Dropbox (NASDAQ:DBX) raised its full-year revenue and profit outlook after third-quarter sales and operating margin exceeded its guidance, while outlining plans to expand into AI infrastructure through its proposed acquisition of object-storage provider Tigris Data.
The company reported revenue of $637.3 million, up 0.5% from a year earlier. Excluding FormSwift, which Dropbox discontinued at the end of the quarter, revenue rose 1%, marking the fifth consecutive quarter of year-over-year growth on that basis. Non-GAAP operating margin was 42.2%, nearly four percentage points above the company’s guidance.
Dropbox ended the quarter with 18.2 million paying users, adding approximately 20,000 sequentially. Excluding FormSwift, it added about 60,000 paying users, led by its lower-priced Simple plan and self-serve teams.
“We still need to demonstrate sustained growth, and that’s the standard we’re holding ourselves to,” Chief Financial Officer Ross Tennenbaum said on the earnings call.
AI Tools and a New Infrastructure Business
Co-CEO Ashraf Alkarmi said Dropbox is rolling out an AI-powered experience that can act on customers’ existing files. The company also announced DBX Agent Cloud, an infrastructure business initially focused on standalone, S3-compatible object storage for companies and developers building AI applications.
Dropbox expects its planned acquisition of Tigris to close in the fourth quarter, subject to customary closing conditions. Alkarmi said Tigris has thousands of customers and would bring developer relationships and technology designed for AI workloads. Dropbox plans to add file-system and content-processing capabilities over time.
Tennenbaum said Tigris is small but growing rapidly, with revenue that was not material to Dropbox’s total revenue over the trailing 12 months. He said Dropbox’s existing storage capacity should be sufficient to absorb Tigris’ current customer footprint and support its expected growth in 2027.
Asked what would justify continued investment in the infrastructure business, Alkarmi pointed to growth. “We want to see growth from this pillar,” he said.
Dropbox is also testing new AI features in its core product. Alkarmi said more than 1.4 million users had connected Dropbox to its AI integrations, while weekly uploads from those tools into Dropbox had risen from more than 600,000 to over 2 million since September.
Tennenbaum said the new Dropbox experience had reached about 70,000 teams. More than 20% of teams that received it had begun using included AI credits, and Dropbox had also sold AI token packs. The company expects to roll out the experience to all eligible self-serve teams by year-end.
Quarterly Results and Outlook
Third-quarter non-GAAP net income rose to $197.8 million from $196.7 million a year earlier. Diluted earnings per share increased to $0.88 from $0.74, with the weighted average share count falling to 225.1 million from 265.1 million.
Cash flow from operations declined to $259.2 million from $302.1 million, primarily because of higher interest payments related to the company’s term loan facility. Unlevered free cash flow was $303.9 million. Dropbox repurchased approximately $150 million of shares during the quarter and ended it with $1.142 billion in cash and short-term investments.
For the fourth quarter, Dropbox forecast revenue of $630 million to $633 million and a non-GAAP operating margin of approximately 40%. Tennenbaum said the outlook reflects marketing spending delayed from the third quarter and only a partial-quarter benefit from the recently announced workforce reduction.
For full-year 2026, the company raised its revenue forecast to $2.528 billion to $2.531 billion and its non-GAAP operating margin outlook to 40.5%. It also increased its unlevered free cash flow forecast by $5 million to at least $1.075 billion. The outlook excludes Tigris because the transaction has not closed.
Early View of 2027
Dropbox expects 2027 revenue to be roughly flat, excluding Tigris. Tennenbaum cited the loss of FormSwift revenue, moderating foreign-exchange tailwinds and the gradual monetization expected from new products. FormSwift contributed $13 million in revenue in 2026, he said.
The company also expects approximately 150 basis points of operating margin expansion in 2027, excluding Tigris, as efficiency measures take effect. Those measures include a workforce reduction of approximately 9%, consolidation of teams and changes to the go-to-market organization.
Dropbox plans to provide formal 2027 guidance, including its expectations for Tigris, in February. Tennenbaum said the company may reinvest some savings to support the acquired business if the deal closes.
About Dropbox (NASDAQ:DBX)
Dropbox, Inc (NASDAQ: DBX) is a software company that provides cloud-based tools for storing, organizing, sharing and collaborating on files. Its platform enables individuals, businesses and teams to access documents, photos and other content across connected devices, synchronize files and manage shared workflows.
The company’s offerings include Dropbox for cloud storage and file collaboration, Dropbox Paper for shared documents and project work, Dropbox Sign for electronic signatures, and DocSend for securely sharing and tracking business documents.
