Docusign Inc. (DOCU) Earnings & Analysis

Latest quarter

Docusign reported Q2 FY2027 revenue of $875.7 million, up from $800.6 million a year earlier. On the basis used for the consensus comparison, revenue was $875.8 million, above the $867.6 million estimate; adjusted earnings per share of $1.16 also exceeded the $1.08 consensus.

The filing attributed the year-over-year revenue increase primarily to expansion in commercial and enterprise accounts and the digital channel. International revenue represented 31% of quarterly revenue, compared with 29% a year earlier, according to the filing.

Docusign’s gross margin rose to 79.7% from 79.3%, while operating margin increased to 13.4% from 8.15%. The filing said research and development expense declined primarily because of personnel costs, including stock-based compensation, while sales and marketing and general and administrative expenses increased.

Diluted earnings per share rose to $0.40 from $0.30. Free cash flow increased to $295.8 million from $217.6 million; CFO Blake Grayson attributed the increase primarily to operating leverage and working capital management.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Allan Thygesen said Intelligent Agreement Management (IAM) accounted for 15.1% of annual recurring revenue in Q2, up from 12.6% in Q1. CFO Blake Grayson said adoption slightly exceeded Docusign’s expectations and that gains came across regions and commercial and enterprise customers. He said digital channels drove customer growth, while direct-customer dollar net retention was 103% on a rounded basis.

Asked about expansion, Grayson said most IAM annual recurring revenue came from existing customers, although new customers also contributed. He said customers sometimes upgrade during a contract, but Docusign does not disclose the level of expansion. Thygesen said IAM was driving the bulk of expansion and growth in deal sizes, with demand across functions and industries.

Thygesen said Docusign launched AI assistant and agent capabilities in August, including tools for contract analysis and workflows. He said customers had ingested more than 300 million documents through IAM’s Agreement Manager. Asked about integrations, he said customers were still examining how to deploy agreements across tools and that enterprises could integrate through APIs or the company’s MCP server.

On pricing, Thygesen said Docusign was testing packaging and pricing in Canada. Grayson added that the digital business continually tests factors such as conversion rates and customer acquisition.

Grayson said Q2 non-GAAP gross margin was 81.7%, down slightly year over year because of cloud migration investment. He said operating margin exceeded the guidance midpoint partly because of revenue and partly because of cost discipline and higher capitalized software costs. Asked about headcount, he said Docusign was managing hiring tightly, using lower-cost locations and targeting investment toward IAM.

For the coming quarters, Grayson said the updated revenue outlook passed through Q2 outperformance and included additional second-half outperformance, partly offset by foreign-currency headwinds. He also said digital add-on revenue is recognized based on usage, whereas subscription revenue is recognized over the subscription period.

Guidance

Docusign raised its fiscal 2027 outlook for annual recurring revenue growth to 8.5% to 9.0% and expects IAM to represent 18% to 19% of total annual recurring revenue exiting Q4. Grayson said the company also raised its full-year operating margin outlook and its revenue outlook excluding foreign-currency effects.

For fiscal 2027, Docusign expects reported revenue of $3.499 billion to $3.507 billion and non-GAAP operating margin of 31.0% to 31.5%. Grayson said the revenue outlook includes approximately $4 million of incremental foreign-currency headwinds.