Cloud storage provider Dropbox Inc. topped $2 billion in annual recurring revenue for the first time as it handily beat Wall Street’s expectations with its fourth-quarter financial results today.

The company reported a profit before certain costs such as stock compensation of 28 cents per share on revenue of $504.1 million, up 14% from a year ago. Wall Street was looking for a 24-cent-per-share profit on revenue of $498 million.

For the full year, Dropbox’s earnings came to 93 cents per share on total revenue of $1.914 billion, up 15% from the previous year.

“2020 was a transformational year for Dropbox,” said Dropbox Chief Executive Drew Houston (pictured). “Going into 2021, we’re focused on executing against our strategy and building essential products for the new era of distributed work.”

Despite the strong showing, Dropbox actually recorded a net loss in the quarter of $345.8 million because of what it said were “impairment charges” totaling $398.2 million that stem from its permanent switch to remote work. The company explained that it’s subletting some of its office spaces and needed to settle charges for right-of-use and other lease-related assets.

Dropbox, which provides a cloud-based file storage platform that’s popular with enterprises, said it benefited from strong customer growth in the most recent quarter. It said it now counts 15.48 million paying users, versus 14.31 million in the same quarter a year ago. Average revenue per paying user was also up, from $125 per user last year to $130.17 now. Thanks to that, Dropbox said, its annual recurring revenue hit $2.022 billion, up 11% from a year ago.

“Dropbox’s results, especially topping $2 billion in annual recurring revenue, offer a snapshot of a company that’s well on its way to delivering sustainably solid enterprise-class performance,” said analyst Charles King of Pund-IT Inc. “The growth in both customer acquisition and revenue per user suggests the company and its executive leadership are on the right path.”

Constellation Research Inc. analyst Holger Mueller said Dropbox had done well to grow its revenue while keeping its sales and general and administrative expenses constant over the year and investing more in research and development. “Now all eyes are on the new financial year to see if Dropbox can maintain its approximate 20% growth rate,” he said.

It’s possible uncertainty over that prospect made investors wary. Dropbox’s shares fell about 4.5% in after-hours trading.

Today’s earnings report comes about a month after Houston made what he said was one of the “toughest decisions” he has ever had to make in the job, when he announced the company would lay off 315 employees, which is about 11% of its staff. Houston said at the time the decision was “painful, but necessary” in order to streamline the company’s operations after switching to remote work on a permanent basis.

Mueller told SiliconANGLE the layoffs and impairment charges demonstrate that the switch to working at home often comes at a big cost for enterprises.

Moreover, more enterprises will likely announce similar downsizing decisions in the coming months, according to King. He pointed out that the COVID-19 pandemic is still taking its toll on economies and markets, and that many commercial organizations are unsure what to expect. As a result, he said, “formulating defensive strategies in uncertain times is entirely sensible, though they often take a toll on individual employees and teams.”

Dropbox didn’t provide any guidance for the next quarter, but Wall Street has modeled a profit of 22 cents per share on revenue of $503.69 million.

Photo: Christophe Pelletier/Flickr