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November 9, 2018updated 30 Jun 2022 7:06am

Dropbox Almost Doubles Net Profit in a Year for Q3

The company will continue to focus on partnerships and integrations that put “Dropbox at the centre of users' workflows”.

By jonathan chadwick

Dropbox has nearly doubled its net income in the space of a year, the company revealed in its third quarter results on Thursday.

Net income for the quarter – the company’s third quarter as a public company – stood at $45 million, up from $24 million for the corresponding period a year prior.

Revenue growth was up 26 percent year over year to reach $360 million, driven by increase in total paying users and average revenue per user (ARPU) expansion.

“We delivered another quarter of strong execution in Q3, driving healthy top line growth and expanding free cash flow margins,” said Dropbox CEO Drew Houston.

Dropbox results

“We’re building deep partnerships with best of breed players, giving our users more choice without adding more noise to the work. And we’re doing all this while generating strong free cash flow.”

The company also reported more than 12.3 million paying users, up from 10.4 million from same period last year. Gross margin was 76 percent, up 7 percent compared to Q3 2017, driven by unit cost efficiency gains with its infrastructure hardware.

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Dropbox expects revenue between $367 million and $370 million for Q4 2018 and gross margins of approximately 75 percent for fiscal 2018.

Dropbox Results Suggest Increased R&D Spend is Paying Off

Quarterly R&D expense was up to $105 million, an increase as a percentage of revenue  that was partly driven by higher investments in new product development and testing.

In the company’s earnings call, Houston mentioned highlighted healthy margins for the quarter as it works to design a “more enlightened” way of working for its customers and transitions a solely cloud focus to include collaboration.

Houston pointed to machine intelligence innovations released in the quarter: Nautilus, an upgraded search engine to speed up searches for relevant files; and optical character recognition technology to search for images stored on the platform.

Dropbox results

(Image: Dropbox)

It also launched Paper Timelines, an interactive tool for project management on its document editing service.

The company will continue to focus on partnerships and integrations that put “Dropbox at the centre of users’ workflows”.

Examples of this include updated apps for Salesforce’s Sales Cloud and Service Cloud, and the launch of Extensions this week, catering to third-party integrations of services from companies including Microsoft, Adobe, Auytodesk, DocuSign, and Pixlr.

CFO Ajay Vashee added: “We want to help reduce or help our customers deal with the fragmentation they’re experiencing, because their content is scattered in all these different places.”

“So we think about search both the Dropbox corpus and then more broadly, how do we help people bring all their content into one place and really organize it before them.”

Read more: Dropbox Bets the Farm on Shingled Magnetic Recording

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