Cloud Stocks: Dropbox Should Focus On PaaS

According to a recent research report, the global enterprise collaboration market is estimated to grow to $69.93 billion by 2024 at a CAGR of 15.23%. Remote working conditions will further accelerate this growth as organizations look to adopt collaboration tools for employee engagement, cost reduction, efficient project management, and knowledge management. Dropbox (Nasdaq: DBX) recently announced its first quarter results for the year where it reported its first ever net income for the quarter.

Dropbox’s Financials

Revenues for the first quarter grew 18% to $455 million, ahead of the market’s forecast of $452.2 million. Dropbox turned in profits for the first time since it went public. It reported a net income of $39.3 million compared with a net loss of $7.7 million a year ago. On an adjusted basis, net loss was $0.17 per share compared with the market’s expectations of $0.14 per share.

Among operating metrics, ARR was $1.864 billion, growing 16% over the year. Paying users grew from 13.2 million a year ago to 14.6 million and average revenue per paying user increased from $121.04 to $126.30.

The impressive quarter was a result of the cost control measures implemented in the previous quarters and the continued focus on adding paying customers.

For the second quarter, Dropbox forecast revenues of $463-$466 million with non-GAAP operating margin of 16.5%-17.5%. It expects to end the year with revenues of $1.88-$1.9 billion. Analysts estimate Dropbox to report revenues of $476.1 million for the quarter and $1.88 billion for the year.

Dropbox’s Product Upgrade

Dropbox has been focused on driving monetization and customer retention for its products. To implement this strategy, over the past few months, it has enhanced its mobile on-boarding flows for users who sign up for a Dropbox Plus trial. Based on the analytics by its data science team, it identified certain actions by mobile users in the first few weeks of their trial that were translating to a higher conversion rates. For instance, activities like sharing links to content were driving the transition. Actively changing their onboarding prompts to users on a trial to take these types of actions has helped drive higher levels of engagement and conversion.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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