We develop a theoretical framework for understanding dynamic morphologies and stability of droplet interface bilayers (DIBs), accounting for lipid kinetics in the monolayers and bilayer, and droplet evaporation due to imbalance between osmotic and Laplace pressures. Our theory quantitatively describes distinct pathways observed in experiments when DIBs become unstable. We find that when the timescale for lipid desorption is slow compared to droplet evaporation, the lipid bilayer will grow and the droplets approach a hemispherical shape. In contrast, when lipid desorption is fast, the bilayer area will shrink and the droplets eventually detach. Our model also suggests there is a critical size below which DIBs cannot be stable, which may explain experimental difficulties in miniaturising the DIB platform.