Cloud storage and e-signature company Dropbox (Nasdaq: DBX) announced better-than-expected results in the Q2 FY2021 quarter, with revenue up 13.5% year on year to $530.6 million. Dropbox made a GAAP profit of $88 million, improving on its profit of $17.5 million, in the same quarter last year.
Is now the time to buy Dropbox? Access our full analysis of the earnings results here, it's free.
Dropbox (DBX) Q2 FY2021 Highlights:
- Revenue: $530.6 million vs analyst estimates of $523.8 million (1.29% beat)
- EPS (non-GAAP): $0.40 vs analyst estimates of $0.33 (22.3% beat)
- Free cash flow of $216 million, up 98.5% from previous quarter
- Customers: 16,140,000, up from 15,830,000 in previous quarter
- Gross Margin (GAAP): 79.8%, up from 78.6% previous quarter
“Q2 was a standout quarter, driven by strong revenue growth, record free cash flow, and margin expansion,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston.
Founded by the long-serving CEO Drew Houston and Arash Ferdowsi in 2007, Dropbox provides a file hosting cloud platform that helps organizations collaborate and share documents.
The acceleration of digital transformation initiatives by enterprises, coupled with the growing volume of data generated by businesses are important factors that are driving the demand for cloud storage and document management platforms.
As you can see below, Dropbox's revenue growth has been solid over the last year, growing from quarterly revenue of $467.4 million, to $530.6 million.
This quarter, Dropbox's quarterly revenue was once again up 13.5% year on year. We can see that the company increased revenue by $19 million quarter on quarter. That's a solid improvement on the $7.5 million increase in Q1 2021, so shareholders should appreciate the acceleration of growth.
Analysts covering the company are expecting the revenues to grow 8.92% over the next twelve months, although we would expect them to review their estimates once they get to read these results.
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You can see below that Dropbox reported 16,140,000 customers at the end of the quarter, an increase of 310,000 on last quarter. That is a bit slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.
Key Takeaways from Dropbox's Q2 Results
With market capitalisation of $12.1 billion, more than $1.94 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
It was nice that Dropbox improved their gross margin, even if just slightly. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, revenue growth is now a bit slower these days and there was a slowdown in customer growth. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 3.01% on the results and currently trades at $32.5 per share.
Should you invest in Dropbox right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our full report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.