File-sharing company Dropbox Inc. offered weak guidance for the current quarter after only just squeezing past Wall Street’s targets as it delivered its fourth-quarter earnings report, sending its stock down in extended trading today.

The company reported earnings before certain costs such as stock compensation of 50 cents per share, just ahead of the analysts’ consensus estimate of 48 cents per share. Revenue rose 6% from a year earlier, to $635 million, edging past the consensus call of $632 million. In total, Dropbox delivered a net profit of $227.3 million, down from the $328.3 million profit it recorded one year earlier.

Those numbers may have been encouraging, if only the company thought it could keep up this level of performance. However, officials had bad news for investors when they announced the company’s targets going forward. For the first quarter of fiscal 2024, the company sees revenue of between $627 million to $630 million, below the Street’s forecast of $632 million.

Dropbox’s full-year projection didn’t get any better. It’s looking for revenue of between $2.535 billion and $2.55 billion in fiscal 2024, some way short of the Street’s projection of $2.58 billion.

Investors reacted badly to the lower guidance, and Dropbox’s stock fell more than 6% in extended trading.

Dropbox is a familiar name among office workers, since the company has established 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.

Dropbox co-founder and Chief Executive Drew Houston (pictured) told analysts he was encouraged by the company’s progress in 2023, despite facing headwinds in the last quarter. “We improved the overall profitability of the core business, while investing in growth initiatives with new AI-powered product experiences like Dash,” he said.

The company also reported annual recurring revenue of $2.523 billion, flat from a year ago. It said it ended the quarter with 18.12 million paying customers, up 17.77 million from the same period one year earlier, but down slightly from the previous quarter.

Like many companies, Dropbox has been enthusiastic about embracing the latest advances in generative artificial intelligence, saying the technology has numerous applications in the world of files and documents. Last year, it announced a host of new generative AI features. They included Dropbox Dash, a new search tool that can scan customers’ content, applications and tools for information and provide insights all in one place, and Dropbox AI, which can summarize the content within any document into an easily digestible blurb that appears when the user hovers a mouse cursor over it.

Holger Mueller of Constellation Research Inc. said it is vital for Dropbox to take advantage of the AI opportunity going forward, because it has become stuck in a rut for some time now with its pedestrian growth. “Its slow growth has become chronic, though it did at least manage to top the $2 billion gross profit milestone in the quarter,” Mueller said. “But Dropbox’s expenses are up, so it is less profitable. Investors will be hoping the company’s AI investments will start to pay off, because if AI cannot get the company growing, the question is, what else can?”

In a conference call, Houston said Dropbox will “continue to focus on driving cash flow and improving efficiency in our core FSS business, while making strategic investments to capitalize on the new market opportunity that AI presents.”

Prior to today’s after-hours stock movement, Dropbox’s shares were up 11% in the year to date and 35% in the past year.

Photo: Web Summit/Flickr