DBX Q4 Earnings Surpass Estimates, Revenues Fall Y/Y, Shares Rise

Dropbox DBX reported fourth-quarter 2025 non-GAAP earnings of 68 cents per share, which surpassed the Zacks Consensus Estimate by 2.52% and decreased 6.8% year over year.

Revenues of $636.2 million declined 1.1% year over year but beat the consensus mark by 1.39%. On a constant-currency (cc) basis, revenues fell 1.6%. 

Total annual recurring revenues (ARR) were $2.53 billion, down 1.9% year over year. On a cc basis, ARR decreased 1.7%.

Dropbox shares inched up 0.2% at the time of writing this article. DBX shares have dropped 7.5% in the trailing 12 months, underperforming the Zacks Computer and Technology sector's 22.3% return.

Dropbox Quarter Details

DBX exited the fourth quarter of 2025 with 18.08 million paying users compared with 18.22 million in the year-ago quarter. The average revenue per paying user was $139.68 compared with $140.06 in the year-ago quarter. 

In the fourth quarter of 2025, Dropbox reported a non-GAAP gross margin of 80.8%, down 230 bps year over year.

In the reported quarter, non-GAAP research and development expenses were $130.9 million, down 8.1% year over year. Non-GAAP sales and marketing expenses decreased 13.2% year over year to $92.8 million. Non-GAAP general and administrative expenses decreased 0.8% year over year to $47.6 million.

The company reported a non-GAAP operating margin of 38.2%, up 130 bps year over year.

Dropbox Balance Sheet & Cash Flow

As of Dec. 31, 2025, DBX had cash, cash equivalents and short-term investments of $1.04 billion compared with $925.3 million as of Sept 30.

Cash generated by operating activities was $235.4 million in the reported quarter compared with $302.1 million in the previous quarter.

In the fourth quarter, the company generated a free cash flow of $224.9 million compared with $293.7 million in the previous quarter.

In the reported quarter, the company repurchased 14 million shares for $415 million. As of the end of the fourth quarter, $1.17 billion remained under the existing share repurchase authorizations.

DBX Initiates Q1 & FY26 Guidance

For the first quarter of 2026, Dropbox expects revenues between $618 million and $621 million. At cc, the company anticipates revenues of $610-$613 million. 

The non-GAAP operating margin is expected to be 38%.

For 2026, Dropbox expects revenues between $2.485 billion and $2.5 billion. At cc, revenues are anticipated between $2.458 billion and $2.473 billion. 

The company expects the gross margin to be 81.5-82% for the year. The non-GAAP operating margin is expected to be 39-39.5%.

Unlevered free cash flow is expected to be $1.04 billion or above, with the capital expenditure between $20 million and $25 million.

Zacks Rank & Stocks to Consider

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

Micron Technology MU, MongoDB MDB and Credo Technology Group CRDO are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector.

Micron Technology shares have soared 321.1% in the past 12 months. This Zacks Rank #1 (Strong Buy) company is scheduled to release second-quarter 2026 results on March 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

MongoDB shares have rallied 30.4% in the past 12 months. MDB is scheduled to release fourth-quarter 2026 results on March 2. The company presently sports a Zacks Rank #1.  
 
Credo Technology shares have surged 95.2% in the past 12 months . CRDO is set to report third-quarter fiscal 2026 results on March 2. The company currently flaunts a Zacks Rank #1.

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

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