Summary
Dropbox reported second quarter fiscal 2024 revenue of $634.5 million, up 1.9% from the same period a year earlier. Constant currency growth would have been 1.8%. Year-to-date revenue reached $1.27 billion, up 2.6%. Total ARR was $2.573 billion, up 2.9% year over year and up $17.3 million quarter over quarter. Paying users totaled 18.22 million, up from 18.04 million a year earlier. Management credited more paying users, a richer mix of higher priced plans, and a shift toward monthly subscriptions, which carry a higher price point than annual plans. Foreign exchange added $0.9 million to quarterly revenue. The platform serves more than 700 million registered users across approximately 180 countries.
Profitability improved sharply. Gross profit was $527.5 million, up 5.0%, and gross margin was 83.1%, up 2.4 percentage points. Operating income reached $127.0 million, up 124.8%, and operating margin was 20.0%, up 10.9 percentage points. Net income was $110.5 million, up 155.8%, and diluted EPS was $0.34, up $0.21. The prior-year quarter carried $37.5 million of workforce reduction costs, which flatters the comparison. A change in the estimated useful lives of certain infrastructure assets, from four to five years, cut depreciation expense by $9.0 million in the quarter. On a non-GAAP basis, operating margin was 35.9% versus 34.2%, and non-GAAP net income was $194.1 million versus $174.0 million. For the first six months, gross profit was $1.05 billion, up 5.6%, operating income was $270.5 million, up 92.4%, and net income was $242.8 million, up 116.4%. Year-to-date diluted EPS was $0.73, up $0.41.
Cash generation stayed strong. Net cash provided by operating activities was $230.6 million, up 22.9%, and free cash flow was $224.7 million, compared with $184.6 million a year earlier. Capital expenditures were $5.9 million, up 96.7%. Over six months, operating cash flow was $406.1 million, up 24.0%, and capital expenditures were $15.1 million, up 208.2%. Deferred revenue, current portion, ended the quarter at $743.0 million, up 1.2%. Cash, cash equivalents and short-term investments totaled $1.063 billion. The company repurchased 11.3 million Class A shares for $262.2 million in the quarter and 22.4 million shares for $543.8 million over six months. It also paid $14.9 million for the second tranche of a San Francisco lease termination.
Dropbox did not include forward-looking numbers in the earnings release. It said it would provide guidance on its quarterly conference call and webcast. The MD&A flags several pressures. Growth in Individual plans was offset by continued pressure in Teams plans. DocSend performed better than anticipated, while FormSwift faced seasonal pressure. Management said the overall paying user growth rate has declined and that the pace of future ARR growth may be lower than in prior periods. It also said cost of revenue should fall in absolute dollars in the near term because of the useful life change, with gross margin rising in the near term. The April 2024 unauthorized access to the Dropbox Sign production environment remains subject to litigation and regulatory scrutiny, though the company said it does not expect a material impact on its financial condition or results of operations. Macroeconomic conditions, including inflation, higher interest rates and foreign exchange swings, round out the risk list.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $634.5M | $631.3M | +0.5% | $622.5M | +1.9% |
| Gross profit | $527.5M | $525.5M | +0.4% | $502.4M | +5.0% |
| Gross margin | 83.1% | 83.2% | -0.1 pp | 80.7% | +2.4 pp |
| Research & development | $227.1M | $219.1M | +3.7% | $262.8M | -13.6% |
| Sales & marketing | $112.5M | $108.8M | +3.4% | $120.9M | -6.9% |
| General & administrative | $60.9M | $54.1M | +12.6% | $60.0M | +1.5% |
| Total operating expenses | $400.5M | $382.0M | +4.8% | $445.9M | -10.2% |
| Operating income (loss) | $127.0M | $143.5M | -11.5% | $56.5M | +124.8% |
| Operating margin | 20.0% | 22.7% | -2.7 pp | 9.1% | +10.9 pp |
| Net income (loss) | $110.5M | $132.3M | -16.5% | $43.2M | +155.8% |
| Net margin | 17.4% | 21.0% | -3.5 pp | 6.9% | +10.5 pp |
| Diluted EPS | $0.34 | $0.39 | -$0.05 | $0.13 | +$0.21 |
Risks
The April 2024 unauthorized access to the Dropbox Sign production environment remains subject to ongoing litigation, including four proposed class action lawsuits in federal court in the Northern District of California, and regulatory scrutiny. The incident could harm reputation and customer relationships and lead to additional costs or liabilities.
As of June 30, 2024, Dropbox served over 700 million registered users but only 18.22 million paying users, and the overall paying user growth rate has declined and may decline further. Loss of enterprise licenses covering large numbers of seat licenses could cause net new paying users to decline or be negative.
MD&A states that during the three months ended June 30, 2024, growth in Individual plans was offset by continued pressure within Teams plans as businesses faced a challenging operating environment. A prolonged downturn could cause paying users to delay, decrease, or cancel purchases.
Dropbox is making significant investments in AI products and faces rapid development and significant competitive pressures in the AI marketplace. The EU Artificial Intelligence Act enacted in March 2024 imposes additional requirements, and AI initiatives may not succeed or generate sufficient revenue to offset declining growth elsewhere.
The content collaboration market is competitive and rapidly changing, with products from Microsoft, Amazon, Apple, Google, Adobe, Atlassian, Slack, Box, and DocuSign. Competitors may offer lower-priced or free products or bundle broader offerings, and pricing and packaging changes have negatively impacted top of funnel and conversion rates.
Under the Virtual First model, Dropbox has retained only a portion of its office space and may record additional impairment charges. The extended decline in demand for commercial real estate in San Francisco has impacted the subleasing strategy and resulted in additional impairment charges beyond original expectations, though no impairment charges were recognized in the three and six months ended June 30, 2024.
Dropbox depends on key personnel, especially CEO and co-founder Andrew W. Houston, and competition for highly qualified employees is intense. The Virtual First model may make oversight of a distributed workforce more difficult and increase employee attrition or loss of key personnel.
The 2026 Notes, 2028 Notes, and revolving credit facility contain covenants that limit Dropbox's ability to incur additional indebtedness, pay dividends, repurchase stock, make investments, and engage in other transactions. Conversion of the notes could dilute existing stockholders or depress the stock price.
Dropbox relies on custom-built co-location facilities and third-party datacenter services such as Amazon Web Services, and capacity planning depends on the global supply chain for hardware. Prolonged supplier disruptions or datacenter problems could cause service interruptions or unexpected cost increases.
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 Q2 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.