Dropbox (DBX) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue reached $629.5 million, up 0.8% year-over-year; excluding FormSwift, revenue grew 2% year-over-year, with unlevered free cash flow margin at 38%.

• Core business showed steady growth in Individuals and Teams, driven by improved retention, product enhancements, and strong engagement with AI-powered Dash and Dropbox Protect.

• Paying users totaled 18.09 million, up 14,000 sequentially, with ARPU rising to $141.18.

• Net income was $114.5 million (GAAP), with non-GAAP net income at $180.4 million; diluted EPS was $0.76 (non-GAAP), up from $0.70.

• AI initiatives, including Dash and Protect, are gaining traction and supporting product differentiation.

Financial highlights

• Gross margin was 81.1%, down 180 basis points year-over-year due to infrastructure costs and depreciation.

• Operating margin was 40.1% (non-GAAP), ahead of guidance but down 160 basis points year-over-year.

• Cash flow from operations was $205 million, up 33% year-over-year; unlevered free cash flow was $236 million, up 69%.

• Total ARR was $2.56 billion, up 0.3% year-over-year; up 1.3% excluding FormSwift.

• Cash and short-term investments totaled $1.29 billion at quarter end.

Outlook and guidance

• Q2 2026 revenue expected at $624–$627 million; non-GAAP operating margin at 38.5%.

• Full-year 2026 revenue guidance raised to $2.497–$2.512 billion; operating margin raised to 39.5–40%.

• Unlevered free cash flow guidance increased to at or above $1.055 billion.

• Weighted average shares outstanding expected to decrease to 222–227 million.

• Management remains cautious due to macroeconomic uncertainty and ongoing product transitions.