File-sharing company Dropbox Inc. delivered solid fiscal first-quarter financial results today, with earnings that met expectations and revenue that beat them.

The company reported net income of $79.9 million for the quarter with earnings before certain costs such as stock compensation coming to 38 cents per share. Revenue for the period came to $562.4 million, up 9.7% from a year ago.

The results met Wall Street’s expectation of 38 cents per share in earnings and beat the Street’s forecast of $558.6 million in sales.

Dropbox co-founder and Chief Executive Drew Houston (pictured) said the company has gotten off to a strong start to fiscal 2022. “I’m pleased with our team’s execution and performance in Q1, including strong profitability and improved user retention, reflecting our resilience in a challenging macro-environment,” he said.

Dropbox is a leading provider of cloud file storage services and one of the most recognizable names in enterprise tech, with thousands of companies globally using its services to organize and share documents.

Besides its basic storage and sharing services, Dropbox provides analytics tools for users to track individual files as they’re shared across an organization. It also offers security features, so a user can set a password needed to access a sensitive document, or revoke access to users with whom a file has previously been shared.

The company provides essential utility in the post pandemic age and that has helped ensure steady growth over the past couple of years. At the end of the quarter, Dropbox said its total annual recurring revenue crept up to $2.29 billion, up 8% from the same period one year ago.

Dropbox continues to add more users too. At the end of the quarter, its total paying customers numbered 17.09 million, up from 15.83 million a year ago. Just as important, Dropbox is squeezing more revenue out of those customers. It reported that its average revenue per paying user increased to $134.63, from $132.55 one year ago.

Although Dropbox continues to grow, analyst Holger Mueller of Constellation Research Inc. said investors may be concerned that it is doing so at a rather pedestrian rate, and they will have questions as to why that is.

“The questions are, is Dropbox simply unable to expand its wallet share or is it unable to find new customers, or is it both?,” Mueller said. “It remains a puzzle as Dropbox keeps innovating in all of the right directions, but for some reason doesn’t manage to participate in the higher growth rate caused by digitization trends in modern economies.”

On the plus side, Mueller said Dropbox has recently become profitable and is now expanding its bottom line, in spite of its sluggish growth. “Dropbox has managed to reduce its costs in sales and market and general and administrative, while investing more in research and development. It clearly has a sound strategy as it managed to double its earnings per share from a year ago.”

Looking to the second quarter, Dropbox said it sees revenue in a range of $568 million to $571 million, just ahead of Wall Street’s forecast of $568.2 million in sales.

Following the report, Dropbox’s shares held steady in the extended trading session, having lost almost 5% of its value earlier in the day. The stock held up surprisingly well on what was the worst day for technology stocks in more than two years.

Photo: Christophe Pelletier/Flickr