Dropbox's (NASDAQ:DBX) Posts Q2 Sales In Line With Estimates, Gross Margin Improves

Kayode Omotosho /
2022/08/04 4:18 pm EDT

Cloud storage and e-signature company Dropbox (Nasdaq: DBX) reported results in line with analyst expectations in Q2 FY2022 quarter, with revenue up 7.93% year on year to $572.7 million. Dropbox made a GAAP profit of $62 million, down on its profit of $88 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 FY2022 Highlights:

  • Revenue: $572.7 million vs analyst estimates of $571.2 million (small beat)
  • EPS (non-GAAP): $0.38 vs analyst estimates of $0.37 (2.7% beat)
  • Free cash flow of $205.9 million, up 57.5% from previous quarter
  • Customers: 17,370,000, up from 17,090,000 in previous quarter
  • Gross Margin (GAAP): 81.5%, up from 79.8% same quarter last year

"Our Q2 results are a testament to the strength of our business and the value our product delivers to our customers, despite the unpredictable macro environment," said Dropbox Co-Founder and Chief Executive Officer Drew Houston.

Founded by the long-serving CEO Drew Houston and Arash Ferdowsi in 2007, Dropbox (NASDAQ:DBX) provides a file hosting cloud platform that helps organizations collaborate and share documents.

The catch phrase "digital transformation" originally referred to the digitization of documents within enterprises. The growth of digital documents has spurred an explosion of collaboration within and between businesses, which in turn is driving the demand for e-signature and content management platforms.

Sales Growth

As you can see below, Dropbox's revenue growth has been unremarkable over the last year, growing from quarterly revenue of $530.6 million, to $572.7 million.

Dropbox Total Revenue

Dropbox's quarterly revenue was only up 7.93% year on year, which might disappoint some shareholders. On the other hand, revenue increased $10.3 million quarter on quarter, a strong improvement on the $3.1 million decrease in Q1 2022, and a sign of acceleration of growth, which is nice to see indeed.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 7.05% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that Dropbox reported 17,370,000 customers at the end of the quarter, an increase of 280,000 on last quarter. That's in line with the customer growth we have seen over the last couple of quarters, suggesting that the company can maintain its current sales momentum.

Dropbox Customers

Key Takeaways from Dropbox's Q2 Results

With a market capitalization of $8.85 billion Dropbox is among smaller companies, but its more than $1.44 billion in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Dropbox improve their gross margin this quarter and once again produce a quarter of strong free cash flows. On the other hand, the revenue growth is slow these days. Overall, it seems to us that this was an ok quarter for Dropbox. The company is flat on the results and currently trades at $23.9 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 actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.