Record results for Box, so why are analysts seeing failure?


Collaboration tools vendor Box posted better than expected first-quarter results, but its shares tumbled yesterday as subscription sales and renewals – aka billings – were lower than analyst expectations.

On the surface, the company had a record quarter: Box reported revenues of $90.2 million, up 37 per cent year on year. CEO Aaron Levie said, “We had strong customer momentum adding more than 5,000 new customers in Q1, our largest number of new customers in a quarter. We also had wins and expansions with leading companies like Airbnb, GEICO, Whirlpool, and Wyndham Hotels and Resorts. We now have more than 62,000 paying customers.”

However, the jittery, superheated environment of the software as a service (SaaS) market was revealed by a nine per cent year-on-year uptick in Q1 billings to $75.9 million being seen as a failure; the consensus analyst forecast had been $84.1 million.

Levie addressed analyst concerns by saying, “We anticipated Q1 billings to be impacted by a few early renewals last quarter and our focus on annual payment durations versus multi-year prepayments.

“As we’re becoming a more strategic investment for our customers, larger transactions are shifting towards later in the year. Looking ahead, underlying demand for Box remains very strong and our competitive position in the market has never been better.”

That said, the company – seen by many as a rising star of the cloud services world – has yet to turn a profit, even as it has consistently grown revenues and reduced losses in recent quarters. Q1 losses stood at $38.6 million, down from $47.3 million in the year-ago quarter.

Levie took pains to emphasise what he described as Box’s “unique proposition”. He said, “We build the only enterprise content management platform that is 100 per cent cloud based. […] Second, Box is a platform agnostic solution with an open architecture. With Box, content can be centralised and we can serve as a single source of truth for a company’s information. […] Finally, we’re the uncontested leader in security.”

Box’s combination of ‘steady as she goes’ progress, enterprise focus, and thought leadership from a charismatic CEO has increased Wall Street gossip about the company being a potential acquisition target – noise that was amplified yesterday by’s announcement of its intention to buy ecommerce vendor Demandware for $2.8 billion, and other large cloud deals in recent weeks.

According to analyst company IDC, Box holds 21 per cent of a cloud collaboration and storage market that is estimated to be worth $0.8 billion, behind Dropbox on 23 per cent. However, Dropbox is increasingly seen as a generalist rather than a provider that has a convincing long-term plan for the enterprise.

As for the future, Levie said that a key focus for Box focus would be on growing an ecosystem of partners and integrators. “As more and more software moves to the cloud, enterprises are looking for a single repository to secure and manage their critical content.

“By creating seamless integrations with leading technology partners, we’re able to provide customers with a centralised content management platform that lets them secure, govern and collaborate on files, no matter what application they’re using.”

‘Frenemy’ Microsoft is a key partner within that strategy, added Levie. “Nowhere is our ecosystem strategy more relevant than our partnership with Microsoft, which continues to yield significant dividends. […] Adoption of Office 365 continues to be a key driver for new customers to invest in Box, as well as allow existing customers to expand their usage of Box.”

About Author

Chris Middleton

Chris Middleton is a widely respected business and technology journalist, author, and magazine editor. In recent years he has been Editor of Computing (where he remains Consulting Editor); co-founder and Managing Editor of Professional Outsourcing – a magazine he developed from scratch and grew to be the leading magazine in its field; Editor of CBR in its most successful year; and co-founder and launch Editor of Today, he is co-Director of EastwoodMiddleton Publishing, and founder, designer, and Editor in Chief of Strategist magazine (UK), the boardroom magazine that provides strategic insight for business leaders, and of its mobile-first digital edition at He is also co-founding Editor of Child Internet Safety magazine, and a contributing Editor of Over the years Chris has also written for, among many others, The Guardian, The Times, the BBC, and Computer Weekly. He is the author of several successful books on digital media, and a commissioning editor of more than 50 books.