Dropbox, Inc. shares were trading at $26.75 on January 13, according to recent market data. The company's trailing and forward P/E ratios stood at 15.20 and 8.89 respectively, as reported by Yahoo Finance.
Inwood Capital published a bearish analysis on Dropbox via its Substack. The firm described Dropbox as operating in a commoditized file sync and sharing market, overwhelmingly dominated by Microsoft and Google.
Dropbox reported $2.5 billion in annual recurring revenue and 18 million paying users as of the third quarter of 2025. However, the platform is now experiencing outright declines in user growth and a steady loss of market share. Its standalone cloud storage offering is seen as disadvantaged relative to Microsoft 365 and Google One, which bundle storage into broader ecosystems.
The recent integration of high-value AI tools within these competing bundles has further weakened Dropbox's competitive position. This has accelerated subscriber losses, pressured pricing, and solidified Dropbox as an "AI loser" in a market where differentiation increasingly relies on ecosystem breadth rather than storage capacity.
Dropbox's response has included cheaper entry tiers and defensive pricing, which underscores its deteriorating pricing power. Google has set an aggressive anchor with free promotions for premium AI tiers. Efforts to diversify through products like Dash remain insignificant, hindered by Dropbox's lack of enterprise go-to-market capabilities and a track record of failed acquisitions such as HelloSign, DocSend, and FormSwift.
Meanwhile, the company's ability to sustain buybacks is fading as upcoming convertible maturities consume cash, limiting repurchases to offsetting stock-based compensation. With EBITDA margins already exceeding 45% after multiple reductions in force, further cost cuts risk worsening operational decline.
Management has guided for additional revenue contraction in 2026 and no margin expansion. This confirms a structurally declining business with no credible path back to growth. Trading at approximately 8 times forward EV/EBITDA, Dropbox faces meaningful downside as competitive, structural, and valuation pressures converge.
Inwood Capital shares a contrarian view but emphasizes Dropbox's structural decline. Previously, a bullish thesis on Adobe Inc. was covered in May 2025, which highlighted Adobe's strong cash generation, pricing power, and durable competitive position. Adobe's stock price has depreciated approximately 17.34% since that coverage, as sentiment around software and AI adoption did not fully materialize. The thesis on Adobe still stands as its fundamentals remain intact.
Dropbox is not on the list of the 30 Most Popular Stocks Among Hedge Funds. According to database information, 31 hedge fund portfolios held Dropbox at the end of the third quarter, which was 27 in the previous quarter.