DocuSign: Questions Around Growth Remain

Here's our initial take on DocuSign's (NASDAQ: DOCU) financial report.

Key Metrics

DocuSign Beats Estimates, but Leaves Investors Wanting More

There was a lot to like about DocuSign's latest quarter. Revenue and adjusted earnings per share were up 8% and 10%, respectively, topping Wall Street expectations. GAAP (generally accepted accounting principles) gross margin came in at 79.4%, up 5 basis points from a year ago, and the company posted solid free cash flow of $227.8 million.

DocuSign also surpassed the 10,000 Intelligent Agreement Management customer threshold during the period.

Billings rose 4% in the quarter, but DocuSign warned that it expects momentum to fade as the year goes on. For fiscal 2026, DocuSign is now forecasting total billings of $3.285 billion and $3.39 billion, down from its prior guidance for $3.3 billion to $3.4 billion.

The billings revision, though slight, highlights the biggest challenge facing DocuSign right now. The business is healthy and profitable, but investors are worried about where growth will come from. The company is forecasting full-year fiscal 2026 revenue of $3.15 billion to $3.16 billion, which, at the midpoint, would represent just a 5% gain from last year's $2.98 billion in total revenue.

DocuSign is putting its cash to work for investors, announcing a new $1 billion repurchase program. But with the company's share count up nearly 6% in just the last three years, much of the buyback would only serve to offset share-based compensation that has added to the float.

Immediate Market Reaction

Investors were more focused on the look ahead than the results. DocuSign shares were down 15% in aftermarket trading following the release but ahead of the company's call with investors.

What to Watch

CEO Allan Thygesen, who has been on the job since October 2022, called the results "an important quarter for Docusign's long-term transformation," highlighting the company's "ambitious product roadmap."

Expect investors to press Thygesen for specifics about how the transformation is going and when it will translate into real, sustained growth.

DocuSign invented its category and continues to hold strong in its core business, even up against competition from Adobe (NASDAQ: ADBE) and Microsoft (NASDAQ: MSFT), which can incorporate e-signatures into broader offerings. But Wall Street is forward-looking.

Shares of DocuSign are up nearly 75% over the past year as an initial response to Thygesen's turnaround ambitions. Until investors gain confidence that DocuSign has found a formula to expand its core offering and generate significant revenue growth, the stock could face limits on its ability to accelerate higher from here.

Helpful Resources

• Full earnings report
• Investor relations page

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe, Docusign, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.