Dropbox Downgraded to Sell by UBS, Shares Slide 1.7%

Dropbox shares fell 1.7% in premarket trading after UBS downgraded the cloud storage company to Sell from Neutral. UBS cited concerns over demand, citing negative signals from Dropbox's Dash service. The downgrade comes as Dropbox faces increased competition in the cloud storage market.

Dropbox shares fell 1.7% in premarket trading on Thursday after UBS downgraded the cloud storage company to Sell from Neutral Dropbox stock rating downgraded to Sell by UBS on AI product concerns^[1]. The downgrade was driven by concerns over demand for Dropbox's new AI product, Dropbox Dash, and continued pressure on its core File Sync and Share (FSS) business. UBS analyst Seth Gilbert cited negative demand signals for Dropbox Dash and the deteriorating revenue fundamentals of the core FSS business Dropbox slides as UBS downgrades to Sell, citing worries over demand^[2].

UBS expects Dropbox to face challenges in returning to and sustaining positive revenue growth, projecting revenue declines of 1.2% and 0.9% in fiscal years 2026 and 2027, respectively. These projections are below consensus estimates, which anticipate revenue declines of 0.6% in FY26 and growth of 0.6% in FY27 Dropbox stock rating downgraded to Sell by UBS on AI product concerns^[1]. The downgrade also reflects UBS's forecast of free cash flow of $955 million and $965 million for those years, which are below consensus estimates Dropbox stock rating downgraded to Sell by UBS on AI product concerns^[1].

Despite the downgrade, Dropbox reported its second-quarter earnings for 2025, surpassing analyst expectations with an earnings per share (EPS) of $0.71, compared to the forecasted $0.62. Revenue also exceeded projections, reaching $626 million against an expected $617.83 million Dropbox stock rating downgraded to Sell by UBS on AI product concerns^[1]. Additionally, Dropbox announced an amendment to its Credit and Guaranty Agreement, securing up to an additional $700 million in delayed draw secured term loans to repay its outstanding convertible senior notes due in 2026 Dropbox stock rating downgraded to Sell by UBS on AI product concerns^[1].

Jefferies raised its price target for Dropbox to $30 from $28, citing strong operating margins. The company achieved an operating margin of 41.5%, significantly exceeding its guidance of 37.5%, primarily due to headcount reductions and lower marketing expenses Dropbox stock rating downgraded to Sell by UBS on AI product concerns^[1].

Dropbox's strategic financial maneuvers and operational efficiency have been evident in its recent earnings and announcements. However, the market competition in the cloud storage sector and the uncertainty surrounding the demand for Dropbox Dash continue to pose challenges for the company.