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

Core Insights - Dropbox reported third-quarter 2025 non-GAAP earnings of 74 cents per share, exceeding the Zacks Consensus Estimate by 15.63% and increasing 23.3% year over year [1][8] - Revenues for the quarter were $634.4 million, a decline of 0.7% year over year, but still beating the consensus mark by 1.75% [1][8] - Total annual recurring revenues (ARR) were $2.54 billion, down 1.7% year over year [1][8] Financial Performance - The company had 18.07 million paying users at the end of Q3 2025, a decrease from 18.24 million in the same quarter last year [3] - Average revenue per paying user (ARPU) was $139.07, slightly up from $139.05 year over year [3] - Non-GAAP gross margin was 81.4%, down 270 basis points year over year [4] - Research and development expenses were $125 million, down 19.6% year over year, while sales and marketing expenses decreased 9.4% to $91.5 million [4] - General and administrative expenses rose 18% year over year to $57.6 million [4] - Non-GAAP operating margin was 27.5%, down 870 basis points year over year [4] Balance Sheet & Cash Flow - As of September 30, 2025, Dropbox had cash, cash equivalents, and short-term investments totaling $925.3 million, down from $954.7 million as of June 30 [5] - Cash generated by operating activities was $302.1 million in the reported quarter, compared to $260.5 million in the previous quarter [5] - Free cash flow for the quarter was $293.7 million, up from $224.7 million in the previous quarter [5] - The company repurchased 14 million shares for $393 million, with $1.5 billion remaining under existing share repurchase authorizations [6] Guidance - For Q4 2025, Dropbox expects revenues between $626 million and $629 million, with a non-GAAP operating margin of approximately 37% [7][8] - For the full year 2025, revenues are expected to be between $2.511 billion and $2.514 billion, with a gross margin of 82% and a non-GAAP operating margin of 40% [9] - Unlevered free cash flow is anticipated to be at or above $1 billion, with capital expenditures between $25 million and $30 million [9]