Cloud storage company Dropbox Inc. beat market expectations for its third-quarter results thanks to some solid growth in its customer base, but its share price barely moved.

The company, which sells file-sharing and collaboration tools to enterprise customers, reported a profit before certain costs such as stock compensation of 13 cents per share on revenue of $428.2 million. Wall Street was looking for earnings of just 11 cents per share on revenue of $423.5 million.

The company remains unprofitable however, with a net loss for the period of $17 million.

Dropbox, which competes with Box Inc. and cloud companies such as Google LLC and Microsoft Corp., has based its business on a “freemium” model to try to attract more customers. The company makes its basic services available for free, but charges money for more advanced services and additional storage space.

Dropbox’s strategy also involves partnerships with Google and Microsoft’s rival file-sharing services, and making acquisitions that can help to grow its customer base. Earlier this year, it bought document management startup HelloSign Inc. for $230 million.

The strategy appears to be working. Dropbox said it had more than 14 million subscribers at the end of the third quarter, up from 12.3 million one year ago. Analysts had expected Dropbox to grow its subscriber base to 13.89 million users.

Another key metric also improved. Dropbox said its average revenue per user increased to $123.15, up from $120.48 in the previous quarter. Dropbox also said its deferred revenue, which is a measure of its future business, came to $541.1 million.

Ajay Vashee, Dropbox’s chief financial officer, said on a conference call that the growth was “primarily driven by strong adoption of our premium professional and advanced plans by new paying users, as well as the repricing and repackaging of our Plus SKU.”

Customer growth is one thing, but Dropbox needs to transform those subscribers into profits, something it’s so far been unable to do. And that’s a concern for analysts who’re watching the company closely.

“Dropbox is doing well on the growth side, but is not doing well on the profitability side,” said Holger Mueller, an analyst with Constellation Research Inc. “The original path to profitability seems to be slipping away and management has to show how they will turn the Dropbox ship towards it. The underlying business dynamics are positive for Dropbox, so it really comes to cost control at this moment.”

Dropbox revamped its desktop app in the quarter just gone. The new app came with a service called Dropbox Spaces, which allows users to create shared team work spaces that connect not only files but tasks and meetings as well.

“We’re excited about the early momentum we’ve seen with our new desktop app — millions are already using it since it was made generally available on September 25,” said Dropbox Chief Executive Officer Drew Houston (pictured).

Dropbox later updated its full-year guidance, saying it expects revenue in a narrow range between $1.657 billion and $1.659 billion, just ahead of Wall Street’s estimate of $1.652 million.

Photo: WSJ Conference and Meeting Photos/Flickr