Dropbox DBX reported fourth-quarter 2024 non-GAAP earnings of 73 cents per share, surpassing the Zacks Consensus Estimate by 17.74% and increasing 46% year over year.

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

DBX’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the earnings surprise being 13.33%, on average.

Revenues of $643.6 million inched up 1.4% year over year and beat the consensus mark by 0.79%. Total annual recurring revenues were $2.574 billion, up 2% year over year.

Dropbox shares slipped 9.88% to $28.73 in the pre-market trading due to slow revenue growth and a decline in paying users, which may affect future earnings.

However, the company has growth opportunities like increasing ARPU and expanding its AI-powered product, and a strong cash reserve. These factors have helped DBX shares rise 6.1% year to date, outperforming the Zacks Computer & Technology sector's 2.1% growth.

Dropbox Key Metrics Details

DBX exited the fourth quarter of 2024 with 18.22 million paying users, marking a sequential decline of roughly 15,000.

The average revenue per paying user (ARPU) was $140.06 compared with $138.83 in the year-ago quarter. However, ARPU grew sequentially due to a higher-priced essentials individual SKU, 
favorable FX trends and a slight shift from annual to monthly subscriptions.

As of Dec. 31, 2024, Dropbox had roughly 575 thousand paying teams and 700 million registered users.

DBX’s Operating Details

In the fourth quarter, Dropbox reported a non-GAAP gross margin of 83.1%, up 80 basis points (bps) year over year.

In the reported quarter, research and development expenses were $142.4 million, down 10.4% year over year.

Sales and marketing expenses decreased 3.8% year over year to $106.9 million. General and administrative expenses rose 0.6% year over year to $48 million.

The company reported a non-GAAP operating margin of 36.9%, up 470 bps year over year.

Dropbox Balance Sheet & Cash Flow

As of Dec. 31, 2024, DBX had cash, cash equivalents and short-term investments of $1.59 billion compared with $890.8 million as of Sept. 30, 2024.

Cash generated by operating activities was $213.8 million in the reported quarter compared with $274.2 million in the previous quarter.

In the fourth quarter, the company reported a free cash flow of $210.5 million compared with $270.1 million in the previous quarter.

In the quarter, the company repurchased 12.5 million shares for $350.4 million. As of the end of the fourth quarter, $1.4 billion remained under the existing share repurchase authorizations.

DBX Provides Q1 & 2025 Guidance

For the first quarter of 2025, Dropbox expects revenues between $618 million and $621 million. The non-GAAP operating margin is expected to be 38.5%.

On a constant-currency basis, the company anticipates revenues of $621-$624 million.

For 2025, it expects revenues between $2.465 billion and $2.480 billion. On a constant-currency basis, revenues are expected between $2.483 billion and $2.498 billion.

The company expects the gross margin to be 82% for the year. The non-GAAP operating margin is expected to be 37.5-38%.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Okta OKTA, DoubleVerify DV and Olo OLO are some better-ranked stocks that investors can consider in the broader sector. Okta sports Zacks Rank #1 (Strong Buy) at present, and Olo and DoubleVerify carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Okta shares have risen 20.8% year to date. OKTA is set to report fourth-quarter fiscal 2025 results on March 03.

DoubleVerify shares have gained 16.4% year to date. DV is set to post fourth-quarter 2024 results on Feb. 27.

Olo shares have declined 7.6% year to date. OLO is set to report fourth-quarter fiscal 2024 results on Feb. 25.

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