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Dropbox: Dropbox's Q4 2025 Earnings: A Strong Foundation for Growth

Dropbox reported revenue of $636 million for Q4 2025, a 1.1% year-over-year decline, but a 0.4% increase excluding the impact of FormSwift. The company's gross margin stood at 80.8%, operating margin at 38.2%, and net income at $174 million. Diluted EPS was $0.68, beating estimates of $0.66. Unlevered free cash flow was $251 million or $0.99 per share, up 44% year-over-year. The company's financial performance was characterized by a strong foundation, with a large and loyal customer base, and a durable financial profile, as noted by CFO Ross Tennenbaum.

DBX

USD 25.48

3.03%

A-Score: 5.9/10

Publication date: February 19, 2026

Full Report

Author: Analystock.ai

📋 Highlights
  • Revenue Trends: Q4 revenue was $636M (-1.1% YoY), but constant currency revenue was $633M (flat YoY excluding FormSwift).<br>
  • Free Cash Flow & Share Repurchases: Generated $1.04B unlevered free cash flow in 2025, up 44% YoY, and repurchased 14M shares ($415M).<br>
  • User Metrics: Ended with 18.08M paying users and $139.68 average revenue per user (ARPU).<br>
  • Dash Engagement: Over 50% of active users return to Dropbox’s AI layer (Dash) multiple days weekly, with plans for broader monetization in H2 2026.<br>
  • 2026 Guidance: Full-year revenue of $2.485B–$2.5B, 81.5–82% gross margin, and $1.04B+ unlevered free cash flow.<br>

Business Highlights

The company focused on strengthening its core business and scaling Dash, an AI intelligence layer, in 2025. The core business showed improvements, with the individual business seeing steady growth. Dash has shown solid early engagement, with over half of active users returning multiple days a week. The company aims to maintain momentum in 2026 and return teams to positive net license growth.

Guidance and Outlook

For Q1 2026, Dropbox expects revenue of $618-621 million and non-GAAP operating margin of around 38%. For the full year 2026, it expects revenue of $2.485-2.5 billion, gross margin of 81.5-82%, and non-GAAP operating margin of 39-39.5%. The company expects unlevered free cash flow of at least $1.040 billion. The guidance reflects a disciplined approach as the company validates execution and refines go-to-market motions.

Valuation

With a P/E Ratio of 12.55 and an EV/EBITDA of 9.78, Dropbox's valuation appears reasonable. The company's Free Cash Flow Yield stands at 13.62%, indicating a strong ability to generate cash. The ROE is negative due to the company's net income not being sufficient to cover its equity, but the ROIC is a healthy 55.42%, indicating efficient use of capital.

Growth Initiatives

The company is focused on driving adoption and engagement for Dash, with plans to scale up integrations to more Dropbox Business customers and roll out the Dash stand-alone product more broadly in the first half of 2026. The company believes Dash has the potential to drive value for users and create a platform for workflow integration and automation.

M&A Strategy

Dropbox remains active in seeking opportunities to expand its product portfolio, with a focus on AI, context engine, and security. The company has had success in bringing in talent, early-stage products, and established businesses, such as HelloSign and DocSend.

Dropbox's A-Score