Summary
Dropbox reported first quarter fiscal 2024 revenue of $631.3 million, up 3.3% year over year. Constant currency revenue growth was 3.2%. GAAP gross profit was $525.5 million, up 6.3%. GAAP operating income was $143.5 million, up 70.6%. GAAP net income was $132.3 million, up 91.7%. GAAP diluted EPS was $0.39, up 95.0%. GAAP gross margin was 83.2%, up 2.4 percentage points. GAAP operating margin was 22.7%, up 9.0 percentage points. Non-GAAP gross margin was 84.6%, compared with 82.4% in the prior-year period. Non-GAAP operating margin was 36.5%, compared with 28.6% in the prior-year period. Non-GAAP net income was $196.7 million, compared with $146.1 million in the prior-year period. Non-GAAP diluted EPS was $0.58, compared with $0.42 in the prior-year period. The company changed the useful lives of certain infrastructure assets from four to five years, which affected depreciation expense in the quarter.
Cash generation improved. Operating cash flow was $175.5 million, up 25.4%. Capital expenditures were $9.2 million, up 384.2%. Free cash flow, a non-GAAP measure, was $166.3 million, compared with $138.0 million in the prior-year period. Deferred revenue was $741.8 million, up 1.9%. Cash, cash equivalents and short-term investments ended at $1.176 billion. Dropbox repurchased and retired 11.1 million shares of Class A common stock for an aggregate amount of $281.6 million during the quarter. The company had no amounts outstanding under its revolving credit facility and total available borrowing capacity of $468.8 million as of March 31, 2024. Dropbox said it expects free cash flow to generally increase in future periods as it increases subscription sales and drives operating efficiencies. It expects capital expenditures to generally remain consistent in future periods.
Total ARR was $2.556 billion, up 3.6% year over year. On a constant currency basis, ARR growth was 2.8%. Total ARR increased $15.6 million quarter over quarter. Paying users were 18.16 million, compared with 17.90 million in the prior-year period. Paying users increased 35,000 quarter over quarter. Dropbox serves more than 700 million registered users across approximately 180 countries. No customer accounted for more than 1% of revenue, and over 90% of revenue comes from self-serve channels. Management said paying user growth came largely from outbound channels and FormSwift seasonality. The MD&A noted continued pressure across Individual and Teams plans as businesses face a challenging operating environment. Dropbox also said its overall paying user growth rate has declined and may decline in the future. Revenue growth depends on increasing average revenue per paying user, for example through pricing and packaging changes or more sales of higher-priced plans, to offset slower growth or decline in paying users.
The earnings release did not include specific next-quarter or full-year guidance figures. Dropbox said it would provide forward-looking guidance on its quarterly earnings call and investor relations website. The company faces several risks. In April 2024, Dropbox became aware of unauthorized access to the Dropbox Sign production environment, and the investigation is ongoing. Macroeconomic conditions, including inflation, higher interest rates, and foreign exchange fluctuations, could hurt results. Other risks include competition, the ability to retain and upgrade paying users, the ability to convert registered users to paying users, pricing and packaging changes, service disruption, and data security breaches. Management also highlighted recent product updates designed to help users secure, organize, and share content across devices, locations, and platforms. Dropbox plans to invest in AI-powered product experiences for distributed work.
The quarter showed strong margin expansion and cash generation. Revenue growth remained modest at 3.3%. The company returned cash through share repurchases. The main questions are whether paying user growth can reaccelerate and whether average revenue per paying user gains can carry revenue growth. The Dropbox Sign security incident adds uncertainty.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $631.3M | $635.0M | -0.6% | $611.1M | +3.3% |
| Gross profit | $525.5M | $513.0M | +2.4% | $494.3M | +6.3% |
| Gross margin | 83.2% | 80.8% | +2.4 pp | 80.9% | +2.3 pp |
| Research & development | $219.1M | $222.1M | -1.4% | $235.2M | -6.8% |
| Sales & marketing | $108.8M | $119.6M | -9.0% | $119.2M | -8.7% |
| General & administrative | $54.1M | $61.3M | -11.7% | $55.8M | -3.0% |
| Total operating expenses | $382.0M | $245.6M | +55.5% | $410.2M | -6.9% |
| Operating income (loss) | $143.5M | $267.4M | -46.3% | $84.1M | +70.6% |
| Operating margin | 22.7% | 42.1% | -19.4 pp | 13.8% | +9.0 pp |
| Net income (loss) | $132.3M | $227.3M | -41.8% | $69.0M | +91.7% |
| Net margin | 21.0% | 35.8% | -14.8 pp | 11.3% | +9.7 pp |
| Diluted EPS | $0.39 | $0.66 | -$0.27 | $0.20 | +$0.19 |
Risks
Dropbox disclosed unauthorized access to the Dropbox Sign production environment on April 24, 2024 (Form 8-K filed May 1, 2024), and states its investigation is ongoing with continuing exposure to reputational harm, customer relationship damage, litigation and regulatory scrutiny. MD&A repeats this item under its own 'Cybersecurity' heading, indicating it is materially emphasized rather than boilerplate.
Dropbox serves over 700 million registered users but only 18.16 million paying users as of March 31, 2024, and warns that renewals and upgrades may fluctuate or decline, including loss of enterprise licenses covering a large number of seat licenses. The filing also notes a continued increase in new customers opting for monthly plans rather than annual plans, which could make subscription renewals more volatile.
Management states that revenue growth rates have slowed and that the pace of future growth may be lower relative to prior periods, and that the overall paying user growth rate has declined and may decline further. MD&A explicitly says revenue and revenue growth rate will decline if paying user growth slows and average revenue per paying user (ARPU, $139.59 for the three months ended March 31, 2024 versus $138.97 in the prior-year period) does not increase.
Dropbox says it has made and will continue to make significant investments in AI products in a highly competitive marketplace and may not compete effectively or realize a return on those investments, while competitors such as Microsoft, Google, Amazon, Apple and Adobe have greater resources. It also flags regulatory uncertainty, citing the European Union Artificial Intelligence Act as imposing prohibitions and additional requirements on certain AI applications.
MD&A reports continued pressure across Individual and Teams plans as businesses face a challenging operating environment, and notes that worsening conditions including inflation, higher interest rates and foreign exchange fluctuations may adversely affect results. The risk factors add that paying users have reduced discretionary spending on the platform during downturns and that this impact may not be fully reflected in results until future periods given the subscription model.
Under its Virtual First model Dropbox has recorded and may record further impairment charges on office space it no longer expects to need, and the extended decline in demand for commercial real estate in San Francisco has impacted its subleasing strategy and resulted in additional impairment charges beyond original expectations. Failure to sublease on favorable terms would leave it incurring substantial lease payment obligations.
Dropbox depends on key personnel including co-founder and CEO Andrew W. Houston, and states competition for highly qualified employees is intense and that it has experienced and may continue to experience difficulty hiring and retaining them. It also notes that its Virtual First model and recent hires may reduce productivity and complicate integration, motivation and retention of a distributed workforce.
SaaS KPIs
All quarters →Paying users
Free cash flow
Total ARR
Free cash flow margin
Non-GAAP operating margin
Non-GAAP gross margin
Average revenue per paying user (ARPU)
Registered users
Summary, forecast, risks and KPIs are extracted from DROPBOX, INC.'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.