Dropbox Earnings: Yet Another Quarter of Weak Sales Expansion Amid Macro Pressures

We maintain our $26 fair value estimate for no-moat Dropbox after the firm reported second-quarter financial results that were marginally ahead of our estimates. While macro pressures continue to affect Dropbox’s top-line expansion, we forecast a slight rebound in sales as these pressures ease in 2025. But even if sales growth returns after a rough 2024, we remain unconvinced of Dropbox’s long-term opportunity and view its solutions as easily replaceable and lacking the customer switching costs often associated with software. At the same time, however, management’s strategy to increase its investments in research and sales to arrest the weak top-line growth is sound. The firm’s shares traded flat after the earnings report and remain in 3-star territory.