Cloud storage and e-signature company Dropbox (Nasdaq: DBX) met Wall Street’s revenue expectations in Q3 CY2024, but sales were flat year on year at $638.8 million. Its non-GAAP profit of $0.60 per share was 12.7% above analysts’ consensus estimates.

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Dropbox (DBX) Q3 CY2024 Highlights:

• Revenue: $638.8 million vs analyst estimates of $637.2 million (in line)

• Adjusted EPS: $0.60 vs analyst estimates of $0.53 (12.7% beat)

• Adjusted Operating Income: $231.5 million vs analyst estimates of $204.1 million (13.4% beat)

• Gross Margin (GAAP): 82.5%, up from 81.1% in the same quarter last year

• Operating Margin: 20%, in line with the same quarter last year

• Free Cash Flow Margin: 42.3%, up from 35.4% in the previous quarter

• Annual Recurring Revenue: $2.58 billion at quarter end, up 2.1% year on year

• Customers: 18.24 million, up from 18.22 million in the previous quarter

• Billings: $636 million at quarter end, in line with the same quarter last year

• Market Capitalization: $9.08 billion

“As we've shared over the last year, we're in a transitional period as a company and we continue to face a challenging environment in 2024. We recently announced a reduction in our workforce to both increase efficiency in and strengthen our core business, and accelerate growth in our new bets, like Dropbox Dash,” said Dropbox Co-Founder and Chief Executive Officer Drew Houston.

Company Overview

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

Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Dropbox’s 6.6% annualized revenue growth over the last three years was weak. This shows it failed to expand in any major way, a rough starting point for our analysis.

This quarter, Dropbox’s $638.8 million of revenue was flat year on year and in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 1.2% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and illustrates the market thinks its products and services will see some demand headwinds.