Box Shares Tumble After-Hours Despite Revenue Beat, Buyback Boost
Investors weigh a slight earnings miss and forward guidance against strong future revenue indicators and a $150 million share repurchase expansion.
Shares of Box Inc. (BOX) fell sharply in after-hours trading on Tuesday after the cloud content management company reported mixed third-quarter financial results and provided a forward outlook that appeared to underwhelm investors.
The stock plunged more than 11% in extended trading, erasing gains from the regular session where it closed up 2.9% at $30.20. The negative reaction came despite a headline revenue beat and a significant expansion of its stock repurchase program.
For the quarter ending October 31, Box reported revenue of $301.1 million, an increase of 9% year-over-year and slightly ahead of the consensus analyst estimate of $299 million. The company posted adjusted earnings of $0.31 per share, which met some Wall Street expectations but was just shy of the more bullish $0.32 estimate noted by some outlets.
The market's downbeat response suggests a focus on the company's guidance and the fine print of its earnings. For its upcoming fourth quarter, Box projects revenue of approximately $304 million and adjusted earnings of about $0.33 per share. While representing continued growth, this forecast may have disappointed investors looking for stronger acceleration in a competitive software market.
Despite the sell-off, Box management highlighted several signs of underlying business strength. Remaining Performance Obligations (RPO), a key metric indicating future revenue under contract, surged 18% year-over-year to $1.5 billion. Billings for the quarter also grew by 12% from the prior year.
In a move signaling confidence in its own valuation, the company announced a $150 million expansion of its share buyback authorization. During the third quarter, Box had already repurchased 2.4 million shares for roughly $77 million, according to its earnings release. The expanded program underscores a commitment to returning capital to shareholders, though it wasn't enough to placate the market's growth concerns.
"Our Intelligent Content Management platform is enabling the world’s largest and most regulated enterprises to power their most critical business processes," said Aaron Levie, co-founder and CEO of Box. Levie emphasized the role of the company's new AI-powered tools in driving customer adoption and expanding deals.
CFO Dylan Smith noted that the adoption of Box AI and advanced enterprise features contributed to an improved net retention rate of 104% for the quarter. This indicates that the company is successfully expanding its revenue from existing customers.
With a market capitalization of approximately $4.28 billion, Box operates in a highly competitive sector against giants like Microsoft and Google, as well as other specialized players. Investors in the software-as-a-service (SaaS) space have become increasingly discerning, punishing companies that show any signs of decelerating growth or failing to significantly exceed expectations.
For the full fiscal year, Box maintained its previous revenue guidance of approximately $1.175 billion, representing an 8% increase from the prior year. It also upheld its full-year adjusted earnings forecast of about $1.28 per share.
The after-hours slide puts the stock's performance in a new light, as it had been trading near the lower end of its 52-week range of $28.00 to $38.80. Investors will now watch to see if the focus returns to the company's solid free cash flow generation and growing contracted revenue base or if concerns about its growth trajectory in a challenging macroeconomic environment will continue to weigh on the shares.