File-sharing company Dropbox Inc. comfortably beat Wall Street’s expectations today as it delivered its fiscal first-quarter financial results, boosting its stock by more than 8% in after-hours trading.

The company reported a first-quarter net income of $69 million, down from the $79.7 million profit it recorded one year earlier. Earnings before certain costs such as stock compensation came to 42 cents per share, while revenue rose 9%, to $611.1 million. The results were good, with Wall Street looking for earnings of just 35 cents per share on sales of $601.4 million.

Dropbox is a familiar name among office workers, with the company establishing itself as one of the leading providers of cloud-based file storage and sharing tools. Its software is used by thousands of companies across the world to organize, manage, share and collaborate on business documents.

Although Dropbox has successfully entrenched itself as an everyday tool for millions of office workers, the company has struggled with a laborious growth rate in recent years. It was notable that Dropbox failed to capitalize on the coronavirus pandemic-driven shift to remote work as well as many had expected. However, the company has shown that it’s nothing if not consistent, maintaining its steady growth rate even amid more adverse economic conditions.

Investors were clearly delighted with the company’s performance. Dropbox’s shares had fallen almost 2% in the regular trading session, only to gain more than 7% after its report was published.

Dropbox co-founder and Chief Executive Drew Houston (pictured) said in a statement that he was pleased with the company’s results and that he’s looking forward to integrating the latest advances in generative artificial intelligence into its products.

“While the economic backdrop remains tough for our existing businesses, the AI era of computing has arrived and we see a huge opportunity to apply AI/ML to our products to transform knowledge work,” Houston said. “I’m committed to ensuring Dropbox is at the forefront of this era and excited to bring more AI-powered products to market for our customers.”

Although Houston declined to reveal the nature of the new AI features Dropbox is planning, it’s likely that we won’t have to wait long to see what they are. The company will no doubt be aware that its main rival in the file-sharing market, Box Inc., announced its own generative AI integrations this week.

There were other reasons to be pleased with Dropbox’s performance. For instance, it reported that its annual recurring revenue rose 8%, to $2.468 billion, at the end of the quarter. Its number of paying customers increased from 17.09 million one year earlier to 17.9 million today.

More importantly, Dropbox revealed that it’s managing to squeeze more money out of those customers. It said its average revenue per paying user increased to $138.97, up from $134.63 one year ago. Investors must have been especially pleased with that metric, as Dropbox’s average revenue per customer had declined on an annual basis in the previous quarter.

Constellation Research Inc. analyst Holger Mueller described Dropbox’s revenue growth as somewhat “pedestrian” given that it’s supposed to be a company at the center of digitization. “It’s not too bad considering the current economic headwinds faced by all tech companies,” he added. “However, its costs have also increased, with sales and marketing expenses up 20%. The next quarters will show if that investment can push its growth into the teens. If Drew Houston and team can get it right, Dropbox can emerge as one of the winners in the spring of AI.”

Looking ahead, Dropbox officials signaled that they’re expecting more incremental growth for the company. They forecast second-quarter revenue of between $612 million and $615 million, the midpoint of which is just ahead of Wall Street’s forecast of $613.5 million.

Photo: Marco Verch/Flickr