Box's AI Gamble Shows Early Promise, But Revenue Growth Still a Question Mark

Cloud content management company Box Inc. saw its stock surge in after-hours trading on August 27th, following a strong second-quarter performance that exceeded Wall Street's expectations. The company reported earnings before certain costs of 44 cents per share on revenue of $270 million, prompting an increase in its full-year revenue forecast to between $1.086 billion and $1.09 billion.

While the results offered a glimmer of hope, Box's sluggish revenue growth – just 3% year-over-year – remains a point of concern for analysts. However, the company is betting big on artificial intelligence to transform itself from a basic cloud storage provider into a sophisticated, AI-powered content management platform.

"In general, customers are leaning into Box AI," Box CEO Aaron Levie told SiliconANGLE in an interview, referring to the company's suite of generative AI tools that allow users to ask questions about their data and automate content creation. "Enterprises want to move off legacy content management systems, and AI is certainly part of that."

Box AI, launched last year, forms the core of the company's AI strategy. The platform offers features for summarizing documents, extracting key insights, and even drafting new content like marketing emails. This strategic shift towards AI has also fueled two key acquisitions this year. In January, Box acquired Crooze for its no-code application development capabilities, and more recently, it snapped up Alphamoon, a company specializing in intelligent document processing.

The Alphamoon acquisition, in particular, signals Box's ambition to tackle the largely untapped potential of unstructured data residing within contracts, invoices, and other business documents. "AI is the ultimate frontier of reinventing this category of content management," said Levie, emphasizing the potential of AI to unlock insights and automate workflows around these traditionally opaque files.

Despite the excitement around AI, industry analysts remain cautious. "It had another typical Box quarter, with tiny revenue growth that barely outpaced the rate of inflation," Holger Mueller, an analyst at Constellation Research Inc., told SiliconANGLE. "The good news is that it did manage to become more profitable, and now looks like it's on track to beat the $1 billion barrier in terms of annual revenue."

Mueller also pointed out the company's vulnerability to foreign exchange fluctuations, citing its significant dependence on revenue from Japan. Nonetheless, he acknowledges the strategic importance of Box's AI investments. "The company has set itself up well for the future with Box AI, and its recent acquisition of Alphamoon is a smart move that should help it enhance those capabilities,” he said.