BOX Q1 2026: AI Upsells Lift Pricing, $7M Renewals Boost Billings
- Robust AI Adoption: Executives emphasized strong customer interest in AI-powered workflows and early renewals driven by the adoption of Box AI capabilities and Enterprise Advanced upgrades, underscoring a positive momentum for expanding AI-related revenue opportunities.
- Pricing & Upsell Strength: Consistent pricing improvements and significant upsell through Enterprise Advanced deals indicate solid pricing power. Customers are increasingly opting for higher-priced suites over traditional seat expansion, which bodes well for revenue quality and long-term margins.
- Ecosystem Integration & Modernization: The company’s ability to win customers migrating from legacy ECM systems—bolstered by strategic partnerships with system integrators and certifications like FedRAMP High for government work—positions Box as a modern, secure, and scalable content platform.
- Reliance on early renewals: Q1 billings were boosted by significant early renewals (roughly a 400 basis point impact) that may not continue at the same pace in future quarters, which raises concerns about the sustainability of revenue momentum.
- Dependence on pricing over organic seat growth: The company is increasingly relying on pricing enhancements to drive growth rather than strong organic expansion in seat numbers. This leaves BOX vulnerable if economic pressures slow down customer adoption or if pricing power softens.
- Macroeconomic uncertainty and cautious federal pipeline: Persistent macroeconomic headwinds and a cautious approach in the federal vertical could dampen new customer acquisition and delay digital transformation initiatives in regulated segments, posing a risk to future growth.
| Metric | YoY Change | Reason |
|---|---|---|
Revenue | Up ~4.4% (from $264,658K to $276,272K) | Modest organic revenue growth in Q1 2026, building on previous period momentum from factors such as multi-product suite adoption and customer seat expansion. This continued performance reflects Box’s established strategies from FY2025 while facing an unchanged external market environment. |
Income from operations | Down ~65% (from $18,007K to $6,338K) | The sharp decline is attributable to increased operating costs and one-time charges, including workforce reorganization expenses and other restructuring costs, which negatively impacted margins compared to the stronger operating performance in Q1 2025. |
Net income | Down ~52% (from $17,222K to $8,194K) | A reduction in operating income, compounded by higher one-off expenses such as deferred tax charges and restructuring costs, led net income to fall significantly relative to Q1 2025. This decline reflects both internal cost pressures and ongoing macroeconomic uncertainties. |
Basic net income per share | Down ~75% (from $0.08 to $0.02) | The per share metric dropped steeply because the substantial fall in net income was not offset by a proportional change in the weighted-average share count, indicating a significant drop in shareholder profitability compared to the previous year’s levels. |
Cash and cash equivalents | Up ~10% (from $624,575K to $689,628K) | Despite lower profitability metrics, strong operating cash flows and favorable exchange rate adjustments contributed to a 10% quarter-over-quarter increase in cash balances, reflecting prudent cash management from the prior period that cushioned the ongoing challenges in profitability. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue (Quarterly) | Q2 2026 | no prior guidance | $290 million to $291 million | no prior guidance |
Billings (Quarterly) | Q2 2026 | no prior guidance | Anticipated to be roughly flat year-over-year | no prior guidance |
Gross Margin (Quarterly) | Q2 2026 | no prior guidance | Approximately 81% | no prior guidance |
Non-GAAP Operating Margin (Quarterly) | Q2 2026 | no prior guidance | Approximately 28% | no prior guidance |
Non-GAAP EPS (Quarterly) | Q2 2026 | no prior guidance | $0.30 to $0.31 | no prior guidance |
Weighted Average Diluted Shares (Quarterly) | Q2 2026 | no prior guidance | Approximately 150 million | no prior guidance |
Revenue (Annual) | FY 2026 | $1.155 billion to $1.16 billion | $1.165 billion to $1.170 billion | raised |
Gross Margin (Annual) | FY 2026 | Approximately 81% | Approximately 81% | no change |
Non-GAAP Operating Margin (Annual) | FY 2026 | Approximately 28% (with a 60bps negative impact) | Approximately 28% | no change |
Non-GAAP EPS (Annual) | FY 2026 | $1.13 to $1.17 | $1.22 to $1.26 | raised |
Billings Growth (Annual) | FY 2026 | Approximately 7% | Approximately 9% | raised |
Weighted Average Diluted Shares (Annual) | FY 2026 | Approximately 153 million | Approximately 151 million | lowered |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q1 2026 | $274 million to $275 million | $276.272 million | Beat |
Gross Margin | Q1 2026 | ~80% | ~78% ((215,599 ÷ 276,272)) | Missed |
Billings Growth | Q1 2026 | Low to mid-teens | ~25.8% YoY ((Q1 2026 vs. Q1 2025)) | Beat |
Weighted Average Diluted Shares | Q1 2026 | ~151 million | 149.614 million | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI Adoption and Capabilities | Q2–Q4 2025 calls emphasized strong customer use cases, advanced pricing models, and increased adoption via Enterprise Plus and Enterprise Advanced (e.g., AI‐powered metadata extraction, early renewals, and cost improvements) | Q1 2026 continued to stress robust AI adoption with customers driving early renewals, a strategic pricing model, and declining AI inferencing costs helping to maintain margin‐neutrality | Consistent and positive momentum with continued strategic focus on AI. |
Enterprise Product Innovations | Q2–Q4 2025 repeatedly detailed the launch and benefits of Enterprise Advanced/Plus, citing pricing uplifts (20–40% higher), deepening customer upgrades, and integration of advanced features | Q1 2026 highlighted strong customer adoption of Enterprise Advanced along with early renewals facilitated by these innovations | Steady momentum reinforcing a key growth engine and pricing benefits. |
Box Apps and No-Code Application Development | Q3 and Q4 2025 showcased robust discussion around Box Apps, no-code application development, and acquisitions enabling workflow automation and custom dashboards | Q1 2026 only briefly referred to Box App dashboards used by customers, with no explicit focus on no-code development | Reduced emphasis in the current period; subject matter may be integrated into broader platform updates. |
Integration of Crooze Technology for Enhanced Customer Economics | Q2 and Q3 2025 discussed integrating Crooze technology to enhance workflow automation and improve customer economics | Q1 2026 did not mention this topic at all [no citation] | The topic is absent in Q1 2026, suggesting it may have been deprioritized or absorbed into overall product narratives. |
Customer Renewals and Contract Commitment Dynamics | Q2–Q4 2025 highlighted steady NRR, longer customer contract durations (RPO growth), and early renewals driven by the adoption of advanced offerings | Q1 2026 again emphasized significant early renewals (approximately $7 million) and expanded RPO, with improved contract durations | Consistent focus with slight improvement in renewal dynamics and contract commitment. |
Pricing Strategies and Organic Seat Expansion Challenges | Q2–Q4 2025 consistently stressed that pricing improvements (especially via Enterprise Advanced) were the main growth driver, while organic seat expansion remained modest | Q1 2026 reiterated that improved pricing is driving growth, with organic seat expansion continuing to contribute minimally | Stable strategy; reliance on pricing uplift continues with similar sentiment and challenges in seat expansion. |
Ecosystem Integration and Public Sector/Partner Expansion | Q2–Q4 2025 focused on deepening integrations with major tech partners, leveraging system integrators, and expanding in the public sector through certifications and partnerships | Q1 2026 highlighted robust ecosystem links, including key AI partnerships and FedRAMP High progress that bolster public sector and partner expansion | Continued and growing strategic emphasis with further deepening of partnerships and public sector opportunities. |
Legacy ECM Replacement and Digital Modernization | Q2–Q4 2025 consistently promoted the replacement of legacy ECM systems and highlighted digital modernization through AI-powered workflows and cloud migration | Q1 2026 reiterated its commitment to digital modernization and legacy ECM replacement through strategic partnerships (e.g., with DataBank) and cloud-based AI innovation | Ongoing and intensifying focus as a high-impact market opportunity. |
Macroeconomic Uncertainty and Federal Pipeline Risks | Q2 had minimal mentions; Q3 provided no details; Q4 cautioned on federal dynamics and showed cautious optimism amid uncertainty | Q1 2026 expressed clear caution regarding macroeconomic headwinds and maintained focus on dynamic federal pipeline risks, indicating a more guarded outlook | Heightened caution in the current period reflecting increasing external economic and federal market risks. |
Revenue Growth Sustainability and Back-End Weighted Growth | Q2–Q4 2025 discussed sustainable revenue growth with an expectation of strong back-end performance due to FX dynamics and early renewals | Q1 2026 again underscored sustained growth driven by early renewals and noted that the first half of fiscal 2026 is back-end weighted | Consistent outlook with predictable back-end momentum continuing to underpin growth forecasts. |
Operating Margin Sustainability and Dependence on One-Time Benefits | Q2–Q4 2025 showed strong operating margins enhanced partly by one-time benefits like data center asset sales, though Q3 highlighted record margins with some tailwind contributions | Q1 2026 reported slightly lower operating margins year-over-year due to the absence of previous one-time data center equipment sale benefits, though adjusted underlying performance remained positive | Margins remain fundamentally strong; however, the current period reflects a recalibration after the loss of one-time tailwinds. |
Decline or Discontinuation of Data Center Asset Sales Tailwind | Q2–Q4 2025 frequently referenced a positive margin tailwind (ranging from 60 to 100 basis points) from the sale of data center assets, with Q3 noting the completion of this benefit | Q1 2026 emphasized the lack of this tailwind, with comparisons showing headwinds (e.g., a 70 basis point headwind) versus the previous year | Clear downward trend as one-time benefits vanish, making margin comparisons more challenging. |
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Revenue Guidance
Q: Why are billings higher than revenue growth?
A: Management explained that Q1 billings benefited from about $7M in early renewals, which boosted the figures, and that normalization is expected in Q2 due to timing effects. -
Full-Year Guidance
Q: Why the constant currency guidance change?
A: Dylan Smith noted that rounding and prudent back‐half expectations amid macro uncertainty led to a slight reduction in constant currency billings growth guidance. -
Early Renewals
Q: What is the trend with early renewals?
A: The team pointed out that while early renewals drove strong Q1 results, they anticipate continued, though more normalized, early renewal volumes moving forward. -
AI Cost Impact
Q: Is AI functionality margin neutral?
A: Management emphasized that declining AI inference costs help maintain margins, making the added AI capabilities effectively margin neutral over the medium term. -
Platform Revenue & AI Adoption
Q: How is AI unit consumption evolving?
A: They described early but varied adoption of AI use cases across sectors, expecting the resulting platform revenue from AI unit consumption to grow steadily as deployments scale. -
Seat Growth & Pricing
Q: What about seat growth versus pricing increases?
A: Management observed that while net seat growth remains steady, most revenue expansion is coming from pricing improvements driven by Enterprise Advanced upsells rather than significant increases in seat numbers. -
Integration & Monetization
Q: How do integrations affect monetization?
A: They explained that by leveraging both seat revenue and AI unit volume through open APIs, they ensure monetization remains robust while keeping the platform interoperable and secure. -
Customer Demand
Q: How are customer conversations overall?
A: Management highlighted very strong customer engagement, with widespread interest in AI-driven workflows enhancing content productivity across industries. -
Industry Expansion
Q: How are innovations driving legacy migrations?
A: They mentioned that recent innovations and key partnerships are increasing win rates, particularly for customers moving away from outdated ECM systems. -
Federal Vertical Trends
Q: What is the outlook in the federal segment?
A: Management noted a cautious federal environment but pointed to the recent FedRAMP High certification as a positive development to capture sensitive government use cases.