Box's Q3 earnings exceed expectations, with 9% revenue growth and 28.6% operating margins, fueled by strong demand for AI-driven solutions and strategic investments.

Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to The Box Incorporated third quarter fiscal 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Cynthia Hipponia, Vice President of Investor Relations. You may begin.

Good afternoon and welcome to Box's third quarter fiscal 2026 earnings conference call. I'm Cynthia Hipponia, Vice President Investor Relations. On the call today we have Aaron Levie, Box Co Founder and CEO, and Dylan Smith, Box Co Founder and CFO. Following our prepared remarks, we will take your questions. Today's call is being webcast and will also be available for replay on our investor relations website. Supplemental slides are now available also on our website. On this call, we will be making forward looking statements including our fourth quarter and full year fiscal 2026 financial guidance and our expectations regarding our financial performance for fiscal 2026 and future periods, including gross margins, operating margins, operating leverage, future profitability, net retention rates, remaining performance obligations, revenue and billings and the impact of foreign currency exchange rates and deferred tax expenses and our expectations regarding the size of our market opportunity, our planned investments, future product offerings and growth strategies our ability to achieve our revenue, operating margins and other operating model targets the timing and market adoption of and benefits from our new products, pricing models and partnerships our ability to address enterprise challenges, enhance our product capabilities and deliver cost savings for our customers the impact of the macro environment on our business and operating results and our capital allocation strategies, including potential repurchase of our common stock and settlement of our convertible debt. These statements reflect our best judgment based on factors currently known to us and actual events or results may differ materially, please refer to our earnings press release filed today and the risk factors and documents we file with the securities and Exchange Commission, including our most recent quarterly report on Form 10Q. For information on risks and uncertainties that may cause actual results to differ materially from statements made on this earnings call. These forward looking statements are being made as of today, December 2, 2025, and we disclaim any obligation to update or revise them should they change or cease to be up to date. In addition, today's call we discuss non GAAP financial measures. These non GAAP financial measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. You can find additional disclosures regarding these non GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release and in the related supplemental slides, which can be found on the IR page of our website. Unless otherwise indicated, all references to financial measures are made on a non GAAP basis. Thank you. With that, let me turn the call over to Erin.

Thanks everyone for joining us today. Building on the momentum and strong results we delivered in the first half of FY26, third quarter revenue exceeded our guidance, growing 9% year over year and producing operating margins of 28.6%. We drove a net retention rate of 104% ahead of our expectations of 103%, driven by both price per seat increases and seat expansion. Our ongoing strategic investments in go to market and products are driving growth reflected in our Q3 billings growth of 12% year over year and RPO growth of 18% year over year. Our strong financial results clearly demonstrate that our intelligent Content Management platform is building momentum in the market. Just a few weeks ago, I met with dozens of CIOs and IT leaders in New York and what struck me was how the conversations have evolved over time. Where the vast majority of these discussions now focus on new use cases for box around using AI agents for extracting structured data and insights from documents, using AI agents to automate knowledge worker tasks, or leveraging AI agents to democratize access to expertise across their organizations. The full power of AI agents is delivered when you can begin to augment knowledge worker tasks with infinitely scalable automation. But as companies try to do this, they quickly come to the same conclusion. The key to success is ensuring agents have access to the right data in the right format and can process it effectively and securely at scale. And when trying to solve this problem, most enterprises experience how difficult this can be. Enterprises are understanding that not only do you have to excel at everything required for AI on unstructured data, which could mean combining and keeping up with dozens of different technologies. You also need a platform that can handle the security, compliance, access, controls, creation, sharing and storage of all of this enterprise content, and the problem is only getting harder as more platforms emerge that need to talk to the same unstructured data assets. You can't easily replicate your files across agentic systems like Salesforce, Google, ChatGPT, ServiceNow, and hundreds of other platforms, all which have different security and governance models, access controls and more companies will increasingly need a trusted AI platform to manage their most important enterprise content that can work with all of their agentic AI platforms. This is what we're building with the Box AI platform. Box is the secure, neutral AI content platform for the most important enterprise content. It's the single source of truth that connects AI models and agents, prevents the content sprawl and security risks of DIY solutions, and ensures data governance and compliance. And best of all, we integrate with OpenAI, Google, Anthropic, AWS, IBM and more so customers can use any model without fragmenting their enterprise content. As we've shared, we introduced Enterprise Advanced less than one year ago to bring together our full suite of powerful AI and intelligent workflow automation capabilities, and Enterprise Advanced continues to drive both upgrades and new logo wins across verticals, segments and geographies. Examples in Q3 include a leading financial services organization upgraded from Enterprise plus to Enterprise Advanced to improve management and search across repositories, including an archive of historical records. By using Box apps and metadata extraction, the organization is streamlining workflows in claims management, hr, legal and member services and migrating non member documents from legacy systems to Box. This supports AI assisted research into over a century of corporate history and provides updated interfaces for data management. A leading international law firm, an early adopter of Enterprise Advanced in Q4 of FY25, expanded its use of Box by hundreds of seats in Q3, driven by Box's proven ability to deliver secure solutions and AI driven workflows. Our platform will support projects with government clients requiring FedRAMP high compliance, enabling lawyers to collaborate securely and efficiently on sensitive matters and finally, a leading renewable energy company in EMEA. A new logo for Box chose Enterprise Advanced to modernize its document management and collaboration processes across multiple departments including legal compliance, security and it. By implementing Box, the company aims to streamline document workflows and improve metadata management and enable secure external collaboration with partners and regulators. To build on the momentum we are seeing with customers, we recently announced a new set of next generation AI agent and automation features at boxworks to drive intelligent workflows in the enterprise. This included Box Extract, a data extraction solution powered by AI agents that delivers accurate data and insights from a multitude of content types, including documents, presentations, images and more. This new capability allows enterprises to easily extract any structured data and insights from their unstructured documents, from contracts and invoices to healthcare records to insurance claims and more. We also announced Box Automate, an agentic workflow automation solution designed to orchestrate work across agents and teams. Box Automate allows customers to design sophisticated workflows that leverage their content in Box as well as connect to other systems via APIs to power any end to end document workflow. Additionally, we announced powerful AI capabilities for Box Apps, our no code solution for quickly building content apps that will continue to get major product upgrades that enable our customers to power more advanced business processes on Box. And we announced Box Shield Pro, a powerful new suite of security capabilities powered by AI, allowing customers to automatically apply AI driven classification, accelerate threat response with agentic insights, and proactively strengthen their security posture against an evolving threat landscape like ransomware attacks. As we have seen, the rate of innovation continues to accelerate from AI model providers and Box is quickly evaluating and enabling updates for our customers to access the latest features and models directly in Box. We have announced integrations for the newest models from Mistral, Anthropic, OpenAI and Google, including being a day one launch partner of GPT 5.1, Gemini 3 and Claude Sonnet 4.5. We've added support for OpenAI's agent kit so customers can bring Box content into their agentic workflows, made Box AI available in Gemini Enterprise through the Google Cloud Marketplace, and introduced support for Slack's new Work Objects to bring Box's intelligence capabilities directly into Slack conversations. We've also strengthened our long term strategic partnership with with AWS with a recent announcement of a multi year AI collaboration agreement to transform agentic AI capabilities on enterprise content. Box will become available in the AWS marketplace to streamline procurement and accelerate the value of both platforms. We're incredibly excited about this partnership and our ability to bring the Box and AWS platforms together more deeply. Now, looking forward in Q4 we are going to be focused on delivering against the major announcements we shared at boxworks. In particular, I'm incredibly excited for the upcoming release of Box Extract. Enterprises are awash in unstructured data that they can now tap into for the first time with AI agents processing and extracting relevant data from these documents and Box Extract makes this easier than ever. We will also be releasing other major updates to Box AI agents in Box, including an all new centralized experience where you can interact with any AI agent from Box from one central location, allowing you to use AI agents to find relevant data or answers in Box or handle much more complex work on content in Box. We'll also be upgrading Box AI Studio, to support improved agent capabilities like attaching existing knowledge to agents and streamlining the agent creation flow to make it easier for anyone to build their own agents in the enterprise. Turning to go to market we are driving the adoption of Enterprise Advanced and continue to see pricing improvements for Enterprise Advancedd over Enterprise plus at the higher end of our 20 to 40% target. Our focus has been and will continue to be on driving adoption of our AI powered solutions in Enterprise Advanced including Custom Box AI Agents, Box Apps and Looking Forward Box Extract and Shield Pro across our customers workflows. Our market positioning emphasizes Box unique strength as a trusted platform for unstructured data with built in AI governance and security. We're continuing to double down on our Enterprise Advanced Sales motion and driving more emphasis across key verticals like financial services, life sciences, government, professional services and more. Our partner led business is a critical part of our strategy as we power more advanced verticalized solutions for customers. We saw continued momentum with partners delivering double digit revenue growth in partner led wins in Q3. These wins include a leading global automotive company who upgraded from Enterprise plus to Enterprise Advanced to centralize its expanding design ecosystem and replace over 75 fragmented content repositories. A leading housing administrator in EMEA partnered with Deloitte and Box to modernize its digital housing platform and tenant communications. Box powers the solution for managing documents and inquiries from housing applicants, tenants and affiliated organizations, improving efficiency and collaboration. We also launched a new partnership with Tata Consultancy Services, one of the world's largest systems integrators to deliver AI powered content management solutions to accelerate digital transformation. By combining Box's intelligent content management platform with TCS's global scale and industry depth, we expanded our reach across key industries from financial services and healthcare to manufacturing, retail and the public sector. Before I turn it over to Dylan, let me update you on how we're expanding an AI first approach at Box using Box AI as Customer zero as I've shared before, we are focused on Box becoming the leading AI first company and we want to use AI agents to augment our productivity, increase our capacity and better serve customers. For instance, in Go to Market we have purpose built Box AI agents that streamline each step in a sales or customer success process. We have a research agent that analyzes a prospect's goals and challenges and maps them to Box capabilities. A discovery agent recommends the best use cases for a customer type using win loss signals from past deals, Coaching agents give reps tips after every customer interaction and more. In Customer Success, a feature adoption agent suggests use cases, target Personas and enablement materials to boost adoption. All of these agents free up our sales and support teams to serve more customers and with greater personalization. And this is just in Go to Market across Box. We are doing the same in our HR and recruiting workflows, IT organization, legal and compliance and product management and engineering and outside of box AI. For instance, in engineering we're leveraging Copilot to accelerate our product development velocity and we're expanding AI assisted coding across the code base to ship features faster. AI is the biggest shift in work that we have ever seen in our lifetimes. Box is embracing the opportunity to demonstrate to our customers how they can transform how they work with content and AI. And we are seeing customers discover new use cases that tap into the value of their unstructured data made possible with our Intelligent Content Management platform. With that, I'll hand it over to Dylan.

Thanks Erin. Good afternoon everyone. In Q3 we delivered another strong quarter. With revenue, billings and operating margin all exceeding our guidance. This outperformance was the result of continued execution against our FY26 priorities, investing in key go to market initiatives and enhancing the AI capabilities of our Intelligent Content Management Platform platform, generating efficiencies across the business and executing on our disciplined capital allocation Strategy. We delivered Q3 revenue of 301 million above the high end of our guidance. This represents 9% year over year growth with sequential acceleration to 8% year over year growth in constant currency. We now have more than 2,000 customers paying us at least $100,000 annually, up 7% year over year. Suites customers now account for 64% of our revenue, an increase from 59% a year ago. We ended Q3 with remaining performance obligations or RPO of 1.5 billion, growing 18% year over year and up 19% in constant currency. Short term RPO grew 14% both as reported and in constant currency. This growth is being fueled by strong customer demand for box AI, resulting in a pronounced upgrade cycle and longer contract durations. We expect to recognize roughly 55% of our RPO over the next 12 months. Q3 billings of 296 million were up 12% year over year, both as reported and in constant currency, driven primarily by strong bookings. In the quarter, billings growth exceeded our guidance of approximately 10% and includes an FX headwind of approximately 220 basis points versus our prior expectations. We ended Q3 with a net retention rate of 104%, up from 103% in Q2 and 102% in the year ago period. This trend is being driven by strong box AI and enterprise events momentum resulting in accelerating bookings and lower dollar churn. We continue to see improvements in both seat price and seat expansion. We now expect to exit FY26 with a net retention rate of 104%, one point higher than our previous expectations. Q3's gross margin was 81.7%, exceeding our guidance of 81%. Excluding the tailwind from data center equipment sales in Q3 of last year, this represents an increase of 50 basis points year over year. We delivered Q3 operating income of 86 million and operating margin of 28.6%, exceeding our guidance in Q3 we delivered EPS of $0.31. In line with our guidance, this includes a headwind of approximately 1 1/2 cents from FX versus our prior guidance. I'll now turn to our cash flow and balance sheet. In Q3 we generated free cash flow of 61 million and cash flow from operations of 73 million, up 7% and 17% year over year respectively. We ended Q3 with 731 million in cash, cash equivalents, restricted cash and short term investments. Turning to our share repurchase plan in Q3 we repurchased 2.4 million shares for approximately $77 million. As of October 31, we had approximately 35 million of remaining buyback capacity. Additionally, our Board of Directors recently authorized a $150 million increase to our share repurchase program. Before turning to guidance, I wanted to address our 205 million of convertible notes due to mature on January 15, 2026. At that time, we intend to settle the outstanding convertible debt principle with cash. With that, let me now turn to our Q4 and FY26 guidance. As a reminder, approximately 1/3 of our revenue is generated outside of the U.S. with roughly 65% of our international revenue coming from Japan. Since we last provided guidance, the US Dollar has strengthened versus the yen and the following guidance includes the expected impact of FX assuming current exchange rates for the fourth quarter of fiscal 2026, we expect Q4 revenue to be approximately 304 million, representing approximately 9% year over year growth or 8% in constant currency. We anticipate our Q4 billings growth to be in the low single digit range, including an expected tailwind from FX of approximately 70 basis points. We expect Q4 gross margin to be approximately 82%. We anticipate our Q4 non GAAP operating margin to be approximately 30%. We expect our Q4 non GAAP EPS to be approximately $0.33. Weighted average diluted shares are expected to be approximately 147 million for the full fiscal year ending January 31, 2026. We are proud to have delivered strong year to date results driven by customer demand for our enterprise grade AI capabilities translating into the momentum we're seeing in Enterprise plus and Enterprise Advanced. As a result, we now expect our full year revenue to be approximately 1.175 billion, representing approximately 8% year over year growth or 7% in constant currency. Adjusting for currency movements, this represents an increase of approximately 5 million versus the midpoint of our prior guidance. We expect our FY26 billings growth to be in the 9 to 10% range. This includes a tailwind of approximately 130 basis points from FX, 100 basis points lower than our previous expectations. Adjusting for currency movements, this represents an increase of 150 basis points versus our prior guidance. We expect FY26 gross margin to be approximately 81% when adjusting for the tailwind from data center equipment sales last year, which also flows through to operating margin. This represents a year over year improvement of 40 basis points. We expect our FY26 non GAAP operating margin to be approximately 28% including a tailwind of approximately 10 basis points from FX. We now expect FY26 non GAAP EPS of approximately $1.28 including an expected tailwind of approximately $0.02 from FX. This represents an increase of $0.01 versus the midpoint of our prior expectations and an increase of $0.03. Normalizing for currency movements since our previous guidance, weighted average diluted shares are expected to be approximately 149 million. We are proud of the strong results we delivered in Q3 with demand for Box AI and adoption of Enterprise advance driving an acceleration in top line metrics. With our ongoing strategic investments in Go to market initiatives and our intelligent Content Management platform delivering strong returns, we are well positioned to capitalize on the opportunity ahead while delivering significant long term shareholder value. With that, Erin and I will be happy to take your questions. Operator.

Thank you and we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one a second time. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is Star One. If you would like to join the. Queue. And our first question comes from the line of Matt Bullock with Bank of America. Your line is open.

Great. Thanks for the question here. I wanted to ask kind of a high level question, kind of turning back the clock to the March Analyst Day where you outlined you know, several growth levers that you, you would be able to use to get to that 10 to 15% growth target over the long term, I guess, since March. Could you comment directionally on how you're. Feeling about each of those growth levers as contributors? Are we ahead of schedule, kind of in line? How should you think about that?

Yeah, so if you look back at. A lot of those growth levers would say that certainly, you know, all of. Those are tracking quite well. And the adoption, just the timing of when we started to see the impact of Enterprise Advanced and some of our newer AI capabilities is exceeding our expectations. And so, you know, that shows up in a lot of the trends around pricing as well as an improvement in net seat growth. That's kind of the upsells and seat expansion dynamic. The new customer acquisition has certainly been. Tracking well, especially given some of the green shoots we're seeing in emea and. We hope to supercharge that with a. Lot of the partner and SIA investments and relationships that we're building. And then finally, and related to Enterprise Advanced as well, that platform expansion, especially in the form of AI units, is. Tracking nicely as well.

Got it. So all three certainly. Yes. One for call if I could. Oh, sorry. Go ahead. Awesome. Thank. Yeah, yeah, I appreciate it. And then I've also, you know, noticed has gradually improved as well. You know, maybe if you could help. Unpack the drivers of, of that sales and marketing efficiency and help us think about general salesforce productivity, maybe your hiring intentions for this year and next year, whether or not that's in line and tracking or if those improvements in productivity are kind of making you more willing to hire on the go to market front.

Yes, we kind of laid out that this was a year where we wanted to be investing incrementally more in sales capacity, some of our vertical efforts, going deeper with system integrators and our partner ecosystem. So we shared that at Financial Analyst Day and obviously throughout this year, various updates. We're very happy with the results that we're seeing thus far on those investments, both in the kind of near term productivity, but also more of the qualitative impact that we're seeing. So building long term partnerships, building more pipeline around those. As we shared today, being listed in the AWS marketplace, which is coming soon, that will add kind of additional channel distribution support for us. We called out the Deloitte deal, what we're doing with tcs, Slalom Databank and IBM and many others. So that partner channel is going to continue to build out. So we're we continue to believe and are bullish on the overall go to market investments that we've made as well as our platform investments. And I think you'll continue to see that from us going into next year.

Fantastic. Thank you.

And our next question comes from the line of Brian Peterson with Raymond James. Your line is open.

Hi, thanks for taking the question.

This is John on for Brian. I wanted to start on FedRAMP high on the FedRAMP high authorization you received earlier in the year. Any details you can share on how the federal vertical is doing for you you? Maybe how we should think about the pipeline of business there and if the. Government shutdown had any impact on late stage deals in the pipe.

And then I have a quick follow up. Yes. So FedRamp High was kind of very important for us to be able to get into many of the more sophisticated and complex government deals. So that is increasing our ability to serve Department of Defense customers for again more and more mission critical work. So we're seeing good momentum there on some of the the sales conversations and pipeline build. We also announced the partnership with OneGov out of the General Services Administration. So I think we're getting even more kind of support and general air cover within the federal government IT ecosystem. And while, you know, we did see a couple kind of incremental shifts on deal timing as a result of the government shutdown, we feel very confident in the momentum that we're seeing now coming into Q4. And overall, you know, we are, we're finding the federal business to be, you know, fairly healthy at the moment. Okay, great color there. And I think the last few quarters you've mentioned, the return to seat growth, want to dig in there a bit more. Is that being driven somewhat by the macro recovery? Is that fair to say that it's being driven somewhat by the macro recovery, but just more by AI enabled workflows, expanding seats. And then while I realize you're not guiding to it for next year, how should we think about the steep dynamics as we head into next year? Thanks. Yeah, so I'd say, you know, certainly. There'S a macroeconomic backdrop element to our business, but it doesn't seem as though, you know, kind of that has been changing a whole lot over the last couple of quarters. So it would mostly point to the impact we look at the deals and where we are seeing those expansions, you know, really coming from the newer use cases and the expansions that Enterprise Advanced and the AI capabilities enable sort of primarily point to that. And then going forward, I mean we have said that over time we do expect that net retention rate to continue to improve from where we are and for those seed trends to continue moving in the right direction over time as well. So you know, to your point, having given kind of specific numbers for next year, but you know, over time we do expect continued strength and those trends continue as well. And just actually, if I can, the one thing I was going to kind of add to my prior comment was we did see healthy deals in Q3 in the public sector. So obviously the government shutdown was more later in the quarter. But we have a had a bunch of good wins and expansions in public sector in Q3.

As a reminder, it is Star One if you would like to ask a question. And our next question comes from the line of Josh Baer with Morgan Stanley. Your line is open.

Great, thanks for the question. Erin. I was just wondering, I mean box. And you, you've been very forward, forward. Thinking and strategic, innovative with all things AI and agents. What does that do for the broader. Core content management opportunity? Just from a competitive perspective, thinking about incumbents, legacy vendors, does it serve as a catalyst with all the market focused on AI and innovation, to see some of the differences in how you've approached those changes versus legacy vendors?

Yeah, so I think, you know, it's interesting. So there's maybe two dynamics at play. And as I mentioned in some of the conversations in New York a few weeks back, you can imagine it's, you know, sort of most of the major banks and you know, private equity, you know, kind of firms that we spend time with in the city. And what's happening is you have sort of two dynamics playing out. One is there's just an you know, instant obvious recognition of, okay, if we could finally structure our unstructured data, which is take equity research, take credit credit data, loan origination documents, any of that information. Where, you know, today you're, you're doing a lot of manual reviews of that information. Now agents can go and extract that data from the documents, put it into the box metadata system so you can query it, you can run analytics on it, you can, you know, import it into a snowflake or a Salesforce data cloud so you can manipulate it like structured data. But again, the source material is all this unstructured content. All of our conversations were around being able to tap into this vast array of unstructured data. So the first thing that's going to happen is the content management market in general is going to grow as a result of now all of these new use cases that companies can do for the first time. And so I'd say maybe 70 to 80% of the conversations that I had against dozens of conversations, there wasn't even a legacy infrastructure or document management system in the conversation. It was net new use cases where for the first time ever, a company could tap into the value of what is inside of this unstructured data. So I think you're going to see just a TAM increase for the overall content management market that will benefit us, I think disproportionately, but it will benefit generally the space, which is great because we've sort of all been living in this world in the content management space of there's so much value in this data that companies have not been able to tap into. So now, for the first time ever, they can, which will increase the overall, I think, investment and excitement around the category. The second component which really gets to the legacy takeout is we had a number of customers that basically say, well, okay, if I'm going to now run agents on my unstructured data and I'm going to plot all these insights or automate a workflow or build a box app to power a business process, well, now I want to move even more of my data into box to be able to go and handle that. And so that's really where you're seeing more and more customers say, okay, how do I get rid of a legacy ECM system? What's that? Migration path. And so that conversation also came up multiple times, just in this a few weeks ago as just one interesting example. But it's happening across the board. So we are seeing way more interest and energy momentum around legacy takeouts and migrations, where AI is the catalyst that is opening up the new use cases that are causing customers to say, okay, now is sort of time to go move our infrastructure to the cloud. And we saw that, you know, a few years ago with security as one of those catalysts. But AI is going to be much bigger because you're actually now, you know, generating real new value propositions for the customer in the process. Awesome. Thanks, Sarah. Yep, thanks.

And our next question comes from the line of George Kurosawa with Citi. Your line is open.

Hey, thanks. I'm on for Steve Enders. I wanted to follow up on this line of thinking. You know, when you first announced Enterprise advance, the obvious big opportunity was on the price per seat and the pricing uplift side. It's been interesting to hear you guys talk more and more about use case expansion and the seat growth side. I'd just love to hear more on what you've seen there, how meaningful you think that could be from an NRR standpoint over the long term. Yeah.

So and maybe just to you know, kind of highlight, we are seeing continued strength in both kind of components of where we thought Enterprise Advanced would impact the business and customer economics have just more recently over the past couple of quarters been highlighting that net feet growth dynamic because that's really what's changed, whereas the pricing has gotten stronger. We've been really pleased with the impact it's having. It's just that had been a driver of NRR and growth for a longer time period. And then in terms of the overall impact and we would say certainly the overall seat dynamics are where we see probably the biggest kind of area of upside. That's also when you looked at the kind of trend and where things had declined previously, that was also the biggest driver. So we do see that as probably. The most variable part and biggest opportunity for the net retention rate to improve. But at the same time, as we get more and more customers moving into Enterprise Advanced and adopting some of the other capabilities of the platform, we continue to see both seat count as well as pricing to be pretty important levers in that algorithm.

Okay, great. And then I know I'm a quarter early here on asking about FY27, but just when we think about the exit revenue growth rate of 8% constant currency relative to billings growth of 12%, CRPO growth of 14%, maybe if you could just help us think through your kind of confidence on maybe a path towards acceleration into next year and what that might look like.

Yeah. So, you know, as noted, we're squarely focused on returning to double digit top line growth. Would say that some of those leading indicators, billings, especially on a quarterly basis and even current RPO aren't perfect leading indicators because of some of those dynamics around contract durations, the kind of midterm upsell that we've been seeing and things like that that help fuel the number, but would say that, you know, kind of the underlying momentum that you can see in the business, the trajectory of revenue is a pretty good indication of the momentum that we're seeing in the business. And then, you know, certainly in your. Point, we'll share a lot more about. Our expectations and the different, you know. Kind of parts of growth and how. We'Re thinking about it in just a. Few months on our Q4 call.

Thanks for taking the questions. Thank you.

And our next question comes from the line of Frederick Gooding with William Blair. Your line is open.

Frederick Gooding Here I'm just curious, I guess slightly piggyback on the previous question, but also backing it up a little bit in terms of broader AI adoption, I guess, are we nearing an inflection point in terms of enterprises overcoming some of those barriers of AI adoption? And it would be great to also get some slight additional color in terms of some of the specific capabilities within the box platform where you're seeing some of these use cases really being unlocked.

Yeah, I think we've always been in, I think the sweet spot of AI, which is we've embedded the more kind of productivity oriented, helping you with your daily knowledge work just into all of our plans. So instantly customers get this added value proposition just by virtue of using box. But the capabilities that we really monetize are showing up in Enterprise Advanced and those are going after very, very pragmatic workflow use cases, again, often oriented around data extraction being the kind of core of what the customer is trying to do, or at least that's the ingredient into the workflow that they're trying to automate. And so we're seeing conversations across the board. I'll start with the kind of most obvious ones and then we can kind of expand, but the super obvious ones, our customers are saying, hey, I have 10,000 or 50,000 or 100,000 contracts or millions of contracts in some large enterprise cases, I want to be able to extract data from those contracts and then be able to automate workflows around them or think about the same use case for an invoice or a lease agreement or a loan origination process. So that's kind of the, you know, that type of conversation is causing a lot of the Enterprise Advanced upgrades to happen right now. Because to get access to box apps where you would build and construct the data views and the dashboards and the applications around that you need access to to Enterprise Advanced. And then with Box extract coming live in Q4, that's only going to further accelerate the adoption of Enterprise Advanced because now customers have an interface as opposed to just doing the data extraction with our agentic APIs, they'll be able to do now that directly built into the box interface. So that's the sort of, you know, the initial tail end. But what's really cool is we're starting to see use cases that customers have. And this is what makes us a guest again, so bullish about the overall category where the customer was likely not in a data extraction addressable market previously, but where agents being able to now read documents and process them and provide insights in them or extract information is sort of expanding the use case of workflow automation around documents. So these are things like where customers might have healthcare records or medical billing claim data, where they were manually processing this data previously. And they've never been able to really bring sort of any form of AI automation to the workflow before. Where that is now those kinds of workflows are being automated on the platform which just for us increases the addressable market of now what we can bring automation to. So we're seeing a lot of these types of use cases emerge and there's not really the kind of typical maybe headwinds you'd see, which is, okay, you have an AI adoption council or governance committees because this is squarely kind of workflow automation where agents are just enabling the workflow to get automated. So I don't think we're going to see a lot of headwinds on the momentum on this front. It's really just up to our own execution and our ability to get the whole customer base to be educated on the capabilities and to drive that upgrade cycle.

Okay, thanks for the color. And then Dylan, for you, it'd be great if you could, I guess, rank order in terms of some of the priorities of go to market investment. I know you touched previously in terms of investing to the system integrators and partner ecosystem, but I'm wondering if we throw in the multi product cross sell motion in there and then also trying to balance that in terms of margin expansion or potential margin expansion for fiscal 2027, how should we think about that as well?

Yeah, so in terms of the initiatives. I mean a lot of the focus areas, if you think about whether it's the, you know, kind of increased focus on verticalization or you know, really driving enterprise advance, that, you know, cross sell upsell that you mentioned, that's really embedded in the way that we're just, you know, kind of enabling our entire sales force. And so you know, from a pure investment standpoint, we are, you know, growing the size the sales force, but you know, hard to parse that out as like individual, you know, stack ranked priorities. So in terms of the specific area of investment, you know, certainly one of the big ones is around. Kind of. The partner SI ecosystem and then another big area in addition to just, you know, kind of a lot of the reps we have is really that verticalization. Of the sales force. So bringing in that industry specific expertise, which we already have in a lot of cases, but really doubling down there, especially given the types of use cases that enterprise advanced enables are, you know, a couple of big investment areas on the sales side and then really continuing to scale a lot of the high ROI marketing programs that we've been delivering as well and really pleased the results there. And so that'll be another area of investment. And then as it relates to, you. Know, kind of the big picture, you. Know, view of the business, again, we'll. Certainly give more specifics. You know, on our, on our Q4 call, we talk about specific numbers for next year, but would say overall we've been very pleased with the results of the go to market investments we'll be making this year. I mean, as Aaron's been talking about, we're in the midst of a massive AI transformation and if we continue to see the strong ROI of those investments, you know, we plan to invest to really capitalize on that opportunity and to deliver, you know, another year of moderate operating margin expansion. So certainly remain committed to the long. Term target model that we laid out. At Analyst Day, but would say that given the opportunity in front of us and what we're seeing in the business very much focused on continuing those go to market investments.

And that concludes our question and answer session. I will now turn the conference back over to Cynthia Hipponia for closing remarks. Great.

Thank you everyone. Appreciate you joining us here this afternoon and we look forward to updating you again on our Q4 call in early March.

Ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.