Dropbox Inc. shares tumbled 5.18% in after-hours trading on Thursday, after the company reported a decline in second-quarter profit despite a slight revenue beat. The drop came as investors digested the earnings release, which highlighted rising costs that weighed on the bottom line.
The file-storage company posted a net income of $95.8 million, or 42 cents per share, down from $125.6 million, or 45 cents per share, in the same quarter a year earlier. The profit decline was driven by higher operating expenses, including increased spending on research and development, as well as higher interest expense. Adjusted earnings per share came in at 75 cents, just above analyst estimates of 74 cents, while revenue edged up 0.9% to $631.5 million, topping the consensus forecast of $626.7 million. However, the company’s GAAP operating margin narrowed to 26.1%, and non-GAAP operating margin shrank to 39.7% from 41.5% a year ago.
Despite the profitability miss, Dropbox reported a third consecutive quarter of paying user growth, adding 96,000 subscribers to reach 18.19 million. Average revenue per paying user also rose to $139.68 from $138.32. The market’s negative reaction suggests that the higher expense burden and margin compression overshadowed the modest top-line beat and user growth.
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