Dropbox (DBX) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue reached $629.5 million, up 0.8% year-over-year; excluding FormSwift, revenue grew 2% year-over-year, driven by growth in Individual plans and favorable FX, partially offset by reduced investment in FormSwift and its planned wind-down by end of 2026.

• Paying users totaled 18.09 million, with ARPU rising to $141.18; sequential growth outperformed expectations, though year-over-year decline was mainly due to the FormSwift wind-down.

• AI-powered Dash and Dropbox Protect products are gaining traction, with Dash engagement metrics showing strong repeat usage and continued expansion.

• Net income for Q1 2026 was $114.5 million, down from $150.3 million in Q1 2025, reflecting higher cost of revenue and increased interest expense.

• Free cash flow for Q1 2026 was $203.3 million, up from $153.7 million in Q1 2025, primarily due to higher cash from operations and lower cash outflows related to prior restructuring.

Financial highlights

• Q1 2026 revenue was $629.5 million, up 0.8% year-over-year; up 2% excluding FormSwift.

• Gross margin was 81.1% (non-GAAP), down 180 basis points year-over-year due to infrastructure costs and depreciation; GAAP gross margin was 79.7%.

• Operating margin was 40.1% (non-GAAP), ahead of guidance but down 160 basis points year-over-year; GAAP operating margin was 27.5%.

• Net income reached $114.5 million (GAAP); non-GAAP net income was $180.4 million; diluted EPS was $0.76 (non-GAAP), up from $0.70 a year ago.

• Free cash flow was $203.3 million, up from $153.7 million year-over-year; unlevered free cash flow was $236.4 million.

Outlook and guidance

• Q2 2026 revenue expected at $624–$627 million; non-GAAP operating margin at 38.5%.

• Full-year 2026 revenue guidance raised to $2.497–$2.512 billion; operating margin raised to 39.5–40%.

• Unlevered free cash flow guidance increased to at or above $1.055 billion.

• Management remains cautious on near-term outlook due to early-stage adoption of pricing and packaging initiatives and ongoing macroeconomic uncertainty.

• ARR is expected to fluctuate, with continued headwinds from the FormSwift wind-down and potential softness in Teams plans, partially offset by growth in Individual plans.