Dropbox, Inc. (DBX): A Bear Case Theory 

We came across a bearish thesis on Dropbox, Inc. on Inwood’s Substack’s Substack by  Inwood Capital. In this article, we will summarize the bears’ thesis on DBX. Dropbox, Inc.’s share was trading at $26.75 as of January 13th. DBX’s trailing and forward P/E were 15.20 and 8.89 respectively according to Yahoo Finance.

Dropbox, Inc. provides a content collaboration platform in the United States and internationally. DBX represents a structurally challenged business operating in a commoditized file sync and sharing market dominated overwhelmingly by Microsoft and Google. Despite reporting $2.5B in ARR and 18M paying users as of 3Q25, the platform is now experiencing outright declines in user growth and a steady loss of market share. Its standalone cloud storage offering is disadvantaged relative to Microsoft 365 and Google One, which bundle storage into broader ecosystems.

The recent integration of high-value AI tools within these bundles has further weakened DBX’s competitive position, accelerating subscriber losses, pressuring pricing, and solidifying DBX as an “AI loser” in a market where differentiation increasingly relies on ecosystem breadth rather than storage capacity. Dropbox’s response—cheaper entry tiers and defensive pricing—underscores its deteriorating pricing power, especially as Google sets an aggressive anchor with free promotions for premium AI tiers. Efforts to diversify through products like Dash remain insignificant, hindered by DBX’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—a core bull argument—is fading as upcoming convertible maturities consume cash, limiting repurchases to offsetting SBC. With EBITDA margins already exceeding 45% after multiple RIFs, further cost cuts risk worsening operational decline. Management’s guidance for additional revenue contraction in 2026 and no margin expansion confirms a structurally declining business with no credible path back to growth. Trading at ~8x forward EV/EBITDA—still rich versus negative-growth peers—DBX faces meaningful downside as competitive, structural, and valuation pressures converge, making the stock a compelling secular short.

Previously we covered a bullish thesis on Adobe Inc. (ADBE) by jackandjillonthehill in May 2025, which highlighted Adobe’s strong cash generation, pricing power, and durable competitive position. The company’s stock price has depreciated approximately by 17.34% since our coverage. This is because sentiment around software and AI adoption did not fully materialize. The thesis still stands as Adobe’s fundamentals remain intact. Inwood Capital shares a contrarian view but emphasizes Dropbox’s structural decline.

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Disclosure: None.