We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
DBX Q2 Earnings Beat Estimates, Revenues Fall Y/Y, Shares Rise
Read MoreHide Full Article
Key Takeaways
{\"0\":\"Dropbox Q2 EPS rose 18.3% to $0.71, beating estimates by 12.7% despite lower revenues.\",\"1\":\"FormSwift\'s scale-back cut Q2 revenues by 140 bps and ARR by 160 bps year over year.\",\"2\":\"Non-GAAP operating margin jumped 550 bps to 41.5% on cost cuts and reduced marketing spend.\"}
Dropbox (DBX - Free Report) reported second-quarter 2025 non-GAAP earnings of 71 cents per share, surpassing the Zacks Consensus Estimate by 12.7% and increasing 18.3% year over year.
Revenues of $625.7 million declined 1.4% year over year but beat the consensus mark by 1.28%. On a constant currency (cc) basis, revenues fell 1.3%. DBX’s decision to scale back FormSwift business and reduce the number of outbound sellers supporting Core FSS business has been negatively impacting top-line growth. In the reported quarter, FormSwift negatively impacted revenues by 140 basis points (bps).
Total annual recurring revenues (ARR) were $2.54 billion, down 1.2% year over year. At cc, ARR decreased 1.1%. FormSwift hurt ARR by 160 bps.
Dropbox shares were up roughly 3% at the time of writing this article. DBX shares have dropped 12.7% year to date, underperforming the Zacks Computer & Technology sector's 12.3% return.
DBX exited the second quarter of 2025 with 18.13 million paying users, marking a sequential decline of roughly 34,000. The average revenue per paying user (ARPU) was $138.32 compared with $139.93 in the year-ago quarter.
In April, Dropbox launched features designed to expand Dash’s use cases and improve user productivity. Recent launches include intranet features like org charts, people pages and integrations with Workday.
Rich media search (part of Dash’s April launch) now accounts for double-digit percent of total queries. The company is seeing growing adoption of Dash chat for answering questions, summarizing long documents, and providing draft writing assistance. Dropbox has seen strong sequential growth in key cohort metrics like weekly active users and activity rates per week.
DBX’s initiatives to redesign the Teams onboarding experience have improved activation and setup rates by 5% and 10%, respectively. Simultaneously, the company has seen a 100% increase in desktop downloads. Dropbox also saw meaningful retention gains for both Teams and individual customers, driven by its feature-adding initiatives.
DBX’s Operating Details
In the second quarter, Dropbox reported a non-GAAP gross margin of 82.2%, down 230 bps year over year.
In the reported quarter, research and development expenses were $128.4 million, down 19.5% year over year. Sales and marketing expenses decreased 21.7% year over year to $80.9 million. General and administrative expenses rose 0.7% year over year to $45.8 million.
The company reported a non-GAAP operating margin of 41.5%, up 550 bps year over year, driven by headcount reduction and lower marketing spend.
Dropbox Balance Sheet & Cash Flow
As of June 30, 2025, DBX had cash, cash equivalents and short-term investments of $954.7 million compared with $1.18 billion as of March 31, 2025.
Cash generated by operating activities was $260.5 million in the reported quarter compared with $153.8 million in the previous quarter.
In the second quarter, the company reported a free cash flow of $224.7 million compared with $153.7 million in the previous quarter.
In the reported quarter, the company repurchased 14 million shares for $400 million. As of the end of the second quarter, $470 million remained under the existing share repurchase authorizations.
DBX Provides Q3 & 2025 Guidance
For the third quarter of 2025, Dropbox expects revenues between $622 million and $625 million. At cc, the company anticipates revenues of $619-$622 million. The company expects FormSwift to negatively impact revenues by 170 bps in the third quarter.
The non-GAAP operating margin is expected to be 37%.
For 2025, Dropbox expects revenues between $2.49 billion and $2.5 billion. At cc, revenues are expected between $2.49 billion and $2.50 billion. FormSwift is expected to hurt revenues by 150 bps.
In terms of paying users, Dropbox expects a decline of approximately 1.5%, or about 300,000 users for 2025, with the remaining decline to be balanced between the third and fourth quarters. The company continues to expect that FormSwift will represent roughly half of the paying user decline this year. ARPU is also expected to suffer.
The company expects the gross margin to be 82% for the year. The non-GAAP operating margin is expected to be 39% (up 50 bps).
Unlevered free cash flow is expected to be at or above $970 million with capital expenditures between $25 million and $30 million.
Image: Bigstock
DBX Q2 Earnings Beat Estimates, Revenues Fall Y/Y, Shares Rise
Key Takeaways
Dropbox (DBX - Free Report) reported second-quarter 2025 non-GAAP earnings of 71 cents per share, surpassing the Zacks Consensus Estimate by 12.7% and increasing 18.3% year over year.
Revenues of $625.7 million declined 1.4% year over year but beat the consensus mark by 1.28%. On a constant currency (cc) basis, revenues fell 1.3%. DBX’s decision to scale back FormSwift business and reduce the number of outbound sellers supporting Core FSS business has been negatively impacting top-line growth. In the reported quarter, FormSwift negatively impacted revenues by 140 basis points (bps).
Total annual recurring revenues (ARR) were $2.54 billion, down 1.2% year over year. At cc, ARR decreased 1.1%. FormSwift hurt ARR by 160 bps.
Dropbox shares were up roughly 3% at the time of writing this article. DBX shares have dropped 12.7% year to date, underperforming the Zacks Computer & Technology sector's 12.3% return.
Dropbox, Inc. Price, Consensus and EPS Surprise
Dropbox, Inc. price-consensus-eps-surprise-chart | Dropbox, Inc. Quote
Dropbox Key Metrics Details
DBX exited the second quarter of 2025 with 18.13 million paying users, marking a sequential decline of roughly 34,000. The average revenue per paying user (ARPU) was $138.32 compared with $139.93 in the year-ago quarter.
In April, Dropbox launched features designed to expand Dash’s use cases and improve user productivity. Recent launches include intranet features like org charts, people pages and integrations with Workday.
Rich media search (part of Dash’s April launch) now accounts for double-digit percent of total queries. The company is seeing growing adoption of Dash chat for answering questions, summarizing long documents, and providing draft writing assistance. Dropbox has seen strong sequential growth in key cohort metrics like weekly active users and activity rates per week.
DBX’s initiatives to redesign the Teams onboarding experience have improved activation and setup rates by 5% and 10%, respectively. Simultaneously, the company has seen a 100% increase in desktop downloads. Dropbox also saw meaningful retention gains for both Teams and individual customers, driven by its feature-adding initiatives.
DBX’s Operating Details
In the second quarter, Dropbox reported a non-GAAP gross margin of 82.2%, down 230 bps year over year.
In the reported quarter, research and development expenses were $128.4 million, down 19.5% year over year. Sales and marketing expenses decreased 21.7% year over year to $80.9 million. General and administrative expenses rose 0.7% year over year to $45.8 million.
The company reported a non-GAAP operating margin of 41.5%, up 550 bps year over year, driven by headcount reduction and lower marketing spend.
Dropbox Balance Sheet & Cash Flow
As of June 30, 2025, DBX had cash, cash equivalents and short-term investments of $954.7 million compared with $1.18 billion as of March 31, 2025.
Cash generated by operating activities was $260.5 million in the reported quarter compared with $153.8 million in the previous quarter.
In the second quarter, the company reported a free cash flow of $224.7 million compared with $153.7 million in the previous quarter.
In the reported quarter, the company repurchased 14 million shares for $400 million. As of the end of the second quarter, $470 million remained under the existing share repurchase authorizations.
DBX Provides Q3 & 2025 Guidance
For the third quarter of 2025, Dropbox expects revenues between $622 million and $625 million. At cc, the company anticipates revenues of $619-$622 million. The company expects FormSwift to negatively impact revenues by 170 bps in the third quarter.
The non-GAAP operating margin is expected to be 37%.
For 2025, Dropbox expects revenues between $2.49 billion and $2.5 billion. At cc, revenues are expected between $2.49 billion and $2.50 billion. FormSwift is expected to hurt revenues by 150 bps.
In terms of paying users, Dropbox expects a decline of approximately 1.5%, or about 300,000 users for 2025, with the remaining decline to be balanced between the third and fourth quarters. The company continues to expect that FormSwift will represent roughly half of the paying user decline this year. ARPU is also expected to suffer.
The company expects the gross margin to be 82% for the year. The non-GAAP operating margin is expected to be 39% (up 50 bps).
Unlevered free cash flow is expected to be at or above $970 million with capital expenditures between $25 million and $30 million.
Zacks Rank & Stocks to Consider
Dropbox currently carries a Zacks Rank #3 (Hold).
Lumentum (LITE - Free Report) , Cisco Systems (CSCO - Free Report) , and Vipshop (VIPS - Free Report) are some stocks worth considering in the broader Zacks Computer and Technology sector. While Vipshop currently sports a Zacks Rank #1 (Strong Buy), Cisco and Lumentum carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lumentum shares have jumped 32.3% year to date. Lumentum is set to report its second-quarter 2025 results on Aug. 12.
Cisco Systems shares have appreciated 18.2% year to date. Cisco is set to report its fourth-quarter fiscal 2025 results on Aug. 13.
Vipshop shares are up 12.3% year to date. Vipshop is set to report its second-quarter 2025 results on Aug. 14.