Dropbox (DBX) stock fell after the company warned that the number of paying users for its cloud-hosted service would decline this year. Announcing its Fiscal fourth quarter results the company warned of “elevated churn” and pressure in its teams business, sending shares down over 6.5% in the premarket session on Friday.
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DBX is seeing a decline in paying users, with a projected reduction of approximately 300,000 users in 2025. Q4 saw a sequential decline in paying users of 15,000 from the past quarter, although the 18.22 million was slightly ahead of the 18.12 million a year ago.
About half of the forecast decline is down to Dropbox’s reduced investment in FormSwift, a business it acquired in 2022 that gives users a template library to create, complete, edit and save business forms and agreements.
According to CFO Tim Regan the remaining half will result from a reduced outbound sales force after it cut headcount. Dropbox said in October it was going to lay off 20% of its global workforce in a bid reduce costs, coming after a 16% reduction in 2023. Regan expects roughly half of the full year’s decline to occur in Q1 coinciding with the elimination of marketing investment in FormSwift.
Q4 Earnings Highlights
Co-founder and CEO Drew Houston said revenue and operating income came in “modestly ahead” of guidance.
Total revenue was $643.6 million, an increase of 1.4% from the same period last year. DBX also reported a 23% year-over-year growth in free cash flow for the fourth quarter. Net income was $102.8 million, as compared to $227.3 million for the same period last year, with the decrease due to expenses related to the layoffs announced in October.
The upside from cutting jobs is seen in the operating margins, where the company is guiding to a range of 37.5% to 38% in 2025.
Is DBX a Good Stock to Buy?
Overall, Wall Street has a Hold consensus rating on DBX, based on one Buy, four Holds and one Sell. The average DBX price target is $31.25, implying about 2% downside from current levels, though this may be subject to changes after the earnings report. Three analysts have reiterated their positions already.
