Dropbox, Inc. (DBX) Earnings

Management highlights

• Drew Houston mentioned Q1 was a strong start, exceeding guidance across revenue and operating margin, with core business improvements led by Ashraf Alkarmi. • Core business initiatives focused on retention in individuals and funnel improvements in teams. • Dash represents evolution to AI-powered content management, integrated into core Dropbox experience with strong engagement, and standalone experience refined for new users. • Dropbox Protect aligns with platform story, leveraging same engine for productivity and protection.

Guidance

• Q2 2026 total revenue expected $624 - $627M, excluding FormSwift 80 basis points y/y growth at midpoint, constant currency $615 - $618M, non-GAAP operating margin ~38.5%. • Full-year 2026 total revenue raised to $2.497B - $2.512B, excluding FormSwift flat y/y, constant currency $2.47B - $2.485B, non-GAAP operating margin 39.5% - 40%, unlevered free cash flow at or above $1.055B, CapEx $20 - $25M, finance lease lines ~4% of revenue, diluted weighted average shares 222 - 227M.

Segment performance

Excluding FormSwift, revenue grew 2% year over year. In the core business, for individuals, targeted retention interventions like mobile user prompts and loss aversion messaging drove mobile churn rate down and improved conversion of basic users for additional storage. For teams, pricing and packaging simplification, better checkout and onboarding experiences contributed. Dash expanded rollout in Q1 with encouraging engagement, over 30% of weekly engaged users using AI features again next week and over 50% of monthly engaged users doing so next month. Dropbox Protect shows demand from IT and security buyers as AI adoption grows.

Risks & headwinds

• Forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially, described in SEC filings including Form 10-K and 10-Q. • Risks related to macroeconomic environment, adoption of Dash and Dropbox, and execution of initiatives.

Analyst Q&A

• Q: Hi, this is Palak for Steven Enders. Thank you so much for taking our questions and congratulations on the great results. I think my first question is about Dash adoption and just trying to understand how much of Dash adoption is happening within the core versus is there a meaningful standalone Dash-driven customer base at this point?

  A: Sure. Thanks for the question. So we're targeting both existing and new users with Dash. Where we're investing a lot is deeply integrating Dash into the core Dropbox experience, and that's also where we're seeing, or that's certainly where we have our home field advantage and our 18 million subscribers and so on. And there's a lot of integration work to make that seamless. So we've seen good progress in terms of Dash within Dropbox in terms of engagement and repeat use and a lot of the signals we're looking at there, and we're continuing to roll out these integrations to a larger percentage of our team space. And then we also see Dash as a way to expand to folks who aren't using Dropbox today. So you don't even need files in Dropbox. Dash will integrate with your Google Docs and your Slack and your Salesforce, basically all of the different apps that you're using. So we do see it as a growth lever, but in the near term, the most rapid way to drive distribution is going to be with our existing base.

• Q: And the next question is on the guide and you know, there's like a pretty solid race on the guide and increase in paying user. And I know a lot of it comes from the advancements within core and you know, simplifying the product, but just trying to understand does this account for any improvement coming specifically from dash or is that not a part of the assumption?

  A: Hi, thanks. Yeah, this is Ross. I think we were pleased, number one, you know, in Q1 that we were able to exceed our expectations on net new paying users. And as you said, we did revise upward our guide to say that we're going to modestly grow net new paying users for the year. And that's mostly driven by individuals and teams. So individuals, including the simplified plan, teams has exceeded our performance as well. So that's mostly driven by core and not a lot of inclusion of Dash right now as we continue to prioritize rolling out Dash and Dropbox and focus on increasing engagement there.

• Q: Could you help us think about the evolution of Dash in terms of the pricing and packaging and then how we should think about Dash as positioned against other ecosystems like, for example, Microsoft Copilot?

  A: Sure. So first we see Dash as, for our existing users, it's a natural extension of of the value that we're already providing to our customers. And particularly with when you integrate Dash into the core Dropbox experience, some of the benefits include being able to talk to your Dropbox in natural language. And a lot of Dropbox customers, as you'd imagine, they work with big files. So these are often creative folks or in marketing or media companies or architecture or construction. So Dropbox's support for all those kinds of content Is a big advantage versus a lot of the other AI tools which tend to be more tech centric against something like Microsoft co-pilot or an AI AI integrations within any one ecosystem dashes platform agnostic similar to Dropbox itself so that we've it's designed to integrate with the whole universe of every ecosystem and every different every different platform which is is a big advantage because otherwise you'll tend to see some siloing. Microsoft will tend to support the Microsoft ecosystem really well, but will have relatively less coverage in the Google ecosystem or in other ecosystems, whereas Dash, again, similar to Dropbox, supports everything by design. We do see that our focus on content is an advantage, and that dovetails naturally with our base. The ability within Dropbox to have multimodal semantic search is really valuable. So if you do a search for a red sunset with Dash in Dropbox, it will actually search the content of all the media in your Dropbox. Whereas you used to have red sunset in the file name to get search results, now any picture that has or any photo or image that has a red sunset in it, if someone says red sunset in a video, we transcribe that. the video under the hood, we index the transcripts, things like that. So we are going deeper on workflows around finding, organizing, sharing, protecting content, which is what people use Dropbox to begin with. And so we see that as a natural advantage for us and source of differentiation in addition to being platform agnostic