DBX Q3 Earnings Beat Estimates, Revenues Fall Y/Y, Shares Rise

Dropbox DBX reported third-quarter 2025 non-GAAP earnings of 74 cents per share, surpassing the Zacks Consensus Estimate by 15.63% and increasing 23.3% year over year.

Revenues of $634.4 million declined 0.7% year over year but beat the consensus mark by 1.75%. On a constant currency (cc) basis, revenues fell 1.2%. 

Total annual recurring revenues (ARR) were $2.54 billion, down 1.7% year over year. At cc, ARR decreased 1.5%.

Dropbox shares were up more than 4% at the time of writing this article. DBX shares have dropped 4.6% year to date, underperforming the Zacks Computer & Technology sector's 25.1% return.

Dropbox Quarter Details

DBX exited the third quarter of 2025 with 18.07 million paying users compared with 18.24 million in the year-ago quarter. The average revenue per paying user (ARPU) was $139.07 compared with $139.05 in the year-ago quarter. 
 

Dropbox, Inc. Price, Consensus and EPS Surprise

Dropbox, Inc. price-consensus-eps-surprise-chart | Dropbox, Inc. Quote

In the third quarter of 2025, Dropbox reported a non-GAAP gross margin of 81.4%, down 270 bps year over year.

In the reported quarter, research and development expenses were $125 million, down 19.6% year over year. Sales and marketing expenses decreased 9.4% year over year to $91.5 million. General and administrative expenses rose 18% year over year to $57.6 million.

The company reported a non-GAAP operating margin of 27.5%, down 870 bps year over year.

Dropbox Balance Sheet & Cash Flow

As of Sept. 30, 2025, DBX had cash, cash equivalents and short-term investments of $925.3 million compared with $954.7 million as of June 30.

Cash generated by operating activities was $302.1 million in the reported quarter compared with $260.5 million in the previous quarter.

In the third quarter, the company reported a free cash flow of $293.7 million compared with $224.7 million in the previous quarter.

In the reported quarter, the company repurchased 14 million shares for $393 million. As of the end of the third quarter, $1.5 billion remained under the existing share repurchase authorizations.

DBX Provides Q4 & 2025 Guidance

For the fourth quarter of 2025, Dropbox expects revenues between $626 million and $629 million. At cc, the company anticipates revenues of $623-$626 million. 

The non-GAAP operating margin is expected to be roughly 37%.

For 2025, Dropbox expects revenues between $2.511 billion and $2.514 billion. At cc, revenues are expected between $2.508 billion and $2.511 billion. 

The company expects the gross margin to be 82% for the year. The non-GAAP operating margin is expected to be 40%.

Unlevered free cash flow is expected to be at or above $1 billion with capital expenditures between $25 million and $30 million.

Zacks Rank & Stocks to Consider

Dropbox currently carries a Zacks Rank #3 (Hold).

Amphenol APH, Digital Turbine APPS and ASML Holding ASML are some better-ranked stocks in the broader sector. Each of the three stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Amphenol, Digital Turbine and ASML Holding is currently pegged at 26.83%, 42.42% and 20.87%, respectively. Shares of Amphenol, Digital Turbine and ASML Holding have appreciated 98.8%, 270.4% and 48.5%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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