Box's (BOX) long-term outlook depends on stronger AI adoption, new usage-based sales, margin gains, and stock buybacks, but more proof is still required that these growth drivers can scale, RBC Capital Markets said in a note Friday.

Box expects margin improvement from lower cost hiring in regional markets, better infrastructure use, and internal efficiency gains, the investment firm said.

RBC said management is putting more focus on AI tools and automated workflows, which could help customers use their data better and create new sales opportunities over time.

Box is also adding a usage-based revenue stream through AI credits, which could bring in more annual recurring revenue beyond its usual seat-based model, and its model-neutral approach could help the company expand adoption of its AI products and workflow tools, RBC analysts noted.

Still, RBC said it kept its underperform rating and $26 price target because progress in enterprise advanced features and Box AI is still at an early stage.

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