Dropbox Stock Drops Despite Beating the Street

On Thursday, stock at Dropbox was up and down before eventually falling after the company posted its results for the first quarter that were better than had been expected for its first earnings report since becoming a public company.

Dropbox earned, excluding special items, 8 cents a share versus an expected 5 cents a share. Revenue for the company reached $316.3 million compared to analyst estimates of $309.2 million.

On Monday, in a statement the cloud software business put revenue growth year over year at 28%. With relation to guidance, the CFO Ajay Vashee said during the company’s first earnings call that it expected revenue during the second quarter to be between $328 million and $331 million and that revenue for the full year of 2018 would be between $1.342 billion and $1.355 billion.

Analysts were looking for Dropbox’s second quarter revenue forecast to be $324.9 million and its full year to be $1.32. No earnings guidance was provided by Dropbox.

Vashee said that the company believes it will have free cash flow during 2018 of between $340 million and $350 million, which is a figure above the analyst estimates that averaged $323 million.

Despite exceeding all estimates, Dropbox stock fell after guidance was given by Vashee.

CEO Drew Houston said that improvements to the profit margin and cost advantages were what Dropbox gains by operating its own data center to operate its collaboration and storage services instead of relying on a third party public cloud such as Amazon Web Services.

Dropbox is also able to adjust infrastructure to meet different needs of its workloads. For instance, it is able to keep files on several types of storage infrastructure depending upon how new it is, said the CEO. Over the long term, Dropbox will be able to bring about improvements in products and boosts to performance, he added.

Following the earnings call, stock at Dropbox was down over 5% from the closing price for the day of $32 a share.

Before the earnings call, analysts were optimistic about the company thanks to customer satisfaction.

During the first quarter partnerships with Salesforce and Google were announced by Dropbox. Partnerships such as those could create revenue tailwinds in the short or long term, wrote analysts, but analysts also commented on how competitive the market was where Dropbox does its business.

Dropbox said that its paying users for the first quarter reached 11.5 million, which is a growth of 500,000, well above analyst estimates of 275,000.