Dropbox's (NASDAQ:DBX) Q3 Earnings Results: Revenue In Line With Expectations

Petr Huřťák /
2023/11/02 4:17 pm EDT

Cloud storage and e-signature company Dropbox (Nasdaq: DBX) reported results in line with analysts' expectations in Q3 FY2023, with revenue up 7.11% year on year to $633 million. Turning to EPS, Dropbox made a non-GAAP profit of $0.56 per share, improving from its profit of $0.43 per share in the same quarter last year.

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Dropbox (DBX) Q3 FY2023 Highlights:

  • Revenue: $633 million vs analyst estimates of $628.3 million (small beat)
  • EPS (non-GAAP): $0.56 vs analyst estimates of $0.49 (14.2% beat)
  • Free Cash Flow of $246.5 million, up 33.5% from the previous quarter
  • Customers: 18,170,000, up from 18,040,000 in the previous quarter
  • Gross Margin (GAAP): 81.1%, in line with the same quarter last year

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.

Document Management

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 two years, growing from $550.2 million in Q3 FY2021 to $633 million this quarter.

Dropbox Total Revenue

Dropbox's quarterly revenue was only up 7.11% year on year, which might disappoint some shareholders. Looking at the last two quarters, we can see that revenue increased by $10.5 million in Q3 compared to $11.4 million in Q2 2023. We'd prefer see growing absolute levels of quarter on quarter revenue gains.

Looking ahead, analysts covering the company were expecting sales to grow 4.21% over the next 12 months before the earnings results announcement.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Customer Growth

Dropbox reported 18,170,000 customers at the end of the quarter, an increase of 130,000 from the previous quarter. That's in line with the customer growth we observed last quarter but a bit below what we've typically seen over the last year, suggesting that sales momentum may be slowing a little.

Dropbox Customers

Key Takeaways from Dropbox's Q3 Results

Sporting a market capitalization of $9.1 billion, Dropbox is among smaller companies, but its more than $1.31 billion in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

Dropbox delivered impressive free cash flow, despite the slowdown in user growth. Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is up 1.06% after reporting and currently trades at $26.72 per share.

So should you invest in Dropbox right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research 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 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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