Docusign Earnings: Robust Billings and Profitability Drive Outperformance

Key Morningstar Metrics for DocuSign

• Fair Value Estimate: $80.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: High

What We Thought of DocuSign’s Earnings

Docusign DOCU delivered solid third-quarter results, surpassing the top end of its guidance ranges. The quarter’s standout theme was robust customer acquisitions, accelerated adoption of intelligent agreement management bookings, and improved retention rates, all driving healthy billings growth. Additionally, the macroeconomic environment is stabilizing, and the company sees improvement in enterprise software clients.

Early deal momentum in IAM is apparent, as new capabilities are gaining traction, particularly with smaller customers. IAM is still in the nascent stages, but should drive meaningful revenue growth over the next several years. Strengthening go-to-market capabilities, increased operating efficiency, and solid guidance likely contributed to the after-hours share price increase. Results show good progress toward operational improvements helping with margins and improving demand indicators, which prompts us to raise our fair value estimate to $80 per share from $70.

Stabilization in the core business, along with billings growth and revenue acceleration, boosted top-line results. Total revenue rose 8% year over year to $755 million, exceeding the high end of guidance of $747 million. Improvement in digital upgrades and usage drove subscription revenue up 7.7% year over year to $735 million, while services grew 3%. We like the demand Docusign is seeing in its international markets, which jumped 14% year over year, representing 28% of total revenue.

Early renewals were the primary driver of billings strength, which came in at $752.3 million, a 9% year-over-year increase. We saw continued momentum in new customer growth, at 11% year over year. Solid engagement, utilization, and retention efforts drove net dollar retention up to 100% from 99% last quarter—the first sequential improvement since April 2021. Management expects slightly tougher comparisons for billings growth in the next quarter.