Dropbox, Inc.

Dropbox sells subscriptions that help individuals and teams store, share, organize and work on content. Its proposed Tigris acquisition and new DBX Agent Cloud business extend that storage infrastructure to application developers. Dropbox trades on Nasdaq under DBX and reports on a calendar-year basis.

Financial results

Adjusted profit excludes stock compensation, acquired-intangible amortization, specified acquisition costs, workforce reduction costs and related tax effects. Unlevered free cash flow adds back cash debt interest net of the associated tax benefit; ordinary free cash flow deducts capital spending from operating cash flow.

Total sales grew 0.5%. Excluding FormSwift, revenue rose 1%, or 0.2% in constant currencies. Paying users were 18.20 million, compared with 18.07 million a year earlier. Average revenue per paying user was $138.76, compared with $139.07.

Adjusted operating margin increased to 42.2% from 41.1%; reported operating margin was unchanged at 27.5%. Lower headcount costs and marketing spending deferred to the fourth quarter helped the adjusted result. Adjusted profit per share also benefited from a lower diluted share count: 225.1 million, compared with 265.1 million.

Earlier expectations and outlook

August's third-quarter forecast was $627 million to $630 million of revenue and an adjusted operating margin of about 38.5%. Both results exceeded those expectations, after an October 28 announcement that results would be at or above guidance. The earlier annual revenue forecast was $2.513 billion to $2.523 billion, with adjusted operating margin of 40% to 40.5% and unlevered free cash flow of at least $1.070 billion.

The fourth-quarter forecast is $630 million to $633 million of revenue and an adjusted operating margin of about 40%. The full-year forecast is $2.528 billion to $2.531 billion of revenue, adjusted operating margin of about 40.5% and unlevered free cash flow of at least $1.075 billion. These forecasts exclude Tigris.

Management's early 2027 expectations also exclude Tigris: roughly flat revenue and at least 1.5 percentage points of adjusted operating margin expansion. Dropbox plans formal guidance, including the acquisition, in February. It expects gradual revenue gains from newer products, while the closure of FormSwift removes about $13 million of 2026 revenue from the following year's comparison.

A roughly 9% workforce reduction announced October 28 follows the combination of the Dash and core Dropbox teams and changes to its sales organization. Expected severance and benefit payments total about $30 million, with about $20 million in 2026 and the rest in 2027.

Tigris and the new infrastructure business

Dropbox agreed on November 3 to buy Tigris Data for approximately $350 million in cash, subject to customary purchase-price adjustments. The acquisition, announced November 5, is expected to close in the fourth quarter, subject to customary closing conditions.

Tigris provides globally distributed object storage for developers and companies building applications, including AI products. DBX Agent Cloud starts with standalone object storage; filesystem and content-processing capabilities are planned. Management expects its existing infrastructure efficiency projects to provide enough capacity for Tigris's current customers and expected growth in 2027.

Management described Tigris as a small, fast-growing business with thousands of customers, revenue immaterial to Dropbox's trailing annual total and modest cash burn. The acquisition's revenue and cash contribution will be a useful measure of the new strategy.

Cash, debt and shareholder returns

At September 30, cash and cash equivalents were $1.105 billion and short-term investments $37.4 million. Term loans had a carrying value of $2.607 billion and convertible notes $691.1 million. Finance leases of $280.5 million were separate. The $400 million revolving credit facility was undrawn.

Dropbox repaid $695.8 million of convertible notes in cash when they matured on March 1, 2026. A $700 million term-loan draw in the first quarter was used primarily for that repayment. The remaining convertible notes mature in March 2028. Term-loan classes mature in December 2029 and September 2030, with quarterly principal payments before those dates.

In the first nine months of 2026, free cash flow was $690.3 million, compared with $705.9 million. Unlevered free cash flow was $823.8 million, compared with $765 million. Cash spent on common-share repurchases was $847.3 million. About $1.235 billion remained under the repurchase authorization at September 30.