[Executive Summary & Q2 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Q2%20Highlights) Docusign achieved strong Q2 FY2026 performance, driven by AI innovation and go-to-market changes, resulting in high growth and profitability across eSignature, CLM, and IAM businesses [Q2 Fiscal 2026 Performance Overview](index=1&type=section&id=Q2%20Fiscal%202026%20Performance%20Overview) Docusign reported an outstanding second quarter for fiscal year 2026, driven by AI innovation launches and recent go-to-market changes, achieving strong performance across its eSignature, CLM, and IAM businesses, leading to one of its highest growth and profitability quarters in recent years - CEO Allan Thygesen stated Q2 was an **'outstanding quarter'** with strong performance across eSignature, CLM, and IAM businesses, leading to **'one of Docusign's highest growth and profitability quarters in recent years.'**[2](index=2&type=chunk) [Key Business Highlights](index=1&type=section&id=Key%20Business%20Highlights) Docusign launched new AI-powered capabilities for its Intelligent Agreement Management (IAM) platform, enhancing agreement preparation, identity verification, and custom data extraction, while also introducing CLM product releases and receiving recognition as an IDC MarketScape Leader - Docusign launched new AI-powered Intelligent Agreement Management (IAM) capabilities to unlock value across the agreement management lifecycle[3](index=3&type=chunk) - New IAM capabilities include Agreement Preparation (automatic template building, field suggestions), Docusign ID Verification with CLEAR (biometric identity network integration), and Custom Extractions in Docusign Navigator (capturing organization-specific information at scale)[4](index=4&type=chunk)[5](index=5&type=chunk)[6](index=6&type=chunk) - CLM product releases include System for Cross-domain Identity Management (SCIM) for automated user provisioning and Maestro Workflow Templates for codeless automation of agreement processes; Docusign was recognized as an IDC MarketScape Leader for AI-Enabled Buy-Side CLM Applications[10](index=10&type=chunk) [Second Quarter Financial Highlights](index=1&type=section&id=Second%20Quarter%20Financial%20Highlights) Docusign reported strong financial performance in Q2 FY2026, with total revenue increasing 9% year-over-year to $800.6 million and billings growing 13% to $818.0 million, alongside a non-GAAP diluted EPS of $0.92 and free cash flow of $217.6 million Q2 Fiscal 2026 Key Financial Highlights | Metric | Q2 FY2026 (Millions) | YoY Change | | :-------------------------------- | :------------------- | :--------- | | Revenue | $800.6 | 9% | | Subscription revenue | $784.4 | 9% | | Professional services and other revenue | $16.2 | -13% | | Billings | $818.0 | 13% | | GAAP gross margin | 79.3% | +0.4 pp | | Non-GAAP gross margin | 82.0% | -0.2 pp | | GAAP net income per diluted share | $0.30 | -92.9% | | Non-GAAP net income per diluted share | $0.92 | -5.2% | | Net cash provided by operating activities | $246.1 | +11.8% | | Free cash flow | $217.6 | +10.0% | | Cash, cash equivalents, and investments (end of quarter) | $1.1 billion | NA | | Repurchases of common stock | $201.5 | +0.7% | [Guidance](index=3&type=section&id=Guidance) Docusign provides financial guidance for Q3 and full-year fiscal 2026, projecting continued revenue and billings growth with stable margins [Q3 Fiscal 2026 Outlook](index=3&type=section&id=Q3%20Fiscal%202026%20Outlook) For the third quarter ending October 31, 2025, Docusign projects total revenue between $804 million and $808 million, representing a 7% year-over-year midpoint change, with billings expected to be $785 million to $795 million, a 5% YoY midpoint change Q3 Fiscal 2026 Guidance (Three Months Ended October 31, 2025) | Metric | Range (Millions) | YoY Midpoint Change | | :-------------------------------------- | :------------------- | :------------------ | | Total revenue | $804 to $808 | 7% | | Subscription revenue | $786 to $790 | 7% | | Billings | $785 to $795 | 5% | | Non-GAAP gross margin | 80.3% to 81.3% | NA | | Non-GAAP operating margin | 28.0% to 29.0% | NA | | Non-GAAP diluted weighted-average shares outstanding | 207 to 212 | NA | - Foreign currency exchange rates are expected to have an approximately neutral impact on year-over-year guided revenue growth for Q3 FY2026[11](index=11&type=chunk) [Full Year Fiscal 2026 Outlook](index=3&type=section&id=Full%20Year%20Fiscal%202026%20Outlook) Docusign anticipates full-year fiscal 2026 total revenue to be between $3,189 million and $3,201 million, a 7% year-over-year midpoint increase, with billings projected to be $3,325 million to $3,355 million, reflecting a 7% YoY midpoint change Full Year Fiscal 2026 Guidance (Year Ended January 31, 2026) | Metric | Range (Millions) | YoY Midpoint Change | | :-------------------------------------- | :------------------- | :------------------ | | Total revenue | $3,189 to $3,201 | 7% | | Subscription revenue | $3,121 to $3,133 | 8% | | Billings | $3,325 to $3,355 | 7% | | Non-GAAP gross margin | 81.0% to 82.0% | NA | | Non-GAAP operating margin | 28.6% to 29.6% | NA | | Non-GAAP diluted weighted-average shares outstanding | 207 to 212 | NA | - Foreign currency exchange rates are expected to have an approximately neutral impact on year-over-year guided revenue growth for the full fiscal year 2026[11](index=11&type=chunk) [Company Information](index=2&type=section&id=Company%20Information) This section provides an overview of Docusign's mission, customer reach, investor relations details, and recent updates to its Board of Directors [About Docusign](index=4&type=section&id=About%20Docusign) Docusign provides solutions for intelligent agreement management, serving over 1.7 million customers and a billion people in over 180 countries, leveraging its leadership in e-signature and CLM to help businesses create, commit, and manage agreements - Docusign serves over **1.7 million customers** and more than a **billion people** in over **180 countries**[14](index=14&type=chunk) - The company's Intelligent Agreement Management (IAM) platform aims to unleash business-critical data trapped in documents, integrating with business systems of record[14](index=14&type=chunk) [Webcast and Investor Relations](index=4&type=section&id=Webcast%20Conference%20Call%20Information) Docusign hosted a conference call on September 4, 2025, to discuss its financial results, with a live webcast available on its investor relations website, and replays also made available - A conference call was held on September 4, 2025, at 2:00 p.m. PT (5:00 p.m. ET) to discuss financial results[13](index=13&type=chunk) - A live webcast and prepared remarks were accessible on Docusign's investor relations website (investor.docusign.com)[13](index=13&type=chunk) [Board of Directors and Governance Updates](index=2&type=section&id=Board%20of%20Directors%20and%20Governance%20Updates) Mike Rosenbaum, CEO of Guidewire, joined Docusign's board, bringing expertise in platform growth, product, and go-to-market strategies, while James Beer was appointed as the next Board Chair, succeeding Maggie Wilderotter at the end of the current fiscal year, leveraging his extensive finance and strategy experience - Mike Rosenbaum, CEO of Guidewire, joined Docusign's board, bringing valuable platform growth, product, and go-to-market experience[10](index=10&type=chunk) - James Beer, a seasoned public company director with CFO experience, was appointed as Docusign's next Board Chair, effective at the end of the current fiscal year[10](index=10&type=chunk) [Non-GAAP Financial Measures and Other Key Metrics](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Other%20Key%20Metrics) This section explains Docusign's non-GAAP financial measures and defines key metrics used to assess core operating performance and liquidity [Explanation of Non-GAAP Measures](index=6&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Docusign uses non-GAAP financial measures to supplement GAAP statements, believing they provide useful information for understanding core operating performance, enhancing transparency, and facilitating comparisons, by excluding items not considered reflective of ongoing operations - Non-GAAP measures are used to understand core operating performance, enhance understanding of past performance and future prospects, and allow for greater transparency[21](index=21&type=chunk) - Exclusions from GAAP measures for non-GAAP calculations include stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, acquisition-related expenses, and restructuring charges[22](index=22&type=chunk) [Definitions of Key Metrics](index=6&type=section&id=Definitions%20of%20Key%20Metrics) This section defines key non-GAAP metrics used by Docusign, including gross profit, operating expenses, income from operations, net income, free cash flow, and billings, explaining their calculation and relevance to the company's financial and operational decision-making - **Non-GAAP Gross Profit, Operating Expenses, Income from Operations, Net Income, and Net Income Per Share:** Defined as respective GAAP measures, excluding stock-based compensation, employer payroll tax on employee stock transactions, amortization of acquisition-related intangibles, acquisition-related expenses, and restructuring charges; a fixed long-term projected tax rate (20% for FY2025, 21% for FY2026) is used for non-GAAP net income[22](index=22&type=chunk) - **Free Cash Flow:** Defined as net cash provided by operating activities less purchases of property and equipment, serving as an important liquidity measure for operational expenses, business investment, and acquisitions[23](index=23&type=chunk) - **Billings:** Defined as total revenues plus the change in contract liabilities and refund liability less contract assets and unbilled accounts receivable; it reflects sales to new customers, subscription renewals, and additional sales to existing customers, measuring periodic performance and working capital generated by upfront payments[24](index=24&type=chunk) [Financial Statements (GAAP)](index=7&type=section&id=Financial%20Statements%20(GAAP)) This section presents Docusign's GAAP condensed consolidated statements, including operations, balance sheets, and cash flows for Q2 FY2026 [Condensed Consolidated Statements of Operations](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Docusign's GAAP condensed consolidated statements of operations show total revenue of $800.6 million for Q2 FY2026, up from $736.0 million in Q2 FY2025, while net income significantly decreased to $63.0 million in Q2 FY2026 from $888.2 million in Q2 FY2025, primarily due to a large income tax benefit in the prior year Condensed Consolidated Statements of Operations (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 | Q2 FY2025 | YoY Change | | :-------------------------------------- | :---------- | :---------- | :--------- | | Total revenue | $800,636 | $736,027 | +8.8% | | Subscription revenue | $784,388 | $717,366 | +9.3% | | Professional services and other revenue | $16,248 | $18,661 | -13.0% | | Gross profit | $635,173 | $580,562 | +9.4% | | Income from operations | $65,227 | $57,801 | +12.8% | | Net income | $62,970 | $888,211 | -92.9% | | Net income per diluted share | $0.30 | $4.26 | -92.9% | [Condensed Consolidated Balance Sheets](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of July 31, 2025, Docusign's total assets were $3.95 billion, a slight decrease from $4.01 billion at January 31, 2025, with total liabilities also decreasing to $1.96 billion from $2.01 billion, while total stockholders' equity remained relatively stable at $1.99 billion Condensed Consolidated Balance Sheets (as of July 31, 2025 vs. January 31, 2025) | Metric (in thousands) | July 31, 2025 | January 31, 2025 | Change | | :-------------------------------- | :-------------- | :--------------- | :------- | | Total assets | $3,949,923 | $4,012,705 | -1.6% | | Total current assets | $1,319,050 | $1,489,261 | -11.4% | | Cash and cash equivalents | $599,986 | $648,623 | -7.5% | | Total liabilities | $1,961,948 | $2,010,013 | -2.4% | | Total current liabilities | $1,776,445 | $1,831,910 | -3.0% | | Total stockholders' equity | $1,987,975 | $2,002,692 | -0.7% | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For Q2 FY2026, net cash provided by operating activities increased to $246.1 million from $220.2 million in the prior year, while net cash used in investing activities decreased significantly to $30.5 million from $176.1 million, largely due to no acquisitions in the current quarter, and net cash used in financing activities increased to $273.3 million Condensed Consolidated Statements of Cash Flows (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 | Q2 FY2025 | YoY Change | | :-------------------------------------- | :---------- | :---------- | :--------- | | Net cash provided by operating activities | $246,073 | $220,208 | +11.8% | | Net cash used in investing activities | $(30,452) | $(176,110) | +82.7% | | Net cash used in financing activities | $(273,340) | $(239,068) | -14.3% | | Net decrease in cash, cash equivalents and restricted cash | $(56,190) | $(194,732) | +71.1% | - The significant decrease in net cash used in investing activities was primarily due to no cash paid for acquisitions in Q2 FY2026, compared to $143.6 million in Q2 FY2025[34](index=34&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=10&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20FINANCIAL%20MEASURES) This section reconciles Docusign's GAAP financial results to non-GAAP measures for gross profit, operating expenses, income, net income, free cash flow, and billings [Reconciliation of Gross Profit and Gross Margin](index=10&type=section&id=Reconciliation%20of%20gross%20profit%20(loss)%20and%20gross%20margin) For Q2 FY2026, Docusign's non-GAAP gross profit was $656.9 million, resulting in a non-GAAP gross margin of 82.0%, which compares to a GAAP gross profit of $635.2 million and a GAAP gross margin of 79.3%, with adjustments primarily for stock-based compensation and amortization of acquisition-related intangibles Gross Profit and Gross Margin Reconciliation (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 | Q2 FY2025 | YoY Change (Q2 FY26 vs Q2 FY25) | | :-------------------------------------- | :---------- | :---------- | :------------------------------ | | GAAP gross profit | $635,173 | $580,562 | +9.4% | | Non-GAAP gross profit | $656,902 | $605,036 | +8.6% | | GAAP gross margin | 79.3% | 78.9% | +0.4 pp | | Non-GAAP gross margin | 82.0% | 82.2% | -0.2 pp | [Reconciliation of Operating Expenses](index=11&type=section&id=Reconciliation%20of%20operating%20expenses) Non-GAAP operating expenses for Q2 FY2026 were lower than GAAP figures across all categories due to exclusions like stock-based compensation, with non-GAAP sales and marketing expenses at $250.1 million (31.2% of revenue), non-GAAP R&D at $105.2 million (13.1% of revenue), and non-GAAP G&A at $63.0 million (7.9% of revenue) Operating Expenses Reconciliation (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 (GAAP) | Q2 FY2026 (Non-GAAP) | Q2 FY2025 (GAAP) | Q2 FY2025 (Non-GAAP) | | :-------------------------------------- | :--------------- | :------------------- | :--------------- | :------------------- | | Sales and marketing | $305,450 | $250,053 | $287,464 | $223,978 | | Sales and marketing as % of revenue | 38.2% | 31.2% | 39.1% | 30.4% | | Research and development | $169,630 | $105,165 | $147,571 | $92,387 | | Research and development as % of revenue | 21.2% | 13.1% | 20.0% | 12.6% | | General and administrative | $94,866 | $62,955 | $87,129 | $51,515 | | General and administrative as % of revenue | 11.8% | 7.9% | 11.8% | 7.0% | [Reconciliation of Income from Operations and Operating Margin](index=11&type=section&id=Reconciliation%20of%20income%20from%20operations%20and%20operating%20margin) Docusign's non-GAAP income from operations for Q2 FY2026 was $238.7 million, significantly higher than the GAAP income from operations of $65.2 million, resulting in a non-GAAP operating margin of 29.8% compared to a GAAP operating margin of 8.1%, after adjusting for stock-based compensation and other non-operating items Income from Operations and Operating Margin Reconciliation (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 (GAAP) | Q2 FY2026 (Non-GAAP) | Q2 FY2025 (GAAP) | Q2 FY2025 (Non-GAAP) | | :-------------------------------------- | :--------------- | :------------------- | :--------------- | :------------------- | | Income from operations | $65,227 | $238,729 | $57,801 | $237,156 | | Operating margin | 8.1% | 29.8% | 7.9% | 32.2% | [Reconciliation of Net Income and Net Income Per Share](index=12&type=section&id=Reconciliation%20of%20net%20income%20and%20net%20income%20per%20share,%20basic%20and%20diluted) For Q2 FY2026, non-GAAP net income attributable to common stockholders was $195.1 million, leading to a non-GAAP diluted net income per share of $0.92, which contrasts with GAAP net income of $63.0 million and diluted EPS of $0.30, with significant adjustments for stock-based compensation and income tax Net Income and Net Income Per Share Reconciliation (Three Months Ended July 31) | Metric (in thousands, except per share data) | Q2 FY2026 (GAAP) | Q2 FY2026 (Non-GAAP) | Q2 FY2025 (GAAP) | Q2 FY2025 (Non-GAAP) | | :------------------------------------------------ | :--------------- | :------------------- | :--------------- | :------------------- | | Net income attributable to common stockholders | $62,970 | $195,085 | $888,211 | $200,994 | | Net income per share, diluted | $0.30 | $0.92 | $4.26 | $0.97 | [Computation of Free Cash Flow](index=12&type=section&id=Computation%20of%20free%20cash%20flow) Docusign's non-GAAP free cash flow for Q2 FY2026 was $217.6 million, calculated by subtracting purchases of property and equipment ($28.4 million) from net cash provided by operating activities ($246.1 million), representing a 10.0% increase year-over-year Free Cash Flow Computation (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 | Q2 FY2025 | YoY Change | | :-------------------------------------- | :---------- | :---------- | :--------- | | Net cash provided by operating activities | $246,073 | $220,208 | +11.8% | | Less: Purchases of property and equipment | $(28,425) | $(22,280) | -27.6% | | Non-GAAP free cash flow | $217,648 | $197,928 | +10.0% | [Computation of Billings](index=13&type=section&id=Computation%20of%20billings) For Q2 FY2026, Docusign's non-GAAP billings totaled $818.0 million, an increase from $724.5 million in Q2 FY2025, with this calculation including adjustments for changes in contract liabilities and refund liability, as well as contract assets and unbilled accounts receivable Billings Computation (Three Months Ended July 31) | Metric (in thousands) | Q2 FY2026 | Q2 FY2025 | YoY Change | | :-------------------------------------- | :---------- | :---------- | :--------- | | Revenue | $800,636 | $736,027 | +8.8% | | Non-GAAP billings | $818,031 | $724,508 | +12.9% | [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section outlines Docusign's forward-looking statements, highlighting inherent risks and uncertainties, and disclaims any obligation to update them [Forward-Looking Statements Disclaimer](index=5&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section contains forward-looking statements based on management's beliefs and assumptions, involving substantial risks and uncertainties, covering expectations regarding future operating results, financial position, business strategy, market growth, and the impact of various factors, including macroeconomic conditions, competition, technological changes, and the success of new products like the IAM platform, with the company disclaiming any obligation to update these statements - The press release contains forward-looking statements based on management's beliefs and assumptions, involving substantial risks and uncertainties[17](index=17&type=chunk) - These statements cover future operating results, financial position, business strategy, market growth, and trends, including expectations for revenue, billings, free cash flow, and the adoption of the Docusign IAM platform[17](index=17&type=chunk) - Risks include global macroeconomic conditions, market competition, infrastructure interruptions, ability to manage growth, attract customers, scale the platform, successfully develop IAM solutions, and maintain intellectual property[18](index=18&type=chunk) - Docusign undertakes no obligation to update any forward-looking statements after the date of the press release, except as required by law[19](index=19&type=chunk)

Core Insights - Docusign reported strong performance in Q2 2025, driven by AI innovations and go-to-market changes, marking one of its highest growth and profitability quarters in recent years [2][3]. Financial Highlights - Total revenue reached $800.6 million, a 9% year-over-year increase, with subscription revenue at $784.4 million, also a 9% increase. Professional services and other revenue decreased by 13% to $16.2 million [7]. - Billings were $818.0 million, reflecting a 13% year-over-year increase, with a 1% positive impact from foreign currency exchange rates [7]. - GAAP gross margin improved to 79.3% from 78.9% year-over-year, while non-GAAP gross margin slightly decreased to 82.0% from 82.2% [7]. - GAAP net income per basic share was $0.31, down from $4.34 in the same period last year, while non-GAAP net income per diluted share was $0.92, down from $0.97 [7]. - Free cash flow increased to $217.6 million from $197.9 million year-over-year [7]. Guidance - For the quarter ending October 31, 2025, total revenue is expected to be between $804 million and $808 million, representing a 7% year-over-year growth [11]. - Subscription revenue guidance is set between $786 million and $790 million, also indicating a 7% increase [11]. - Billings are projected to be between $785 million and $795 million, reflecting a 5% year-over-year growth [11]. Key Business Developments - Docusign launched new AI-powered capabilities within its Intelligent Agreement Management (IAM) platform, enhancing agreement management across the lifecycle [3][12]. - The integration with CLEAR's biometric identity network allows for faster ID verification [5]. - Custom Extractions feature in Docusign Navigator enables organizations to capture specific information from agreements efficiently [6]. - Docusign was recognized as a leader in IDC's MarketScape for AI-Enabled Buy-Side CLM Applications, emphasizing its strategic focus on IAM [12]. Governance Updates - Mike Rosenbaum, CEO of Guidewire, joined Docusign's board, bringing extensive SaaS experience [12]. - James Beer has been appointed as the next Board Chair, succeeding Maggie Wilderotter [12].

Core Insights - DocuSign, Inc. is set to release its second-quarter earnings results on September 4, with analysts expecting earnings of 85 cents per share, a decrease from 97 cents per share in the same quarter last year [1] - The company is projected to report quarterly revenue of $780.59 million, an increase from $736.03 million a year earlier [1] Financial Performance - In the first quarter, DocuSign reported earnings of 90 cents per share, surpassing the analyst consensus estimate of 81 cents [2] - Quarterly revenue for the first quarter was $763.7 million, exceeding the Street estimate of $748.13 million [2] - Following the first-quarter results, DocuSign shares increased by 2.5%, closing at $75.90 [2] Analyst Ratings and Price Targets - Wedbush analyst Daniel Ives maintained a Neutral rating and reduced the price target from $100 to $85 [7] - Citigroup analyst Tyler Radke kept a Buy rating but lowered the price target from $115 to $100 [7] - B of A Securities analyst Brad Sills maintained a Neutral rating and cut the price target from $88 to $85 [7] - Morgan Stanley analyst Josh Baer maintained an Equal-Weight rating and reduced the price target from $92 to $86 [7] - JP Morgan analyst Mark Murphy maintained a Neutral rating and lowered the price target from $81 to $77 [7]

SAN FRANCISCO, Aug. 21, 2025 /PRNewswire/ -- Docusign (NASDAQ: DOCU) today announced it has been named a Leader in the IDC MarketScape: Worldwide AI-Enabled Buy-Side Contract Lifecycle Management Applications 2025 Vendor Assessment (doc # US53575125, June 2025). DocusignCLM, powered by the Intelligent Agreement Management (IAM) platform, helps manage every step of the contract process with its secure, AI‑powered platform—from document generation and collaborative negotiation to workflow automation and elect ...

Group 1 - The core viewpoint is that electronic signatures, such as those provided by Docusign, enhance convenience for both consumers and businesses [1] - Docusign is expected to benefit from strong tailwinds that could potentially boost its revenue for decades to come [1]

Group 1: Industry Outlook - Morgan Stanley's report indicates that the disruptive impact of AI continues to suppress sentiment in the software industry, and Q2 earnings reports from SaaS companies are unlikely to alleviate concerns [1] - Individual stock performance is expected to diverge, with companies that exceed expectations and raise guidance likely to see significant stock price increases, while those with weak key metrics or slowing growth will heighten market concerns about AI competition or business models [1] Group 2: Company Ratings and Expectations - Morgan Stanley maintains a "Hold" rating on Box (BOX.US), expecting strong Q1 performance to continue into Q2, with potential for significant upward revisions to full-year guidance due to conservative expectations and a stable macroeconomic environment [1] - Morgan Stanley also holds a "Hold" rating on DocuSign (DOCU.US) with a target price of $86, anticipating that Q2 billings may exceed expectations due to a low base effect, but expressing caution regarding potential disappointments in Q3 and the overall outlook for the second half of the year [1] - For Asana (ASAN.US), Morgan Stanley maintains a "Reduce" rating with a target price of $13, noting that while Q2 performance may be stable, growth rates in the second half could slow to mid to high single digits, leading to stock price fluctuations if guidance does not show significant adjustments [2] - Morgan Stanley gives Zoom (ZM.US) a "Hold" rating, expecting Q2 results to significantly exceed market expectations, but indicating that sustained accelerated growth will require more time, thus maintaining a cautious outlook until the company's prospects become clearer [2]

Group 1 - DocuSign (NASDAQ: DOCU) has experienced a nearly 20% correction from recent highs due to concerns regarding growth saturation [1] - The investment thesis for DocuSign now relies on the valuation correction, presenting an opportunity for potential gains [1] Group 2 - The analyst has over 20 years of experience in quantitative research, financial modeling, and risk management, focusing on equity valuation and market trends [1] - The analyst's background includes a role as Vice President at Barclays, leading teams in model validation and stress testing [1] - The research approach combines rigorous risk management with a long-term perspective on value creation, emphasizing macroeconomic trends and corporate earnings [1]

Company Overview - Docusign (NASDAQ: DOCU) is identified as an attractive growth company with a strong profitability and cash flow profile despite recent expansion into the contract life cycle management (CLM) market [1] Investment Insights - The company is trading at an extremely reasonable price, indicating potential for value investment [1] - The focus on companies with robust, consistent, and predictable cash flows allows for more accurate valuation and sensitivity analysis [1] Market Context - The analysis reflects a seasoned investment perspective, emphasizing the importance of macroeconomic factors in driving market cycles and affecting valuation discounts or premiums [1]

Core Insights - DocuSign (DOCU) and Spotify (SPOT) are digital leaders with scalable, subscription-based business models and large global user bases [1][2] - Both companies utilize cloud technology and data-driven personalization to enhance user experience and engagement [2] DocuSign (DOCU) Insights - DocuSign is enhancing its Intelligent Agreement Management (IAM) platform, integrating with Microsoft and Salesforce to optimize agreement workflows [3][4] - The IAM platform positions DocuSign as a comprehensive digital agreement hub, facilitating seamless contract management within familiar enterprise tools [5] - In Q1 FY26, DocuSign reported $764 million in total revenues, an 8% year-over-year increase, with $746 million from subscriptions, indicating strong SaaS model stability [6] - The company achieved a net revenue retention rate of 101%, suggesting increased customer spending, despite a 4% slowdown in billings growth [6] - DocuSign generated $228 million in free cash flow in Q1, reflecting a 30% margin, and expanded its share buyback program, indicating a focus on shareholder returns [7] - The forward 12-month P/E ratio for DocuSign is 21.83X, significantly lower than its median of 64.82X, suggesting it is attractively valued [20] Spotify (SPOT) Insights - Spotify has introduced innovative features like AI DJ and AI Playlist tools, leading to a 16.9% increase in monthly active users (MAUs) in Q4 2023 and a further 10% rise by the end of Q1 2024 [8][9] - The platform's average revenue per user increased by 4% year-over-year, indicating improved monetization through value-added features [10] - Spotify's partnership with ElevenLabs to offer AI-narrated audiobooks expands its content offerings and strengthens its position as a comprehensive audio platform [11] - The Zacks Consensus Estimate for Spotify indicates a 21% year-over-year sales growth and a 51% increase in EPS for 2025 [17] - Spotify has a higher forward P/E of 54.06X, slightly below its median of 54.07X, indicating a premium valuation compared to its growth prospects [20] Comparative Analysis - DocuSign is highlighted as having stronger fundamentals, deeper enterprise integration, and predictable growth with 98% of revenues from subscriptions [21] - While Spotify shows impressive user growth, DocuSign's profitability and capital discipline make it a more compelling long-term value play [21]

Core Viewpoint - Docusign's stock has significantly declined from its peak, but the launch of its new AI-powered platform, Intelligent Agreement Management (IAM), presents a potential investment opportunity as it addresses a $2 trillion problem in contract management [2][4][17]. Group 1: Company Performance - Docusign went public in 2018 at $29 per share and peaked at $310 by mid-2021 due to increased demand during the COVID-19 pandemic [1]. - The company's stock is currently trading 75% below its peak, reflecting a slowdown in business as social conditions normalized in 2022 [2]. - In the fiscal 2026 first quarter, Docusign reported $763.7 million in revenue, an 8% increase year-over-year, exceeding management's forecast [8]. - The company's operating expenses grew by only 1.6% year-over-year, leading to a 166% increase in operating profit to $60.2 million [9]. - Docusign's net income for the same quarter was $72.1 million, a 113% increase compared to the previous year [10]. Group 2: New Product Launch - The IAM platform aims to solve poor contract management processes that cost businesses $2 trillion annually [4]. - IAM includes tools like Navigator, which stores contracts and uses AI to extract important information, making contract management simpler [5]. - The AI-Assisted Review tool helps identify problematic clauses in contracts and can reduce legal expenses for businesses [6]. - Docusign's international IAM sales surged by 50% from the previous quarter, indicating strong demand for the new platform [7]. Group 3: Valuation and Investment Potential - Docusign's price-to-sales (P/S) ratio has dropped to 5.4, significantly lower than its long-term average of 12.4, suggesting the stock may be undervalued [13][14]. - The company is shifting focus towards profitability rather than aggressive revenue growth, which may lead to more sustainable long-term performance [12]. - If Docusign continues to generate consistent GAAP profits, it could eventually be valued using the price-to-earnings (P/E) ratio, enhancing its attractiveness as an investment [16].