Dropbox Adds Users Again as Debt Costs Erode Profit
Dropbox posted a third straight quarter of paying-user growth even as interest expense from its expanded term loan nearly tripled and net income fell 24%.
Dropbox (DBX) reported revenue of $631.5 million for the second quarter of 2026, up 0.9% from a year earlier, or 1.7% excluding the FormSwift business the company is winding down. The file-storage and collaboration company added 96,000 paying users during the quarter, bringing its base to 18.19 million and marking the third consecutive quarter of subscriber growth after a stretch of stagnation.
The growth rate itself is decelerating even as it turns positive. Revenue grew 0.8% year over year in the first quarter of 2026 (2.0% ex-FormSwift), and the second-quarter figures represent a slower pace than that, though both quarters mark a reversal from the fourth quarter of 2025, when revenue fell 1.1% year over year, or was flat at 0.4% growth excluding FormSwift. Dropbox is growing again, but the growth is thin.
Profitability continued to compress. GAAP operating margin fell to 26.1% from 26.9% a year earlier, the third straight quarter of year-over-year margin decline, following 27.5% in the first quarter (down from 29.4%) and 25.5% in the fourth quarter of 2025, which had included a $47.2 million workforce-reduction charge. Non-GAAP operating margin slipped to 39.7% from 41.5%, though that still exceeded the company's own guidance of above 39%. GAAP net income fell to $95.8 million from $125.6 million, a 23.7% decline that closely tracked the first quarter's 24.1% drop, which was primarily due to higher interest expense.
That interest expense is the story beneath the margin numbers. Interest expense, net, nearly tripled year over year to $50.0 million from $18.6 million, as Dropbox drew further on its term loan, which stood at $2,582.4 million as of June 30, roughly double the $1,433.7 million balance at the end of December 2025. The company fully repaid its $695.4 million in current convertible senior notes over the same period, effectively swapping convertible debt for term-loan borrowing.
Gross margin showed a steadier trend. GAAP gross margin held flat year over year at 80.2%, an improvement in trajectory from the first quarter's 79.7% (down from 81.3%) and the fourth quarter's 79.2% (down from 81.2%, which was due to increased depreciation from a datacenter refresh). Non-GAAP gross margin still slipped to 81.6% from 82.2%, the third consecutive quarter of year-over-year compression on that measure.
Cash generation improved sequentially even as it lagged the prior year on one measure. Net cash from operating activities came in at $238.5 million, down from $260.5 million a year earlier, but unlevered free cash flow rose to $283.5 million from $276.4 million, continuing a rebound from $204.5 million in operating cash flow and $236.4 million in unlevered free cash flow in the first quarter, and from $235.4 million and $250.5 million in the fourth quarter of 2025.
Dropbox kept up an aggressive buyback pace, repurchasing $330.3 million of stock in the quarter, down from $410.0 million a year earlier, which helped push diluted weighted-average shares outstanding down 18% to 226.8 million from 276.7 million. The share count has now fallen for at least two consecutive quarters, following a similar decline to 236.7 million from 295.7 million in the first quarter.
The results marked the first earnings release delivered under Dropbox's new leadership structure. Ashraf Alkarmi, named co-CEO alongside Drew Houston on May 26, 2026, delivered the earnings quote in the release, with Houston transitioning toward the role of executive chairman. The quarter also included a new $2.8 million workforce-reduction charge tied to a reorganization meant to unify Dropbox's product organization, folded into research-and-development expense.
Dropbox did not include forward guidance figures in the press release itself, stating the numbers would be provided on the earnings call and posted to its investor-relations website, the same disclosure practice it followed in the first quarter.