Shares of Box Inc. took a bit of a beating in extended trading today after the cloud content management firm reported second-quarter financial results that barely topped earnings and revenue estimates and followed up with soft guidance.

Box reported net income of $10.8 million, with earnings before certain costs such as stock compensation coming to 36 cents per share. Revenue rose 6%, to $261.4 million. The results were just ahead of Wall Street’s targets of 35 cents per share in earnings and $261 million in revenue.

However, Box executives admitted that they are unlikely to beat expectations next time around. They forecast third-quarter revenue of $261 million to $263 million, below Wall Street’s consensus estimate of $265.6 million. The full-year forecast doesn’t look much better, with Box targeting a range of $1.04 billion to $1.044 billion, and Wall Street aiming for $1.05 billion.

Box Chief Executive Aaron Levie (pictured) insisted that more enterprises are turning to the company’s Content Cloud to transform the way they work and get more value out of their data. The company sells cloud-based content management tools, focused on collaboration and file sharing. It was originally focused on consumers when it first launched in 2005, but within a few years had pivoted towards the enterprise, helping organizations manage their entire content lifecycles and work securely from any location.

Levie stressed Box’s long-term prospects with the growth of generative artificial intelligence services. He pointed out that while chipmakers like Nvidia Corp. are seeing immediate benefits, application providers like Box will also experience growth as AI becomes essential for enterprises. “With Box AI, we will be able to securely connect customer’s enterprise content with the world’s leading AI models, uniquely positioning Box at the center of the future of work,” he promised.

Investors remain unconvinced, however. Following the report, Box’s stock fell more than 8% in the after-hours trading session.

Box’s other reported metrics were mixed. It reported remaining performance obligations of $1.138 billion at the end of the quarter, up 8%, while billings came to $232.5 million, down 1% from a year earlier. RPO represents the sum of invoiced amounts and the future amounts not yet invoiced for contracts with customers, while billings represents the amount invoiced for that is due for payment shortly. As such, both metrics are used as a gauge of a company’s future revenue.

On the product front, the highlight of the quarter was the launch of Box’s new plugin for Microsoft 365 Copilot, an AI assistant that Microsoft Corp. introduced earlier this year. Box said at the time that the new plugin extends the capabilities of Microsoft 365 Copilot to its cloud-based file storage platform. According to the company, it will reduce the amount of time necessary to extract information from business records.

Box is doing the right thing on the product side as it strives to change the future of work, but those efforts have so far been unable to impact its bottom line in a significant way, said analyst Holger Mueller of Constellation Research Inc. “What Box needs to do is achieve a product innovation velocity that can beat the price pressure of its offerings,” the analyst explained. “The alternative strategy would be to find more customers or markets, but Box has been working on this for years already, so all eyes are on its speed of innovation.”

Box investors will be hoping that the company’s AI gambits start paying off soon. Prior to today’s dip, Box’s stock was down 1% in the year to date, trailing the wider S&P 500 Index, which is up 17%.

Photo: The Demo Conference/Flickr