Is Docusign's Strategy to Transform Into IAM Yielding Results?

Core Insights - Docusign (DOCU) has transitioned from an e-signature product to an Intelligent Agreement Management (IAM) platform, aiming to capture the entire lifecycle of agreements, with early financial metrics indicating success [1] Financial Performance - Docusign reported $800.6 million in revenue for Q2 fiscal 2026, marking a 9% year-over-year increase, while billings grew by 13% compared to the same quarter last year, driven by demand for the AI-driven IAM platform [2] - The dollar net retention rate increased to 102% in Q2 fiscal 2026 from 101% in the previous quarter, and up from 99% year-over-year, indicating strong customer inclination towards the IAM platform [3] - Gross margin and operating margin improved by 40 basis points and 20 basis points, respectively, with free cash flow rising to $217.6 million from $197.9 million in the same quarter last year, showcasing financial efficiency during the business model transformation [4] Market Performance - Docusign's stock has declined by 26% over the past six months, underperforming its industry, which saw a 3.7% dip, and also lagging behind competitors Appian (APPN) and StoneCo (STNE), which experienced growth of 27.6% and 8.6%, respectively [5] Valuation Metrics - Docusign trades at a 12-month forward price-to-sales ratio of 3.83, which is lower than the industry average of 4.61, but higher than Appian's 3.77 and StoneCo's 1.49 [9] - The Zacks Consensus Estimate for DOCU's fiscal 2026 EPS is $3.69, with a slight increase over the past 60 days, and for fiscal 2027, the estimate is $4.06, also reflecting a marginal rise [12]