Dropbox, Inc. (DBX) Q3 2025 Earnings Call Transcript
Total Revenue $634 million, a decline of 70 basis points year-over-year. Constant currency revenue declined 120 basis points year-over-year to $631 million. Excluding the impact of FormSwift, which acted as a 150 basis point headwind to revenue, year-over-year constant currency revenue was slightly positive, driven by relative strength in individual SKUs.
Total ARR $2.536 billion, down 1.7% year-over-year and 1.5% on a constant currency basis. FormSwift acted as a 160 basis point headwind to ARR in the quarter.
Paying Users 18.07 million, a sequential decline of approximately 64,000 paying users. The decline was primarily driven by downsell within the managed account base and reduced investment in FormSwift. Positive traction was seen from the Simple SKU, a lower-priced, lower storage plan targeted to mobile-first users.
Average Revenue Per Paying User (ARPU) $139.07, compared to $138.32 in the prior quarter. ARPU increased sequentially due to FX rate tailwinds and shifts to higher-priced and monthly plans.
Gross Margin 81.4%, down 260 basis points from the year-ago period. The decline reflects higher depreciation from the data center refresh cycle and investments in infrastructure for Dash.
Operating Margin 41.1%, up roughly 490 basis points from the year-ago period. The increase was due to headcount reductions, elimination of marketing spend for FormSwift, and targeted reductions in core performance marketing. Compared to guidance, operating margin benefited from delayed hiring, lower outside services, and marketing spend, as well as some one-time benefits.
Net Income $197 million, up 3% year-over-year.
Diluted EPS $0.74, compared to $0.60 in the year-ago quarter, representing a 23% year-over-year increase.
Cash Flow from Operations $302 million, an increase of 10% versus the year-ago period. Q3 included $21 million of interest payments, net of the associated tax benefit related to amounts drawn under the term loan facility.
Capital Expenditures $8 million in the quarter, resulting in unlevered free cash flow of $314 million or $1.19 per share, up 39% year-over-year.
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