Dropbox (DBX) Q3 2025 earnings summary

Executive summary

• Q3 2025 revenue reached $634.4 million, down 0.7% year-over-year but exceeded guidance, driven by strong retention in Individual and self-serve Teams plans and operational efficiency improvements.

• Dash, the new AI-powered search and productivity tool, launched self-serve in the US, saw significant product enhancements, and early strong user engagement, with 60% of managed Dash weekly active users using it at least two days a week.

• Core file sync and share (FSS) business posted record customer satisfaction scores, with ongoing improvements in retention, trial conversion, and product localization.

• DocSend achieved double-digit revenue growth, supported by increased account creations and engagement, while Sign and FormSwift modestly exceeded expectations.

• Maintained a leading position in the $11.6B content sharing and collaboration market, with 20.9% market share, second only to Microsoft.

Financial highlights

• Q3 2025 revenue was $634.4 million, down 0.7% year-over-year; constant currency revenue declined 1.2% to $631 million.

• Excluding FormSwift, constant currency revenue was slightly positive year-over-year.

• Total ARR was $2.536 billion, down 1.7% year-over-year; paying users declined by 64,000 sequentially to 18.07 million.

• Average revenue per paying user (ARPU) rose to $139.07 from $138.32 in the prior quarter.

• Gross margin was 81.4% (non-GAAP), down 260 bps year-over-year due to higher depreciation and infrastructure investments for Dash; GAAP gross margin was 79.8%.

• Non-GAAP operating margin was 41.1%, up 490 bps year-over-year and above guidance; GAAP operating margin improved to 27.5%.

• Net income was $197 million (non-GAAP), up 3% year-over-year; GAAP net income was $123.8 million, up from $106.7 million.

• Diluted EPS was $0.74 (non-GAAP), up 23% year-over-year; GAAP diluted EPS was $0.47, up from $0.34.

• Cash flow from operations was $302 million, up 10% year-over-year; unlevered free cash flow was $314 million, up 39%.

Outlook and guidance

• Q4 2025 revenue expected at $626–$629 million; constant currency revenue at $623–$626 million.

• Non-GAAP operating margin for Q4 expected at 37%.

• Full-year 2025 revenue guidance raised to $2.511–$2.514 billion; constant currency revenue guidance raised to $2.508–$2.511 billion.

• Full-year non-GAAP operating margin outlook raised to 40%; gross margin outlook unchanged at 82%.

• Unlevered free cash flow expected at or above $1 billion for 2025.

• Paying users expected to decline by 250,000 for the year, an improvement from prior outlook.

• 2026 expected to focus on scaling Dash and self-serve Teams, with continued revenue headwinds from FormSwift exit and reduced managed sales investment; no margin expansion expected.