Dropbox’s DBX shares have gained 5.8% in a month, outperforming the broader Zacks Computer & Technology sector’s return of 3% and the Zacks Internet Services’ appreciation of 4.8%. 

Over the trailing six-month period, DBX shares have surged 33% against the sector and industry’s appreciation of 18.7% and 14.4%, respectively.

The outperformance can be attributed to strong demand for Dropbox’s AI-powered product portfolio, which has been a key catalyst in driving up the paid user base. Its strategy of leveraging AI to develop products that organize all cloud content on a single platform is a positive.

Dropbox’s offerings that help in effective team collaboration have been driving business user growth. DBX exited the third quarter of 2024 with 18.24 million paying users, marking sequential growth of roughly 19,000. Paying user count for the reported quarter includes roughly 23,000 paying users through its acquisition of Reclaim.

DBX Stock’s Performance

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Dropbox is trading at a discount, as suggested by the Value Score of B.

In terms of the forward 12-month Price/Earnings, DBX is trading at 12.14X, higher than the sector’s 27.54X.

Price/Earnings (F12M)

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DBX shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.

DBX Trades Above 50-day & 200-day SMA

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Strong Partner Base Aids DBX’s Prospects

DBX is a leader in the content sharing and collaboration applications category, currently worth $12 billion, per IDC estimates. DBX currently supports more than 700 million registered users through its File Sync and Share plans and has better market share than Apple AAPL and Box BOX.

Per IDC’s May 2024 report, Dropbox enjoys a market share of 20.9%, followed by Google’s 16.4% share and Box’s 8.8%, while Apple has an 8.6% market share. Microsoft MSFT, with a 29.4% market share, was placed at #1 by IDC.

Dropbox is benefiting from a strong partner base that includes Google, Slack, Adobe, Atlassian, Zoom, Microsoft, Salesforce and NVIDIA.

DBX has added new security, organization and sharing features, as well as real-time co-authoring integrations with Microsoft 365. Microsoft Copilot Integration now gives users the ability to query their Dropbox files directly from within Microsoft Teams. The latest security update offers an advanced data protection feature that adds an extra layer of protection. 

Dropbox’s collaboration with NVIDIA expands its extensive AI functionality with new uses for personalized generative AI. This improves search accuracy, provides better organization and simplifies workflows for its customers across its cloud content. DBX leverages NVIDIA’s AI foundry to enhance its latest AI-powered products, including Dropbox Dash and Dropbox AI.

Expanding Product Portfolio: A Key Catalyst for DBX

Dropbox’s product offerings, like Dropbox Dash and Dropbox AI, have been gaining strong adoption. Dropbox Dash allows users to quickly find everything in one place, including content pulled from Microsoft Outlook, Google Workspace or Asana. 

Dash’s enhancements improve search functionality and help customers get answers much faster. The solution is capable of searching by keywords and semantic search, which provides more contextually relevant search results.

The launch of Dropbox Dash for business users in October 2024 is a noteworthy development. This is expected to boost clientele.

Dropbox has updated its other notable solutions, including DocSend and Replay. In April 2024, it added features like Advanced Data Room (sharing multiple data files with a single link), viewing permission, user verification and built-in NDAs in DocSend. Replay integrations with Adobe After Effects, Apple Final Cut Pro and Avid Pro Tools are now available for users.

Earnings Estimate Revisions Steady for DBX

The Zacks Consensus Estimate for 2025 earnings is pegged at $2.62 per share, unchanged over the past 60 days and indicates 9.62% growth over 2024’s estimated figure of 2.39 per share.
 

The consensus mark for 2025 revenues is pegged at $2.55 billion, indicating growth of 0.19% over 2024’s estimated figure of $2.54 billion.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

For 2025, DBX expects non-GAAP operating margin to expand roughly 150 basis points relative to 2024 based on flat constant currency growth in revenues. It expects free cash flow to be at or above $950 million.

How Should You Approach DBX Shares?

Dropbox’s strong portfolio, which leverages AI and a rich partner base, is positive. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.

However, DBX faces stiff competition from well-established players including Microsoft and Apple in its key domain. Many of its mature solutions (File Sync and Share) witnessing slowing growth while newer ones like Dash will take some time to contribute to top-line growth.

A challenging microeconomic environment is a headwind for Dropbox as it continues to see down selling in the teams’ part of the business. The company is focusing on retaining customers, which might keep average revenue per paying user growth under pressure.

Dropbox currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable time to accumulate the stock. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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