Dropbox stock rose slightly and then fell more as much as 3 percent after the tech company reported better-than-expected fourth-quarter earnings on Thursday.
Here’s how the company did:
- Earnings: 10 cents per share, excluding certain items, vs. 8 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $375.9 million, vs. $370 million as expected by analysts, according to Refinitiv.
Revenue for Dropbox grew 23 year over year in the quarter, which ended Dec. 31, the company said.
Dropbox said added around 400,000 paying users in the fourth quarter, with a total of 12.7 million. Analysts polled by FactSet had been looking for an increase of 277,000 paid users in the quarter.
The company also exceeded estimates on average revenue per user at $119.61. The FactSet consensus estimate was $118.48.
But at the end of the quarter Dropbox’s deferred revenue was below the $498 million estimate, at $485 million.
Dropbox provides a cloud-based file sharing application with more than 500 million registered users, and it competes with the likes of Apple, Google and Microsoft.
“Each quarter, we have become increasingly impressed with DBX’s business and financial model,” RBC Capital Markets analysts led by Mark Mahaney, who have an outperform rating on the stock, wrote in a note distributed to clients on Tuesday.
“Best of breed FCF [free cash flow] margins (33 percent in Q3) coupled with robust, consistent revenue growth. Call it Internet Scalability with SaaS [software as a service] Predictability. DBX’s freemium model enables highly cost-efficient customer acquisition, very high customer retention levels, and substantial revenue visibility with plenty of upsell opportunities. And new product improvements seem to be sticking with paying users. We continue to see a favorable set up for the stock.”
In the fourth quarter Dropbox announced a partnership with video calling software company Zoom and introduced Extensions that incorporate third-party services into its app. In January Dropbox made its biggest-ever acquisition, HelloSign, which has put it in competition with Adobe and DocuSign.
“We remain positive on. the HelloSign acquisition, as it helps Dropbox move up the value chain, similar to the motion with Dropbox Paper, in our view,” Rishi Jaluria of DA Davidson, who has a buy rating on Dropbox, wrote in a Tuesday note.
Dropbox will issue guidance on its conference call.
Shares have risen almost 24 percent since the beginning of the year.
Executives will go over the results with analysts on a conference call at 5 p.m. Eastern time.
This is breaking news. Please check back for updates.
WATCH: Dropbox CEO: ‘We’re not going to run out of people who need Dropbox anytime soon’