Dropbox Reports Slowest Paid User Growth Since IPO

Dropbox's paid user growth has been slowing despite its try-to-buy freemium offer, causing investors to worry about its ability to convert free users into paying ones.

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Dropbox Reports Slowest Paid User Growth Since IPO

Dropbox reported the number of paying users rose to 13.6 million from 13.2 million in the last quarter

Highlights
  • Analysts had expected 13.4 million paying users on the platform
  • Dropbox beat profit and revenue estimates
  • Its revenue rose 18 percent to $401.5 million

File sharing company Dropbox reported its slowest growth in paid users since going public last year and fell short of expectations for a quarterly revenue metric that indicates future growth, sending its shares down 5 percent on Thursday.

Dropbox's paid user growth has been slowing despite its try-to-buy freemium offer, causing investors to worry about its ability to convert free users into paying ones.

The company's deferred revenue, which measures future business for subscription-based software vendors, rose 6.7 percent to $517.3 million (roughly Rs. 3,647 crores), but was below estimates of $528.2 million (roughly Rs. 3,724 crores), according to three analysts polled by Refinitiv.

The number of paying users rose to 13.6 million from 13.2 million in the prior quarter and 11.9 million a year earlier. Analysts had expected 13.4 million paying users, according to FactSet.

Dropbox, however, beat profit and revenue estimates for the second quarter ended June 30.

DA Davidson analyst Rishi Jaluria said the results beat was much smaller that what is typically expected from the company.

Dropbox competes with Alphabet's Google, Microsoft as well as Box. It reported average revenue per user of $120.48, which narrowly missed estimates of $120.8, according to IBES data from Refinitiv.

The company expects third-quarter revenue in the range of $421 million (roughly Rs. 2,968 crores) to $424 million (roughly Rs. 2,990 crores), above analysts' estimates of $419.2 million (roughly Rs. 2,956 crores).

Dropbox's revenue rose 18 percent to $401.5 million (roughly Rs. 2,831 crores), beating the average analyst estimate of $400.9 million (roughly Rs. 2,827 crores). Excluding items, it earned 10 cents per share, above expectations of 8 cents per share.

Net loss widened to $21.4 million (roughly Rs. 151 crores), or 5 cents per share, for the second quarter ended June 30, from $4.1 million (roughly Rs. 28.91 crores), or 1 cent per share, a year earlier.

© Thomson Reuters 2019

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