continued enterprise advanced momentum, and reducing total shares outstanding by executing our disciplined capital allocation strategy. Q1 revenue of $3.00 6 million was up 11 percent year over year and up 10 percent in constant currency. Customers paying us at least a $100 thousand annually grew 11 percent year over year.

Suites customers now account for 67 percent of revenue up from 61 percent a year ago. We ended Q1 with remaining performance obligations, or RPO, of 1.6 billion a 12 percent year over year increase or 16 percent in constant currency. Short term RPO was up 8 percent year over year and up 12 percent in constant currency. We expect to recognize roughly 55 percent of our RPO over the next 12 months. Q1 billings of $255 million were up 5 percent year over year or 13 percent in constant currency. This result exceeded our expectations of low single digit growth despite absorbing an FX headwind that was 2 hundred 60 basis points greater than our prior expectations. This outperformance was driven primarily by strong Q1 bookings fueled by continued momentum from customers upgrading to Enterprise Advanced.

Our net retention rate in Q1 was 105%, above our guidance of 104%, and up from 102% 2 percent in the year ago period. Our annualized full churn rate remained at 3 percent. We now expect our net retention rate to be 105% exiting FY 2027. We delivered Q1 gross margin of 81.5% up 100 basis points from the year ago period. Operating income of 85 million resulted in operating margin expansion of 240 basis points from the year ago period to 27.7% or 28.1% in constant currency. This was above our guidance of 27.5%. In Q1, we delivered EPS of 37 cents which was above our guidance of 36 cents Turning to our cash flow and balance sheet. In Q1, we generated record free cash flow of $128 million and cash flow from operations of 140 million up 8 hundred 10 percent year over year, respectively.

We ended Q1 with $479 million in cash equivalents, restricted cash and short term investments. In March, we announced a $500 million expansion of our share repurchase program. We repurchased 4.8 million shares in Q1 for approximately $114 million As of April 30, 2026, we had approximately $445 million of remaining buyback capacity under our current share repurchase plan. With that, let me now turn to our Q2 and updated FY 2027 guidance. For the second quarter of fiscal 27, We expect Q2 revenue to be approximately $319 million representing approximately 9 percent year over year growth or 10 percent growth in constant currency. This includes an expected headwind of approximately 170 basis points from FX. We anticipate our Q2 billings growth to land in the low double digits which includes an expected tailwind from FX of approximately 140 basis points.

We expect Q2 gross margin to be in the range of 81% to 81.5%. We anticipate our Q2 operating margin to be approximately 28.5% which includes an expected headwind from FX of 100 basis points. We expect our Q2 EPS to be approximately 39 cents which includes an expected headwind from FX of approximately 3 cents Weighted average diluted shares are expected to be approximately 139 million. Dollars For the full fiscal year ending January 31, 2027. We are raising our revenue expectations for the full year by 5 million to approximately 1.28 billion representing 9 percent year over year growth or 10 percent in constant currency. This includes an expected FX headwind of approximately 90 basis points 30 basis points higher than our prior expectations.

Adjusting for currency movements, this represents an increase of approximately 8.5 million versus our prior guidance. We expect our FY 27 billings growth to be roughly in line with growth. This includes an expected headwind of approximately 150 basis points from FX, 50 basis points higher than our prior expectations. We expect FY 2027 gross margin to be in the range of 81% to 81.5%. We expect our FY 2027 operating margin to be approximately 28 percent or 28 point 7 percent in constant currency. We now expect FY 27 EPS of approximately $1.56 or $1.64 in constant currency. This represents an increase of approximately 6 cents when normalizing for currency movements versus our previous expectations. Weighted average diluted shares are expected to be approximately 139 million a reduction of 2 million shares versus our prior expectations.

Our return to double digit revenue growth underpinned by enterprise advanced momentum and an improving net retention rate reflects the growing demand we are seeing in the market for our AI powered solutions. In Q1, we continued to build on our strong market position launching powerful new capabilities, such as our Box Agent and Box Automate. At the same time, our go to market investments are translating into increased partner led deal momentum and encouraging early traction with Box Solutions. As we look ahead, we remain confident in the opportunity in front of us and committed to investing with discipline, to drive accelerating revenue growth expanding profitability, and long term shareholder value. With that, Aaron and I will be happy to take your questions.

Operator?

Operator: At this time, if you would like to ask a question, press star then the number 1 on your telephone keypad. To withdraw your question, simply press 1 again. Your first question comes from the line of Steve Enders with Citi. Please go ahead.

Q&A Session

Analyst (Steve Enders): Okay. Great. Thanks for taking the questions. This afternoon. I guess maybe just to start on I guess, what you are actually seeing from AgenTic AI adoption within your customers and I guess as you have a look at the more sophisticated customers that you have, Just kind of where are we in terms of their adoption curve and how that is translating to how that is changing,, I guess, their usage of Box moving forward as a result of that?

Aaron Levie: Yeah. So, I think we are still relatively early in the journey on what we would probably consider to be more advanced agents working with enterprise content. So I think the really exciting thing is how much upside that remains ahead of us. You know, some of the biggest use cases that we are seeing so far are things like our document extraction agent. Has absolutely kind of become a killer app for us within enterprises that have large amounts of contracts or invoices or financial documents. We are seeing a lot of momentum on our data extraction efforts. Our Box automate product that just launched in q, at the tail end of Q1 is going to be another kind of mechanism for deploying agents that can do much more advanced work on enterprise content workflows.

So things like client onboarding or RFP workflows or brand asset detection, anything where you want to be able to in an automatic process have an agent go and review information, generate new content, extract metadata. So those are some of the kind of big use cases. I think right now, it is mostly showing up within the enterprise advanced revenue momentum that we are seeing. So that is really driving a lot of the accelerated growth that we are seeing. And then layered on top of that, we are certainly seeing more platform usage and utilization. So box APIs will be leveraged more across agents that are outside of Box So customers are leveraging the Box APIs for agentic work they are doing within Cloud or within OpenAI. And other platforms, and then as well as our AI unit monetization which is now starting to ramp up.

Still, again, the early phases, but seeing good momentum with a lot of the heavy workload use cases like Box Extract that drives pretty heavy AI unit consumption from customers.

Analyst (Steve Enders): Okay. that is helpful context and, and great to hear. And maybe on just the guide, I mean, looks like a pretty healthy raise on a constant currency basis. I guess, you know, I want to get a better understanding for, I guess, maybe what is kind of changed in some of the underlying assumptions How much of this is, you know, based off of what you have already booked and seen coming through in Q1 versus maybe something that is still kind of on the come later this year and in terms of what you are seeing in the pipeline?

Dylan Smith: Yeah. So, definitely pleased with the underlying momentum that we are seeing in the business. And really, what is driving the majority of, the increase in our expectations is, on the come, but in areas that we have pretty good visibility into. Now that we see the continued impact and momentum of Enterprise Advanced in particular. Certainly, a portion of that increase you can see, did already occur in the Q1 time frame, and so we flowed that through But the magnitude of the beat, especially when factoring in the FX adjustment, so that $8.5 million increase to our expectations for the for this year’s revenue outcome, is really about just the continued pipeline build and momentum that we are seeing in the business, that we are, again, really, really pleased by.

Analyst (Steve Enders): Okay. Perfect. Thanks for taking the questions.

Operator: Thank you. Your next question comes from the line of Matt Bullock with Bank of America. Please go ahead.

Analyst (Matthew Bullock): Oh, hi. Great. Thanks for taking the questions. Wanted to ask about net revenue retention. Obviously, that continues to track very well, ahead of expectations. Maybe, Dylan, if you could just unpack the incremental drivers of that upside Then you also mentioned the EA net revenue retention is also above average. I would love, if you could speak a little bit more about the drivers of that as well.

Dylan Smith: Sure. So we would say actually that the overall net retention rate there is the business driver, which actually is directly related to the second part of the question. Which is just very healthy momentum and adoption of enterprise advanced. So that is what is driving from a mix standpoint, the increase that we have been seeing in net retention rate. And then if you think of, like, components of what drives that net retention rate, we have seen an increase both on the seats and on the pricing side of that expansion But really what is, moved most recently and has been the case for the past 3 quarters is around, seat expansion. So that is, just going a click deeper, what is really been driving that. But, again, you know, much of that is being driven by enterprise advanced.

And as that becomes a larger portion of the business and the and the customer expansion that rate that is a little bit higher than the than the overall average is what is bringing up the blended net retention rate, to that 105% as well.

Analyst (Matthew Bullock): Very helpful. And then if I could sneak 1 follow-up. That would be fantastic. Dylan, maybe if you could just unpack the changes to the constant currency margin guidance for the full year. Anything specifically driving the change? So for operating margin? For operating margin.

Dylan Smith: Yeah. So, really, we so we– on an as reported basis, maintained our operating margin expectations of 28 percent. But on a constant currency basis, you know, up about 20 basis points. So absorbing and offsetting that FX headwinds because the efficiencies that we are driving And, you know, there is no single item that is driving that increase, really just continuing to drive efficiencies across the business and as we continue to see that healthy top line growth. You know, that is certainly helpful as well. So just really a continuation of a lot of the kind of leverage points and overall operating discipline that we have been driving across the business. Wonderful.

Analyst (Matthew Bullock): Thank you.

Operator: Thank you. Your next question comes from the line of Taylor McGinnis with UBS. Please go ahead.

Analyst (Taylor McGinnis): Yeah. Hi, team. Thanks so much, ma’am, for taking my questions. Aaron, maybe first 1 for you. So you talked about a lot of AI innovation that you guys are bringing to market in your prepared remarks. So when we think about the growth levers outside of SKU upgrades to advance, any thoughts on when AI credits and MCP access could be more needle moving to numbers or box spend. I guess part of the question is just with the broader hiring environment, you know, still being fairly muted. Curious how your conversations with customers are going on box spend potential near term. If you are starting if you are seeing some signs of weak weaker seat expansion, but, you know, if Box is offsetting that potentially with some of this mix shift to usage.

Aaron Levie: Yeah. Great question. I mean, first of all, we, I think in the core seat part of the business, trends remain strong. Both the upgrade to enterprise advanced and overall kind of, you know, seat just health. And so I think some of the broader narrative is sort of not something that is reflected within our, within our customer base and within what we are seeing in the in the business model. So I would I would kinda call that out first as just a very positive trend we are seeing on the pure enterprise advanced side. And then as we have, you know, talked about these 2 additional growth levers beyond the pure you know, seat and price per seat dynamic with enterprise advance. there is the growth of AI units which are really the consumption pool of AI tokens, that our customers are leveraging across our native agents.

And then there is API monetization that increasingly will happen as agents are deployed external to Box that take advantage of content and documents in Box beyond whatever the kind of seat allocation is provisioned for. And both of those metrics are, are growing nicely. And, you know, sometimes we decide to monetize when a customer has some burst capacity and we go in and ensure that they are kind of, you know, sort of right-sized for their deployment. And then at other times, we will at the kind of appropriate renewal moment, customers will buy into more API calls or they will buy into more AI units. So some of that will lag, some of the usage, and some of that will come with, at the moment that the usage is happening depending on what we are doing with that customer.

But overall, both of those metrics are already driving, you know, kind of top line revenue, and I think that will continue to kind of provide a nice, healthy component of the revenue over the near, medium, and long run. But I think we are firing on all cylinders from a monetization standpoint right now. With, again, kind of very clear vectors of upside as you get more of the consumption model that we are commercializing. Awesome.

Analyst (Taylor McGinnis): Thanks, Aaron. And then, Dylan, 1 for you. Could you comment on the billings outperformance in Q1? So it was really strong. And it looks like the guide assumes, like, a continued low double digit constant currency growth in the first half. So when I look at the guide for the second half, if I ran my math right, it looks like it implies something closer to high single digits. So any, you know, shift, I guess, in renewals from second half into first half or anything to keep in mind there? Or, you know, is this a function of prudence of doing this throughout the year?

Dylan Smith: Sure. So would say that, the Q1 outperformance was really just driven by a lot of the underlying strength and bookings momentum that we saw in the business. Nothing unusual in terms of early renewals or know, payment durations or any of those, types of factors. So that was really responsible for the upside. And you are right that the H1 billings expectations, for that growth rate versus H2. H 1’s a little bit higher, but they are pretty close to each other. So we are expecting to see the momentum that we are seeing continue, if not pick up. And, that delta is really just a function of, you know, comparing largely out actuals and the and the near term expectations to the back half. So really just being prudent as we always want to make sure that we are setting expectations, that we are confident in meeting or exceeding.

Analyst (Taylor McGinnis): Congrats on the quarter, guys. Thanks so much.

Operator: Thank you. Your next question comes from the line of Lucky Schreiner with D.A. Davidson. Please go ahead.

Analyst (Lucky Schreiner): Great. Thanks for taking my questions. Maybe a quick follow-up on some of the agent and AI questions that have been asked. You know, curious how customers are maybe balancing their AI budgets And as they, you know, scale their AI usage and the consumption pricing, you know, have you seen any instances of maybe token optimization and enterprises trying to introduce better cost controls? And maybe in general, how would you characterize the urgency in customer conversations today with regards to ramping AI adoption and trying to maximize productivity.

Aaron Levie: Yeah. So maybe, in reverse. I think the urgency is, is quite high for the overall execution of a agentic strategies within enterprises right now. I mean, we I am in just a tremendous amount of conversations at the moment. And, and, you know, every week talking to probably half a dozen to a dozen customers depending on the week and we are hosting events and the trends are unbelievably consistent across industry, across geography, across size of business, which is you know, everybody has seen the amazing capabilities of things like coding agents, you know, kind of take off within their engineering organizations. Most companies have either deployed or are in the midst of deploying some kind of chat agent strategy. And so now the big the big kind of open area is, Okay.

Well, how do I get the gains of kind of coding agents, but in the rest of knowledge work? How do I accelerate the productivity of my sales organization or of my finance team or of, you know, the legal organization for client on and contract review processes or research and development. In life sciences or manufacturing. And so in all of those areas, you know, everybody kind of wants those same gains of the coding agents. But they are quickly met with this challenge of, well, to get those gains, you need to have your actual workflows and your data look a lot closer to how engineers have always worked, which is your data’s in the same place. You have access to it all, in a in an efficient way. You have the right kind of tooling to get your agents access to that information.

And all of those kinds of challenges, you know, show up pretty quickly because the customer says, I want to get these gains with AI, but my data is some legacy on premises system. I cannot easily connect it to agents. My provider does not have, you know, MCP support. My data is fragmented across a variety of systems, so I do not have the right access controls. For people or agents to get access to that information. So that is kind of the contour of the conversation right now, which is why we are in so many conversations, again, across industry and across you know, size of the company because everybody’s realizing they have to go and solve that problem if they are going to deploy agents at scale on their organization. So we are having an unbelievable amount of customer conversations You know, this is why we are on the road with our Content AI Summit.

Box first coming up this fall. We just had our Content AI virtual summit last week with major product announcements. So demand is strong. Pipeline is building. The conversations are fantastic, and so the momentum is absolutely building there. But customers do realize they have to go in and you know, through this journey, and there is change management. There is new technology they have to deploy. And that is going to take them, you know, some amount of time. Which is, puts us in a great position because they are going to need partners to help them bridge from all of these amazing you know, AI innovations that they are seeing in the market to being able to actually deploy this in their own environment. So that is the second part of your question.

And on the first part on tokenomics and overall kind of token budgeting, you know, dynamics, this is also a major theme. So every dinner we host with CIOs and we do this, you know, every 1 to 2 weeks pretty much somewhere in the country. The token budgeting conversation has absolutely taken over as 1 of the most important topics for CIOs. And there is a variety of factors kind of at play right now. But 1 thing that we strategically have as an advantage is you are gonna see the value of having a neutral layer that you have between your data and the ultimate AI consumption because what you wanna be able to do is swap in and out of different model providers or different harnesses or different agents based on whatever the type of performance gains you are getting based on the different cost profile you have of your workload.

You do not wanna have your data kinda stuck with 1 vendor that is going to, you know, sort of you know, try and, you know, keep your workloads going down a particular path. You wanna be able to have some flexibility of which agents you can use which models do you choose based on, based on the workload. So that puts our layer of the stack in effectively a premium position for the customer because what happens is we can go in, and this is where we are seeing with our relationships with customers. We can go in and say, okay. We can actually lower your cost on document extraction by choosing a different AI model that will get you the same amount of, you know, performance but at a at a lower cost. And that is something that is incredibly attractive.

To them. And lo and behold, that is dramatically more revenue than we were getting from that same customer before. So it is all revenue upside for us. But we then play a strategic role for that customer because we can route their workloads to different AI models based on their use case. And so that is gonna be the value of the neutral sort of, you know, AI model neutral layer in the enterprise. it is also the value of having your own AI harness. Where we can route those workloads depending on, again, what the right sort of price quality mix is. And so I think as token budgeting becomes a bigger topic, you are gonna see more value accrue to the layer that can really kind of swap out models for different workloads based on what the customer is trying to solve.

Analyst (Lucky Schreiner): So we think that is a great position to be. that is great to hear. Maybe a quick question for Dylan as well. Last quarter, you called out strength in the commercial segment. Did that continue this quarter? Any nuances commercial and enterprise adoption and potential impacts to linearity in this quarter?

Dylan Smith: No. So we saw a pretty consistent, trends and healthy execution and demand. In most of the markets that we operate in. Globally, and that holds true for continued strength and consistent, strong performance in the commercial business really globally as well. So, that is been 1 of the bright spots and drivers of, some of the green shoots we are seeing in EMEA. But then our US, commercial business and our JAPAC commercial business are also both coming pretty nicely right now.

Analyst (Lucky Schreiner): Great. Appreciate you taking my questions.

Operator: Your next question comes from the line of Josh Baer with Morgan Stanley. Please go ahead.

Analyst (Josh Baer): Congrats on the double digit growth. Wanted to ask sort of a follow-up on the different layers that play in. And, really, is it important to win the UI? I am wondering just given enterprises using ChatGPT, Copilot, Gemini, you know, all the agentic front ends, is it important to defend Box’s position there? You know, understanding the role that Box can still play around governing and accessing, securing the underlying content, but just curious on your thoughts there around positioning and value capture for the UI layer.

Aaron Levie: Yeah. Yeah. So and we have talked about and shared this a little bit over the past couple quarters. We emphatically, and I cannot underscore this more, we emphatically are both agnostic and endorse every possible use case of content at the agent and application layer above us. This has been core to our ethos really since the first few, honestly, weeks of launching Box. We very quickly realized 1 of the biggest value propositions we would have 1 of the biggest differentiators was you could store your content in 1 place, but access it from anywhere. And so we were integrating with external service providers you know, within truly the first couple months of launching the business. And, and that has been just in our DNA since day 1.

So agents to us represent a force multiplier of that value because what you are gonna do is you are gonna have all these new end points where people wanna be able to go and send off a task to an agent go to Claude and you say, hey. Can you go and summarize the past, you know, 50 contracts that I have signed? Or you go to ChatGPT and you build an agent that has all of your sales materials and you say, can you answer this question about this customer that I am in front of? Every single 1 of those are gonna be, are gonna be agentic workflows where our APIs will be consumed most likely an order of magnitude or more than what people ever did with their data. And so the importance of that is that actually then having a system that can securely manage that information govern who has access to it, get auditability of what agents have done with every single step along the way of what that agent ended up seeing, what files they looked at, what context retrieval they executed, being able to log and report and govern and retain any of those kind of critical actions, that actually that value is gonna go up in an enterprise as you have agents doing way more with our content than people.

So I would I would actually argue that we do not wanna we do not wanna fight for the UI layer. We wanna fight for the best possible level of integrations and APIs. Across all of those agentic systems. And then the UI gets used as much as knowledge workers wanna be able to go in directly, you know, interact with their content or interact with the box agent. But we feel very comfortable that these are highly complementary interactions. The usage of box across, you know, every surface that we can think of is only going up. Even in a world of agents because you the more you have agents doing with your things with your content, the more you are also gonna need to go and you know, look at the content directly within Box or go and collaborate on it with other people.

So none of this is at all in kind of contention for that usage pattern. So we want all the all the endpoints to grow. Very clear. Thanks, Aaron.

Operator: Your next question comes from the line of Brian Peterson with Raymond James. Please go ahead.

Analyst (Brian Peterson): Congrats on the strong quarter I will keep it to 1 question. So given the strength that you are seeing in the pipeline, double digit growth, are there any thoughts of leaning in a little bit more aggressively either in the go to market or the product side? And how are you guys thinking about incremental M and A opportunities?

Aaron Levie: So, you know, we are we are we are honestly incredibly excited about the growth prospects right now. And we do spend a decent amount of time, you know, figuring out as we have overperformance in the business. What things we should be doubling down in, where are we seeing investment areas, that we believe would have near and medium term kind of return profile. So I would say already that is sort of happening within the budgeting process as you are you are seeing these results play out. Maybe to point to some areas that we are really focused on as I mentioned, our vertical strategy is taking on a lot of focus right now because the way that you are going to translate, you know, AI to most enterprises through some vertical lens You know, AI, at the end of the day, the customer is really kind of bringing in an external you know, service effectively as software.

And the way that you have always procured services is through some form of an industry orientation because you want that service provider to understand your business. And so the way that AI will get used in life sciences will be different than financial services, which will be different yet again than legal or, or media and entertainment or many other industries. So verticalization, of the go to market efforts, is increasing, and that is that is something we are investing in. We are certainly investing across the system integrator kinda hyperscaler ecosystems. We see a lot of upside in how we work with partners. You know, we were quite excited by the AWS announcement with OpenAI. We obviously have a lot of customers that leverage Box with the OpenAI models, and giving them choice of being able to deploy those on Bedrock.

And have that, you know, route through the Vox platform or connect to agents that the customer has deployed on Bedrock is another kind of growth vector, for us, and we can now co sell with Amazon through the AWS Marketplace. So we think that is gonna be you know, some meaningful upside over the, again, kinda medium and long run. So we are definitely doubling down on key go to market areas. And in r and d, know, we do think that there is some efficiency as we continue to scale up, but we are making sure that we are staffing the R&D efforts appropriately for the kind of road map we are delivering, which is an expanded road map and delivering far more innovation to our customers. So but I would say that go to market incrementally is getting more of the investment just given the nature of, you know, how customer centric we have to be right now with, with deploying AI in these environments.

Thanks, sir.

Operator: That concludes our question and answer session. I will now turn the call back over to Cynthia for closing remarks. Great.

Cynthia Hiponia: Thank you, Tiffany. Thank you, everyone, for joining us this afternoon, and we look forward to updating you on our next quarterly earnings call.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. May now disconnect.