Box Down 19% in a Year: Can a Strong Portfolio Help the Stock Recover?

Box BOX shares have dropped 18.9% in the trailing 12-month period, underperforming the Zacks Internet Software industry’s decline of 2.3% and the broader Zacks Computer and Technology sector’s return of 24.7%. The underperformance can be attributed to a challenging macroeconomic environment and higher expenses related to investments in cloud infrastructure, sales and marketing, and administration, which are hurting profitability.

In the trailing nine-month period ending Oct. 31, 2025, gross margin was flat year over year at 81.2%. Operating expenses increased 9.7% year over year to $635.6 million on 11.2% growth in research and development expenses, 7.4% increase in sales and marketing and 13% rise in general and administrative expenses. Operating margin contracted 50 basis points (bps) year over year. Box now expects a gross margin of 81% for fiscal 2026, indicating a 20-bps contraction from fiscal 2025. However, operating margin is expected to be 28% for fiscal 2026 (including positive forex impact of 10 bps), roughly unchanged from fiscal 2025.

Can a Strong Portfolio, Rich Partner Base Aid Box Shares?

A strong portfolio and a rich partner base that includes the likes of OpenAI, Amazon AMZN cloud arm Amazon Web Services (AWS), Google, Anthropic and IBM, are helping Box maintain its clientele. The company now has more than 2,000 customers paying at least $100K annually, up 7% year over year. Net retention rate in the third quarter of fiscal 2026 was 104%, ahead of management’s expectation of 103%, driven by price per seat increases and seat expansion. Meanwhile, partner-led user wins delivered double-digit revenue growth in the third quarter of fiscal 2026.

Box is expected to benefit from strong customer demand for Box AI and the growing adoption of its Enterprise Advanced suite. The Box AI platform connects AI models and agents, and prevents content sprawl and security risks of do-it-yourself solutions. The platform ensures data governance and compliance. Box Automate is an agentic workflow automation solution that is designed to orchestrate work across agents and teams. The company has added powerful AI capabilities for Box apps, its non-code solution for quickly building content apps. Meanwhile, Box Shield Pro is a powerful new suite of security capabilities powered by AI.

The company’s latest release, Box Extract, is a data extraction solution powered by leading generative AI agents. It delivers accurate data and insights from a multitude of content types, including documents, presentations, images and more. Box Extract allows enterprises to intelligently and securely extract the most valuable information from content and save it as metadata in Box. By using Box Extract, enterprises can automate workflows and gain speed in decision-making. Box Extract helps to unlock the information and transform the business’s potential to make quick decisions using analytical information.

Regarding partnerships, Box’s deal with Amazon is noteworthy. BOX and AWS inked a new multi-year strategic collaboration agreement to transform how organizations securely use AI to extract value from their most important content. The deal focuses on creating new Box AI agents for customers to use, built using AWS's advanced AI services and trusted infrastructure. Box also released new offerings and capabilities, including a new Amazon Quick Suite integration, customization of Amazon Q Developer, and compatibility with Amazon Strands, Kiro, and Amazon Bedrock AgentCore to streamline content-centric workflow automation and enable intelligent applications. The company signed a new partnership with Tata Consultancy Services to deliver AI-powered content management solutions to increase digital transformation.

BOX Q4 & FY26 Guidance Reflects Challenges

The company expects fourth-quarter revenues to be approximately $304 million, indicating 9% year over year, or 8% on a constant currency (cc) growth. Box expects fourth-quarter billings growth to be in the low-digit range, including a tailwind of 70 bps from favorable forex. 

Non-GAAP earnings are expected to be 33 cents per share. The Zacks Consensus Estimate for Box’s fourth-quarter fiscal 2026 earnings is pegged at 33 cents per share, unchanged over the past 30 days, indicating a decline of 21.4% from the figure reported in the year-ago quarter. 

The company expects fiscal 2026 revenues to be approximately $1.175 billion, indicating growth of 8% year over year on a reported basis or 7% at cc. Box expects fiscal 2026 billings growth to be in the 9-10% range, including a forex tailwind of 130 bps, which is, however, 100 bps lower than management’s previous expectation. 

Box now expects fiscal 2026 non-GAAP earnings of $1.28 per share. The consensus mark for Box’s fiscal 2026 earnings is pegged at $1.28 per share, unchanged over the past 30 days, indicating a decrease of 25.2% from the figure reported in fiscal 2025.

Zacks Rank & Stocks to Consider

Currently, Box carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader sector are Analog Devices ADI and KLA KLAC, each of which currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Analog Devices and KLA are currently pegged at 18.5% and 10.6%, respectively. Shares of Analog Devices and KLA have surged 21.9% and 36%, respectively, in the last three months.

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This article originally published on Zacks Investment Research (zacks.com).

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