(Reuters) – Dropbox Inc on Thursday reported a better-than-expected quarterly profit, raised its outlook for operating margins, and announced a $600 million share buyback, sending its shares up 11 percent in trading after the bell.
FILE PHOTO: The-Dropbox-app-logo is seen on a mobile phone in this illustration, the photo is 16 October 2017. REUTERS/Thomas White/Illustration
The company has increased its operating margin to be between 28% and 30%, which is expected to be reached by 2024, up from the initial range of 20% to 22%.
“The big story is the us $600 million in buybacks, which is a clear indication that Dropbox will up their stock as undervalued, and that management is optimistic about the future of the company,” said Rishi Jaluria, an analyst from the real estate business, D. A. Davidson & Co.
He added that the move was “unusual” in view of the fact that the company went public for less than two years ago.
The company-which counts National Geographic, and the Spotify Technology SA among its customers, said that it had 14.3 million subscribers at the end of the fourth quarter of the year.
Analysts had expected 14.2 million subscribers, according to research firm FactSet.
Dropbox has been trying to attract customers by providing tools that allow users to create and share documents across platforms, such as Google Docs and Microsoft’s Office suite.
The company has also taken advantage of the “freemium” model, where the consumer is able to use the basic services for free but have to pay for the additional services.
With the exception of the items, it earned 16 cents a share, above expectations of 14 cents per share.
The average revenue per user increased to $125 to $119.6 for a year or so ago, while analysts had estimated $124.8 for the quarter that ended in dec. 31.
Sales increased 18.6% to $446 million, edging past the average analyst estimate of $443.3 million, according to IBES data, Refinitiv.
Reporting by Neha Malara in Bengaluru; Editing by shailesh Kuber