Cloud storage and e-signature company Dropbox (Nasdaq: DBX) reported Q2 CY2025 results exceeding the market’s revenue expectations, but sales fell by 1.4% year on year to $625.7 million. Its non-GAAP profit of $0.71 per share was 12.3% above analysts’ consensus estimates.
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Dropbox (DBX) Q2 CY2025 Highlights:
- Revenue: $625.7 million vs analyst estimates of $618.4 million (1.4% year-on-year decline, 1.2% beat)
- Adjusted EPS: $0.71 vs analyst estimates of $0.63 (12.3% beat)
- Adjusted Operating Income: $259.4 million vs analyst estimates of $232.4 million (41.5% margin, 11.6% beat)
- Operating Margin: 26.9%, up from 20% in the same quarter last year
- Free Cash Flow Margin: 41.3%, up from 24.6% in the previous quarter
- Customers: 18.13 million, down from 18.16 million in the previous quarter
- Annual Recurring Revenue: $2.54 billion at quarter end, down 1.2% year on year
- Billings: $629.6 million at quarter end, in line with the same quarter last year
- Market Capitalization: $7.46 billion
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.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Dropbox grew its sales at a weak 4% compounded annual growth rate. This was below our standard for the software sector and is a poor baseline for our analysis.
This quarter, Dropbox’s revenue fell by 1.4% year on year to $625.7 million but beat Wall Street’s estimates by 1.2%.
Looking ahead, sell-side analysts expect revenue to decline by 2.4% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and suggests its products and services will face some demand challenges.
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Annual Recurring Revenue
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Over the last year, Dropbox failed to grow its ARR, which came in at $2.54 billion in the latest quarter. This performance mirrored its total sales, showing the company faced challenges in winning long-term deals and renewals. It also suggests there may be increasing competition or market saturation. 
Customer Base
Dropbox reported 18.13 million customers at the end of the quarter, a sequential decrease of 30,000. That’s better than last quarter but a bit below what we’ve seen over the previous year. This indicates the company is optimizing its go-to-market strategy to reinvigorate growth.
Key Takeaways from Dropbox’s Q2 Results
We were impressed by Dropbox’s strong growth in customers this quarter. We were also happy its billings outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $26.35 immediately after reporting.
Dropbox may have had a good quarter, but does that mean you should invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
